Spring Statement: Philip Hammond hails better debt and growth forecasts

Media captionPhilip Hammond says economic growth forecasts have been revised.

Chancellor Philip Hammond has unveiled upgraded projections for growth and predicted falling inflation, debt and borrowing in his Spring Statement.

He claimed the UK economy had reached a turning point and there was “light at the end of the tunnel”.

He ruled out an immediate end to austerity but hinted at possible spending rises in the future.

Labour accused him “astounding complacency” in the face of the worst ever public sector funding crisis.

The chancellor told the House of Commons growth was forecast to be 1.4% this year, 0.1% higher than forecast by the Office for Budget Responsibility in November, with the forecast for 2019 and 2020 unchanged at 1.3%.

In his 26 minute statement he also said debt would fall as a share of GDP from 2018-19, which would be the start of “the first sustained fall in debt for 17 years, a turning point in the nation’s recovery from the financial crisis of a decade ago”.

The chancellor resisted calls from Labour and some Tories to use the extra cash from an unexpected boost in tax receipts to ease the spending squeeze.

But he hinted at possible spending increases to come, in his autumn Budget, when he will “set an overall path for public spending for 2020 and beyond” with a detailed spending review in 2019.

Mr Hammond unveiled a series of consultations on future policies:

  • A reduction in tax on for the least polluting vans to “help the great British white van driver go green”
  • A possible tax on single use plastic
  • A new VAT collection mechanism for online sales to ensure that the VAT that consumers pay “actually reaches the Treasury”
  • How online platforms can help their users to pay the right amount of tax
  • A call for evidence “on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas”
  • Inviting cities across England to bid for a share of £840m to deliver on “local transport priorities”.
  • A plan to make the least productive businesses learn from the most productive
  • Measures to end late payments for firms
  • The future of cash and digital payments

The OBR’s background papers confirm the final amount the UK expects to pay to divorce from the EU as 41.4bn euros (£37.1bn).

Labour’s shadow chancellor John McDonnell said: “Does the chancellor really believe the NHS can wait another eight months for the lifesaving funds it needs? How many people have to die waiting in an ambulance before he acts?”

Mr McDonnell also raised concerns over funding for schools, the emergency services and local councils.

He said “austerity was a political choice not an economic necessity”, adding: “We were never all in this together as they claimed.”


By BBC Economic Editor Kamal Ahmed

There is good news today.

Employment is high, and the OBR said that inflation would fall back to the Bank of England target of 2% by the end of the year.

The chancellor said that meant incomes would start rising in real terms by the first three months of next year.

That will be an important moment, as the squeeze on incomes is the way millions of people experience the real economy.

Mr Hammond opened the door to possible increases in spending on public services such as health and defence in the Budget later in the year.

But it was only a crack, given that growth is still struggling.

A situation that does not look like changing any time soon.

Read Kamal’s full blog

In a break with recent tradition, the chancellor did not use the financial statement midway between Budgets to present a “mini-Budget” or pre-Budget report.

Mr Hammond accused Labour of talking the economy down, comparing them to the gloomy character from Winnie the Pooh he has himself been likened to in the past.

“If there are any Eeyores in the chamber they are over there. I meanwhile am at my most positively Tiggerlike today, as I contemplate a country which faces the future with unique strengths.”

Media captionSpeech in full: Hammond sees “light at the end of tunnel”

Media captionResponse in full: McDonnell on “astounding complacency”

The next revaluation for business rates has been brought forward to 2021, after which the government will move to revaluations every three years, the chancellor said.

Mr Hammond also announced that London would receive an additional £1.7bn to deliver 26,000 affordable homes – including homes for social rent, taking the total number to more than 116,000 by the end of 2021/22.

Ahead of Mr Hammond’s statement, the OECD said the UK economy will grow at a slower pace than any other major advanced or emerging nation this year, as it raised its growth forecast to 1.3% in 2018.

The SNP’s leader at Westminster, Iain Blackford, said the “real tragedy” was that austerity was still with us “10 years on from the financial crisis” and the OBR had said real wage growth will “remain subdued for the next five years”.

“The light at the end of the tunnel is a hard Brexit, which is going to cost jobs and prosperity in the this country,” he added.

Spring Statement: Philip Hammond hails better debt and growth forecasts

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