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Budget 2017: Philip Hammond downgrades UK economic growth while Brexit takes place Budget 2017: Philip Hammond downgrades UK economic growth while Brexit takes place
(about 3 hours later)
The Chancellor was forced to slash his official economic growth forecasts while the Brexit talks take place, as he delivered his first Budget.The Chancellor was forced to slash his official economic growth forecasts while the Brexit talks take place, as he delivered his first Budget.
Philip Hammond told MPs that Britain’s economy would grow faster than previously expected in the next financial year – by two per cent, up from 1.4 per cent.Philip Hammond told MPs that Britain’s economy would grow faster than previously expected in the next financial year – by two per cent, up from 1.4 per cent.
But he said the independent Office for Budget Responsibility (OBR) now expected lower growth in 2018-19 (1.6 per cent), in 2019-20 (1.7 per cent) and in 2020-21 (1.9 per cent).But he said the independent Office for Budget Responsibility (OBR) now expected lower growth in 2018-19 (1.6 per cent), in 2019-20 (1.7 per cent) and in 2020-21 (1.9 per cent).
It means the British economy is now expected to grow at a slower rate than before the Brexit referendum, all the way through to EU withdrawal and beyond.It means the British economy is now expected to grow at a slower rate than before the Brexit referendum, all the way through to EU withdrawal and beyond.
Britain can no longer claim to be the fastest-growing in the G7 group of the largest economies, but is now “second only to Germany”, the Chancellor said.Britain can no longer claim to be the fastest-growing in the G7 group of the largest economies, but is now “second only to Germany”, the Chancellor said.
However, Mr Hammond said real wages are forecast to rise in every year of the period – which means workers would feel better off.However, Mr Hammond said real wages are forecast to rise in every year of the period – which means workers would feel better off.
During his speech, the Chancellor also announced: During his speech, the Chancellor also announced that inflation is forecast to be 2.4 per cent this year, two per cent next year and two per cent in 2019 – so above the Bank of England's two per cent inflation target for three years.
* Inflation is forecast to be 2.4 per cent this year, two per cent next year and two per cent in 2019 – so above the Bank of England's two per cent inflation target for three years. Borrowing will also dip £16.7bn lower than originally forecast at £51.7bn, falling to £48.3bn in 2017-18, then £40.8bn, £21.4bn and £20.6bn in 2020-21. Overall debt is forecast to be 86.8 per cent this year, peaking at 88.8 per cent next year – 1.4 per cent lower than forecast.
* Borrowing this year will be £16.7bn lower than originally forecast at £51.7bn, falling to £48.3bn in 2017-18, then £40.8bn, £21.4bn and £20.6bn in 2020-21. There was mixed news for workers, with the National Living Wage set to rise again to £7.50 in April – but tax hikes for the self-employed. The rate of Class 4 National Insurance Contributions for the self-employed will rise by one per cent to ten per cent from April 2018, with a further one per cent increase in 2019.
* Debt is forecast to be 86.8 per cent this year, peaking at 88.8 per cent next year - 1.4 per cent lower than forecast. The move immediately sparked criticism that the Chancellor had explicitly broken the 2015 Tory general election manifesto pledge not to raise direct personal taxes.
* The National Living Wage will rise again to £7.50 in April.
* The rate of Class 4 National Insurance Contributions for the self-employed will rise by one per cent to ten per cent from April 2018, with a further one per cent increase in 2019.
That immediately sparked criticism that the Chancellor had explicitly broken the 2015 Tory general election manifesto pledge not to raise direct personal taxes.
The Chancellor dismissed arguments that the lower borrowing forecasts should mean “more unfunded spending” – warning “each year, we are spending £50bn on debt interest”.The Chancellor dismissed arguments that the lower borrowing forecasts should mean “more unfunded spending” – warning “each year, we are spending £50bn on debt interest”.
The only responsible course of action, he argued, was to continue with austerity, saying: “We will not saddle our children with ever-increasing debts.”The only responsible course of action, he argued, was to continue with austerity, saying: “We will not saddle our children with ever-increasing debts.”