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The story of the Spring 2017 Budget explained in seven charts The story of the Spring 2017 Budget explained in seven charts
(35 minutes later)
The tradition of the Spring Budget has gone out with a wimper rather than a bang as far as the economic and public finance forecasts are concerned. Philip Hammond will hold one Autumn Budget a year from 2018. Philip Hammond will hold one Autumn Budget a year from 2018, meaning that this was the last Spring Budget.
In Wednesday's Budget there was very little change in the general picture since the Autumn Statement in November, when there was a significant deterioration pencilled in by the Office for Budget Responsibility due to the fallout from Britain's vote to leave the European Union. That means the tradition has gone out with a wimper rather than a bang as far as the economic and public finance forecasts are concerned. 
Here we tell the story in seven charts, provided for The Independent by Statista. In Wednesday's Budget there was very little change in the general picture since the Autumn Statement in November, when there was a significant deterioration pencilled in by the Office for Budget Responsibility due to the fallout from Britain's vote to leave the European Union.
Here we tell the story of the Budget in seven charts, provided for The Independent by Statista.
There was much anticipation of a better picture on public borrowing relative to November.There was much anticipation of a better picture on public borrowing relative to November.
And the Office for Budget Responsibility delivered that in its outlook for the current financial by slashing its borrowing estimate from £68.2bn to just £51.7bn. And the Office for Budget Responsibility delivered that in its outlook for the current financial year by slashing its borrowing estimate from £68.2bn to just £51.7bn.
However, the OBR has concluded that this is mainly a one-off benefit due to various technical factors affecting the tax take this financial year, such as changes to the timing of the recognition of corporation tax receipts and income shifting by individuals to avoid an increase in the dividend tax. However, the OBR has concluded that this is mainly a one-off benefit due to various technical factors affecting the tax take this financial year, such as changes to the timing of the recognition of corporation tax receipts and individuals shifting their income into different tax years.
The OBR expects borrowing to rise to £58.3bn in 2017-18. The OBR therefore expects borrowing to rise again to £58.3bn in 2017-18.
The profile of annual borrowing is lower in 2018-19 than expected in November. But for the final three years of the forecast it is almost identical.The profile of annual borrowing is lower in 2018-19 than expected in November. But for the final three years of the forecast it is almost identical.
All the various spending and taxing measures in Philip Hammond’s Budget - from the additional money for free schools to the business rates relief for small firms to the increase in National Insurance contributions from the self-employed - are small in the overall context on the public finances and broadly balance out over the next five years. All the various spending and taxing measures in Philip Hammond’s Budget - from the additional money for free schools to the increase in National Insurance contributions from the self-employed - are small in the overall context of the public finances and broadly balance out over the next five years.
  
Overall the OBR thinks the Government will borrow £24bn less than it anticipated in November.Overall the OBR thinks the Government will borrow £24bn less than it anticipated in November.
That’s certainly positive for the public finances, but it pales in comparison with the massive £122bn upward adjustment in its borrowing forecast in the wake of the Brexit vote.That’s certainly positive for the public finances, but it pales in comparison with the massive £122bn upward adjustment in its borrowing forecast in the wake of the Brexit vote.
There have been several other downward revisions in borrowing forecasts between fiscal events in the past, meaning that this one is nothing out of the ordinary.There have been several other downward revisions in borrowing forecasts between fiscal events in the past, meaning that this one is nothing out of the ordinary.
  
