Philip Hammond delivered the strongest hint yet that he is ready to draw a line under austerity as he unveiled higher growth forecasts and lower government borrowing.
Delivering his Spring Statement, the Chancellor seized on good news on the economy and tax revenues to insist there is ‘light at the end of the tunnel’ for the UK.
Mr Hammond confirmed that the government’s day-to-day spending is finally heading back in the black after a decade of belt-tightening following the credit crunch.
And he said he is ready to loosen the purse-strings to bolster key public services in the Autumn Budget if the finances remain on track.
Delivering his Spring Statement, the Chancellor seized on good news on the economy and tax revenues to set out an optimistic vision for the UK’s future
The independent OBR has upgrade its economic forecasts for the UK economy next year
Mr Hammond told MPs the government was finally hitting its target for wiping out the deficit
For the first time in decades the Spring event was not a full fiscal package – as the Budget has been moved to the end of the year.
Instead Mr Hammond gave a 25-minute update to Parliament on the economy and public finances.
In a highly political intervention that drew sharp dividing lines with Labour, Mr Hammond:
- Condemned Labour’s ‘doom and gloom’ about the economy, and made fun of his own ‘Eeyore’ reputation on Brexit saying he was at his most ‘Tigger-like’.
- Pointed out that manufacturing was enjoying its strongest run for 50 years and the government had achieved the first sustained fall in debt for 17 years.
- Highlighted the resilience of the economy amid uncertainty about Brexit negotiations and said the deficit reduction target will be reached this year.
- Suggested he is ready to pump more money into key services at the Budget in November as long as the prospects of UK plc do not take a turn for the worse.
- Announced consultations on cracking down on single use plastics and an overhaul of the VAT system to benefit small businesses.
The Chancellor said he had been struck by the resilience of the UK economy since the EU referendum.
Mr Hammond said the government was making ‘solid progress towards building an economy that works for everyone’ with growth every year since 2010.
He accused Labour of ‘relentlessly talking Britain down’ with ‘doom and gloom about the state of the nation’.
Last November, a hole was knocked in Mr Hammond’s plans when the Office for Budget Responsibility slashed its predictions for growth.
But today the OBR upgraded its estimates for growth this year from 1.4 per cent to 1.5 per cent.
The OBR figures from the Spring Statement show that the deficit will shrink faster than previous expected. These figures show the overall balance of government spending – including capital projects – rather than the government’s target of the cyclically current deficit
Philip Hammond (pictured leaving Downing Street today) said Britain’s economy is set to confound the sceptics during Brexit
The figures for next year and 2020 are unchanged since the November Budget at 1.3 per cent.
But the estimates were trimmed from 1.5 per cent to 1.4 per cent in 2021, and by 0.1 per cent to 1.5 per cent in 2022.
Mr Hammond said borrowing was due to fall in every year of the forecast.
Debt is forecast to fall as a share of GDP from 2018-19 and the OBR has revised down debt and borrowing in every year.
What was in Philip Hammond’s 2018 Spring Statement?
Philip Hammond today outlines his Spring statement to MPs
Britain’s finances are improving:
Borrowing is due to fall in every year of the forecast.
Debt is forecast to fall as a share of GDP from 2018-19 and the OBR has revised down debt and borrowing in every year.
Education
£80million to fund apprenticeships at small businesses
Housing:
Philip Hammond said the Government would tackle the housing crisis, announcing an extra 215,000 homes will be built in the West Midlands by 2031.
In London 116,000 affordable homes will be built by the end of 2022.
Transport:
Mr Hammond said he was inviting cities across England to bid for a share of £840 million to deliver on ‘local transport priorities’.
Austerity:
Mr Hammond did not announce any major new spending, but hinted he would turn the spending taps on at November’s Budget if Britain’s finances continue to do well.
Business:
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 a call for evidence where the least productive businesses will learn from the most productive, as well as looking at measures to end late payments.
Borrowing is now forecast to be £45.2billion this year, £4.7billion lower than forecast in November.
The Government is set to run a ‘small’ surplus on day-to-day spending in 2018-19, borrowing only for capital investment, the Chancellor said.
And the Government is forecast to hit its borrowing target for 2020-21 with £15.4billion headroom.
Debt is forecast to be 1 per cet lower than expected at the time of last autumn’s Budget, peaking at 85.6 per cent of GDP in 2017-18, before falling gradually to 77.9 per cent in 2022-23.
In a strong hint that will please Tory MPs, Mr Hammond said there should be scope to boost funding for public services in the coming years.
