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Spring Statement: Brexit has had less impact than feared, says OBR

Live coverage of Chancellor Philip Hammond’s Spring Statement at 12.30pm
Philip Hammond
There was no red box with the Spring Statement
  • OBR revises GDP forecasts

  • Inflation set to ease over next year

  • Borrowing forecasts lowered

  • Hammond says Brexit talks have made progress

 

1.30pm: Economy has slightly more momentum in near-term, says OBR

The OBR has released a statement explaining its revised forecasts for UK economic growth.   

“The economy has slightly more momentum in the near term, thanks to the unexpected strength of the world economy, but there seems little reason to change our view of its medium-term growth potential,” it said.

“And while the budget deficit looks likely to come in almost £5 billion lower this year than we expected in November, the explanations for this imply smaller downward revisions for future years. As a result, the Government’s headroom against its fiscal targets is virtually unchanged.”

The OBR said Brexit appears to have slowed the economy but by less than it had feared - thanks in part to the willingness of consumers to maintain spending by reducing their saving.

“But it is important not to put too much weight on early estimates of economic activity either side of the referendum, not least because the bottom-up measures of GDP growth in the National Accounts differ as to whether growth slowed down, speeded up or remained stable between 2016 and 2017.”

1.10pm: Hammond's complacency is astounding, says shadow chancellor 

Hammond has finished his Spring Statement, saying he wants the UK to be a force for good and a country everyone can be proud of.

Shadow Chancellor John McDonnell responded to the statement by saying Hammond's "complacency is astounding". 

He said public service workers, including doctors and nurses, need Hammond to take action. 

"The chancellor says there is light at the end of the tunnel. That shows how cut off he is," said McDonnell.

The government has put £700mln on the national debt despite promising to have eliminated the deficit by 2015, he added. 

1.05pm: Air pollution and plastic

Hammond said the government will tackle air pollution and plastic waste. 

The Chancellor will publish a call for evidence on whether the tax relief for agricultural diesel contributes to air pollution. He will also consult on tax cuts for low-emission vans.

Hammond said the Treasury will launch a call for evidence to examine options on reducing single-use plastics, including taxes. 

1.00pm: Education, housing and broadband

Hammond said the education secretary will release up to £80m to help small firms take on apprentices.

On housing, he said there is an investment programme of £44bn. The government is on track to raise the housing supply to 300,000 by the mid-2020s, he said. 

12.50pm: Brexit spending plans

The UK government will negotiate a Brexit that delivers prosperity and jobs, Hammond said. 

He said "substantial progress" has been made in Brexit talks.

The Treasury will today publish details on how it plans to spend the £1.5bn set aside for Brexit planning, he added.

It will also announce how some of the £190mln will be spent on improving full-fibre broadband.

12.45pm: Less income tax

Hammond said in the next tax year taxpayers will pay £1,075 less in income tax than in 2010-11.

He added that there will be more pay for NHS employees if Management and workers agree on a deal. 

12.40pm: Inflation set to ease, borrowing forecasts lowered

The OBR expects inflation to fall from its peak of 3% to the Bank of England's 2% over the next 12 months. 

The Chancellor’s predicts real wage growth will turn positive in the first quarter of 2019.

The borrowing forecast for 2017-18 is £45bn, £13bn less than forecast a year ago and £4bn less than Autumn forecast. But the structural deficit is almost unchanged in 2019-20.

The new forecasts for government borrowing as a percentage of GDP are 1.8% in 2018-19, 1.6% in 2019-20, 1.3% in 2020-21, 1.1% in 2021-22 and 0.9% in 2022-23.

12.35pm: OBR revises GDP forecasts

The Office for Budget Responsibility has revised its economic growth forecast for 2018 to 1.5% from a previous estimate of 1.4%. The body left its forecasts unchanged for 2019 at 1.3%.
 
It predicts GDP to remain at 1.3% in 2020, also unchanged.
 
In 2021, GDP is forecast to rise to 1.4%, down from the 1.5% expected in the November budget. 
 
GDP in 2020 is expected to grow 1.5%, down from the prior estimate of 1.6%. 
 
12.30pm: Hammond kicks off statement

Philip Hammond has kicked off its Spring Statement by saying the UK was the only major economy to make major tax changes twice a year.

The economy has seen higher employment and lower unemployment, adding 3 million jobs, he said. Wages of the lowest paid are up by almost 7%, he added.

12.10pm: What to expect

Philip Hammond is expected to keep his Spring Statement short and sweet at 20 minutes.

The budget statement is also tipped to include improved economic growth and borrowing forecasts. Those looking for any major spending or policy announcements will be left disappointed. 

Hammond's Treasury deputy Liz Truss said there would be "no red box, no rabbits out of the hat and no tax changes".

"Today’s brief address will likely see the first full analysis of Brexit’s impact on UK public finances, good news in terms of lower public borrowing and economic growth higher (but not necessarily an end to austerity), as well as announcement of a range of consultations on issues such as tax for small businesses, inheritance tax for individuals and a levy on ‘single use’ plastics," said Accendo Markets analysts Mike van Dulken & Henry Croft.


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