Philip Hammond’s new fiscal mandate is for cyclically-adjusted public sector net borrowing to be less than 2 per cent of GDP in 2020-21.Philip Hammond’s new fiscal mandate is for cyclically-adjusted public sector net borrowing to be less than 2 per cent of GDP in 2020-21.
The OBR’s forecast for borrowing in that year is only 0.9 per cent of GDP.The OBR’s forecast for borrowing in that year is only 0.9 per cent of GDP.
This implies that the Mr Hammond could borrow around £23.5bn more in that fiscal year and still be just within his mandate. This implies that the Mr Hammond could borrow around £23.5bn more in that fiscal year and still be (just) within his self-imposed borrowing mandate.
The Treasury has been briefing that the Chancellor is keeping this leeway, rather than using it up in spending or tax cut promises, in case the economy deteriorates further over the next few years due to the Brexit. The Treasury has been briefing that the Chancellor is keeping this leeway, rather than using it up now in spending or tax cut promises, in case the economy deteriorates further over the next few years due to the Brexit and he is forced into borrowing more.
  
Modestly lower annual borrowing also helps keep the national debt to GDP ratio under control. Modestly lower annual borrowing in the latest forecasts also helps keep the national debt to GDP ratio under control.
The ratio is on a slightly lower path according to the OBR relative to November. The ratio is on a slightly lower path according to the OBR relative to November, peaking at 88.8 per cent of GDP and declining to 79.8 per cent in 2021-22.
By falling between 2019-20 and 2020-21 the Chancellor also meets the “supplementary” part of his new fiscal mandate. By falling between 2019-20 and 2020-21 (from 86.9 per cent to 83 per cent) the Chancellor also meets the “supplementary” part of his new fiscal mandate.
  
The 2017 growth forecast has been upgraded to 2 per cent, up from 1.4 per cent in November.The 2017 growth forecast has been upgraded to 2 per cent, up from 1.4 per cent in November.
This is due to stronger growth in the second half of 2016 in the wake of the Brexit vote that the OBR expected. This is mainly due to stronger growth in the second half of 2016 in the wake of the Brexit vote that the OBR expected.
But this is not seen as a lasting improvement. But this is not seen as a lasting improvement.
The OBR has downgraded its growth forecast slightly in 2018, 2019, and 2020.The OBR has downgraded its growth forecast slightly in 2018, 2019, and 2020.
And these growth rates are all below what the OBR was forecasting before the Brexit referendum.And these growth rates are all below what the OBR was forecasting before the Brexit referendum.
  
The foundation of all the OBR’s forecasts is its estimate of the potential productivity growth forecast for the UK economy (measured as output per hour). The foundation of all the OBR’s forecasts is its estimate of the potential productivity growth of the UK economy (measured as output per hour).
This refers to the speed that the economy can grow without setting off excessive inflation.This refers to the speed that the economy can grow without setting off excessive inflation.
This was downgraded in November, with the OBR blaming the negative impact of weaker investment due to Brexit and lower expected migration. This potential estimate was downgraded in November, with the OBR blaming the negative impact of weaker investment due to Brexit and lower expected migration.
And this bleaker outlook has not changed since November, confirming that the OBR has not had a change of mind over the negative impact of leaving the European Union. And this bleaker outlook has not changed since November, confirming that the OBR has not had a change of mind over the harmful economic impact of leaving the European Union.
  
The OBR projected a big squeeze on average real earnings in November due to a jump in inflation stemming from the collapse in the pound since the referendum. The OBR projected a big squeeze on average real earnings in November due to a jump in inflation stemming from the slump in the pound since the referendum.
That does not change much in this forecast.That does not change much in this forecast.
Average earnings growth is expected to moderately higher in 2017. Average earnings growth is expected to be moderately higher in 2017.
But the forecast has been downgraded for the four subsequent years.But the forecast has been downgraded for the four subsequent years.
Combined with essentially the same inflation forecast, the OBR’s projections imply real wage growth almost disappearing this year and rising by just 0.4 per cent in 2018. Combined with essentially the same inflation forecast as in November (with inflation peaking at 2.4 per cent of GDP) the OBR’s projections imply real wage growth almost disappearing this year and rising by just 0.4 per cent in 2018.
This means living standards are set to come back under pressure soon, after a couple of years of rising real wages. All this means that, despite an upwards revision in overall GDP growth in 2017, living standards are set to come back under serious pressure for the next two years as we prepare to leave the EU.