The NHS and defence have both been highlighted as areas that need a cash injection.
‘If in the autumn the public finances continue to reflect the improvements that today’s report hints at then in accordance with our balanced approach and using the flexibility provided by the fiscal rules, I would have capacity to enable further increases in public spending and investment in the years ahead while continuing to drive value for money to ensure not a single penny of precious taxpayers money is wasted,’ he said.
The OBR said last month it expected borrowing in 2017/18 to undershoot its previous prediction by a ‘significant’ margin.
Speaking at the weekend, Mr Hammond cautioned that, at 86.5 per cent of GDP, Britain’s national debt remains ‘higher than the safe level’.
‘There is light at the end of the tunnel because what we are about to see is debt starting to fall after it has been growing for 17 continuous years,’ said the Chancellor.
‘That is a very important moment for us but we are still in the tunnel at the moment.’
Nick Timothy, Theresa May’s former joint chief of staff, has urged the Chancellor to announce the ‘end of austerity’.
But Nicky Morgan, chairman of the Commons Treasury committee, said this would be premature.
On the Conservative Home website yesterday, she wrote: ‘If we relax too much then we undermine our criticism of the last Labour Government for not ‘fixing the roof while the sun shines’.’
Mr Hammonnd’s Treasury deputy Liz Truss has said there will be ‘no red box, no rabbits out of the hat and no tax changes’.
Although Mr Hammond avoided making tax or spending announcements, he revealed consultations with far-reaching effects.
They include a review to consider if single-use plastics and chewing gum should be taxed while the long-term impact of an ageing society will be examined.
However, Mr Hammond risked re-opening a row about the treatment of small business when he confirms plans to review VAT rules.
Last year, he axed a bid to slash the threshold from £85,000 to £25,000 after a backlash from Tory MPs.
But the Chancellor will ask officials to look at tapering the need to register VAT to avoid an immediate bill of £17,000 for firms going through the £85,000 barrier.
How Hammond hammed it up: The quips in the Chancellor’s Spring Statement to MPs
Philip Hammond – dubbed Spreadsheet Phil – tried to shake off his dry persona by peppering his speech with some jokes
Philip Hammond – dubbed Spreadsheet Phil – tried to shake off his dry persona by peppering his speech with some jokes.
Here are some of them:
In a jibe at John McDonnell famously brandishing Mao’s little red book in the House of Commons:
‘I wont be producing a red book today Mr Speaker, but of course I cant speak for the right honourable gentleman opposite’
Poking fun at his gloomy persona which saw some newspaper dub him ‘Eyeore’
‘I reject the party opposite’s doom and gloom about the state of the nation…
‘If there are any Eeyores in the chamber – they are over there (pointing at Labour)
‘I meanwhile am at my most positively Tigger-like today as I contemplate a country which faces the future with unique strengths.’
On Britain’s unique tech strengths
‘Our tech sector is attracting skills and capital from the four corners of the earth.
‘With a new tech business being founded somewhere in the UK every hour producing world class products including apps like Transfer Wise, citymapper, Matt Hancock
Hitting back at John McDonnell’s figures claiming that transport investment favours the wealthy south rather than the north:
‘He reels out the same wrong figures – I think he got the briefing from Russia Today’
Hammond announces consultation on cracking down on environmentally damaging single-use plastics
Michael Gove (pictured in Downing Street in January) has championed environmental lcauses since he was brought back to the Cabinet last year – and picked himself up a reusable coffee cup
Fresh taxes could be imposed to crackdown on the use of single use plastics, Philip Hammond announced today.
Theresa May has pledged to scrap all avoidable plastic waste by 2042 as part of her mission to transform the Tories into a party which champions the environment.
The Chancellor confirmed a consultation which will look at how the taxation system can be used to tackle the widespread use of single-use plastics.
The Tories have said they want to build upon the success of the 5p plastic bag charge, and have plastic cutlery, straws and single-use coffee cups in their sights.
Mr Hammond said: ‘Single-use plastics waste is a scourge to our environment. From crisp packets to coffee cups, each year the UK produces millions of tonnes of waste which is neither recyclable nor biodegradable.
‘We are determined to create an environment that is fit for future generations. By working with industry, innovators and the public I am confident we can bring about real change.’
Ever since Michael Gove was brought back to the Cabinet as Environment Secretary last year the Tories have championed environmental causes.
But they have faced criticism for not bringing in a latter levy – a charge for single use coffee cups.