No public spending programme on the horizon yet but UK economy looking healthier, says Hammond. Britain’s Chancellor of the Exchequer used his first Spring Statement to raise economic growth forecasts for the UK.
While ruling out an end to austerity, Philip Hammond told Britain’s House of Commons that borrowing is due to fall and that the economy is now forecast to grow by 1.5% this year – 0.1% higher than previously expected by the Office for Budget Responsibility (OBR) in November. UK economic growth forecasts for 2019 and 2020 remain unchanged at 1.3%.
Austerity: UK reaches debt ‘turning point’
Hammond told MPs that debt as a share of GDP would fall from 2018-19 and that this would be the beginning 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”.
While the Chancellor did not unveil new public spending promises in light of the Hammond, he told the Commons that if these continued, the Government would “have capacity to enable further increases in public spending and investment in the years ahead”.
New tax consultations announced
Breaking with the tradition of the past few years, the Chancellor replaced the customary Spring Budget with a ‘Spring Statement’. Beforehand, the Treasury confirmed that there would be no new policy introductions ahead of this Autumn’s Budget but that the economic picture looked rosier than previously expected.
As such, no new policies were unveiled but Hammond announced a series of consultations on a number of issues, including a possible tax cut for low-polluting vans to help “the great British white van driver go green”, a new ‘tech tax’ on firms such as Google and Facebook, a tax on single use plastic and solutions to help end slow payment of small firms.
The OBR also confirmed that Britain’s Brexit divorce bill will be £37.1bn or 41.4bn euros.
No ‘rabbits from the hat’ means less tinker time, say tax experts
John Cullinane, the Chartered Institute of Taxation’s (CIOT) Tax Policy Director welcomed the lack of new policy initiatives. “A limited statement, with no fiddly tax changes or ‘rabbits from the hat’, but launching a number of broad early stage consultations, is just what we wanted to see,” he said.
“Tax change is one of the greatest causes of complexity, and having two major fiscal events a year encouraged government to keep fiddling about with the system, while frequently not allowing enough time to consult on planned changes.
“Today’s Spring Statement indicates that the Chancellor is serious about limiting new tax announcements to just one annual fiscal event – the Autumn Budget. This should enable officials at HMRC and the Treasury to get off the treadmill of constant change, reducing the strain on the Government’s tax policy resources and freeing up time for better consultation and scrutiny of those proposals that are put forward.”
Statement ‘light on content’, says Fidelity
However, Maike Currie, investment director for Fidelity International, a UK-based investment company, complained that the Spring Statement was “light” on content for hard-pressed British consumers.
“Chancellor Philip Hammond may have described himself as ‘positively Tigger-like’ but for Britain’s squeezed households, today’s Spring Statement was light on substance and notably low key,” she said.
“Arguably, the most eye-catching announcement for our personal finances was the Chancellor’s prediction that real wage growth would turn positive in the first quarter of 2019, which has various implications for our personal finances. Despite a record number of people being in work, our wages have been increasing at a glacial pace.
“This has hurt hardworking households because our earnings have fallen behind inflation, which stood at 3%, according to latest CPI figures. This means that as each month rolls by, we’ve been getting progressively poorer.”
More money needed for NHS, says Labour
Labour’s Shadow Chancellor, John McDonnell, criticised Hammond for not using the Spring Statement to provide additional ’emergency’ funds for Britain’s cash-strapped NHS and public services, saying, “austerity was a political choice not an economic necessity”.