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Chancellor's spring statement

Hammond: light at the end of the tunnel

Philip Hammond

Philip Hammond says the UK is at a turning point in the nation’s recovery


Chancellor Philip Hammond insisted there is ‘light at the end of the tunnel’ for the UK economy as he revealed it was growing faster than forecast with borrowing down.

In his first spring statement, Mr Hammond said that the Office for Budget Responsibility predicted GDP growth would be 1.5% in 2018, up from the 1.4% previously expected.

Forecast growth for 2019 and 2020 is unchanged at 1.3% but growth in the following two years is revised down by 0.1% to 1.4% and 1.5% respectively.

In his 26-minute statement, Mr Hammond also said public sector net borrowing in 2017-18 would be 2.2%, 0.2% lower than previously expected.

The OBR expects borrowing of 1.8% of GDP in 2018-19, 0.1% down from the previous forecast, though the chancellor said he expects a “small” current budget surplus in that period.

Borrowing in 2020-21 is predicted at 1.3 per cent, rather than 1.5 per cent.

According to the OBR, inflation is expected to return to its 2% target over the next 12 months.

He hailed the figures as a “turning point in the nation’s recovery from the financial crisis of a decade ago.”

The chancellor also said he would be bringing forward the next revaluation for business rates to 2021, after which the government will move to revaluations every three years.

The national living wage will increase to £7.83 per hour from next month, with Mr Hammond saying the wages of the lowest paid are up by almost 7% since 2015.

£4billion is going into the NHS in 2018, with the chancellor promising more pay for NHS staff if management and workers reach agreement on a pay deal.

On Brexit, Mr Hammond said that ‘substantial progress’ had been made and that the Treasury would be publishing information about how £1.5bn set aside for planning will be spent.

He unveiled a number of consultations on future policies including:

  • Measures to end late payments for firms
  • The future of cash and digital payments
  • A reduction in tax for the least polluting vans
  • A possible tax on single use plastic
  • A new VAT collection mechanism for online sales
  • How online platforms can help users pay the right amount of tax

Commenting on the spring statement, Scottish Policy Convener of the Federation of Small Businesses (FSB), Andy Willox, said: “Small businesses know all about living within their means and it’s good news that our years of hard work have helped get the deficit down.

“It seems like the public finances are getting back into better shape. But there’s no room for complacency. The numbers will only continue moving in the right direction if we make it easier for smaller businesses to trade and get paid.

“So the chancellor is absolutely right to commit the government to eliminate the scourge of late payments.  Allowing large companies to use their smaller suppliers as a free overdraft puts serious financial pressure on more than eight out of ten small businesses in Scotland.  These are welcome words that must be backed up with real action.

“The chancellor flagged up a lot of work in progress, consultations and future plans – on everything from moving to cashless local economies to reforming Vehicle Excise Duty for the least polluting vans.

“But, as we know only too well, the impact of these measures will depend on how they work in local economies – they cannot impose excess cost or admin on the very businesses the government is relying on to get the economy back to growth.”

John Hawksworth, chief economist at PwC said: “With limited change to either growth or borrowing forecasts, there was no particular economic reason for the Chancellor to make tax and spending changes and, as expected, he chose not to do so.

“But he did hint that he might consider some carefully targeted increases in spending in his Autumn Budget. That will depend, however, on the public finances continuing to improve at least as fast as the OBR projects and on no nasty shocks from the Brexit negotiations.

“The OBR expects the UK economy to remain in the slow lane of global growth for some time to come.

“In particular, the OBR has stuck to its view that productivity growth will remain relatively subdued over the next five years. While noting the surprisingly strong growth in output per hour during the second half of 2017, they have put this down to a potentially erratic decline in average hours worked rather than any increase in output growth.

“As such, they remain sceptical that this better productivity growth trend will persist or translate into higher GDP growth going forward.”

Welcoming the earlier review of business rates, CBI chief economist Rain Newton-Smith said: “The impact of the out-dated business rates system continues to be an Achilles’ heel for many businesses, so it’s absolutely right to fast forward revaluations.”

Sterling hit a session high in the wake of the Chancellor’s optimism for recovery, gaining 0.46% against the dollar to $1.396 and 0.18% against the euro to €1.128. The FTSE 100 dropped 0.4% to 7,185 points while the FTSE 250 was down 0.6% to 19,996 points.

Andy WilloxScottish Policy Convener of the Federation of Small Businesses (FSB), Andy Willox (right), said: “Small businesses know all about living within their means and it’s good news that our years of hard work have helped get the deficit down.

“It seems like the public finances are getting back into better shape.  But there’s no room for complacency. 

“”The numbers will only continue moving in the right direction if we make it easier for smaller businesses to trade and get paid.

“So the Chancellor is absolutely right to commit the government to eliminate the scourge of late payments.  Allowing large companies to use their smaller suppliers as a free overdraft puts serious financial pressure on more than eight out of ten small businesses in Scotland.  These are welcome words that must be backed up with real action.

“The Chancellor flagged up a lot of work in progress, consultations and future plans – on everything from moving to cashless local economies to reforming Vehicle Excise Duty for the least polluting vans.

“But, as we know only too well, the impact of these measures will depend on how they work in local economies – they cannot impose excess cost or admin on the very businesses the government is relying on to get the economy back to growth.”

 



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