Spring Statement summary: Hammond proclaims "brighter future" within reach amid Brexit turmoil

Rolling coverage of Chancellor Philip Hammond's Spring Statement

Philip Hammond
Chancellor Philip Hammond said UK borrowing was to be lower than previously expected in 2019
  • Lower government borrowing for 2019

  • "Deal dividend" if Brexit impasse broken

  •  £3bn affordable housing scheme

  • Three year spending review announced

3.35pm: Pound rallies, but probably not on the Spring Statement

In late-afternoon, sterling was rallying, up 0.9% at US$1.319 against the dollar, although probably not on the back of Hammond's performance.

Fiona Cincotta, senior market analyst at Cityindex, said that the prospect of a 'no deal' Brexit being rejected by MPs in a vote this evening had put pound traders in a bullish mood, with the OBR's growth forecast cut to 1.2% from 1.6% for 2019 not enough to stem the good feeling.

"Brexit optimism is pushing the pound towards US$1.32, up a staggering 100 points, not bad given the future of the UK looks so uncertainty. Whilst traders are focused on the upcoming vote, it is also worth pointing out that tonight’s vote is not legally binding. Whilst Parliament may express a wish not to leave the EU in a disorderly fashion, that doesn’t mean it won’t happen. At these levels the pound continues to look on the optimistic side, disbelieving that the UK could crash out of the EU in just two weeks."

3.26pm: Forecasts would be "torn up" in the event of 'no deal', says analyst

Laith Khalaf, senior analyst at Hargreaves Lansdown, said that while the Spring Statement showed good news in the form of growing tax receipts which could give the Chancellor "a bit more wriggle room with the country’s finances", a 'no deal' or "bad" Brexit would mean "all the Treasury’s budgetary forecasts would have to be torn up, and the bean counters at the OBR would have to head back to the drawing board".

The financial services firm also revealed from the Statement's small print that taxpayers would be paying around £50bn more in income tax by 2023/24, with self-assessment taxes set to rise to £40.3bn by 2023/24 from £28.3bn in 2017/18.

As a bit of an extra sting, the government was also currently sitting on a £31bn loss from its bailout of Royal Bank of Scotland Group PLC (LON:RBS) during the 2008 financial crisis. 

1.42pm: Summary of the Spring Statement

The Chancellor has concluded his Spring Statement speech.

Highlights included lower government borrowing for 2019, wage growth being revised up to 3% or higher for the next five years, and employment increases.

There was also the announcement of a three-year spending review to be launched before Parliament’s summer recess and concluded alongside the next Autumn Budget.

Funding for technology was also unveiled as well as a review of competition in the digital market by Jason Furman, the former chief economist of Barack Obama.

A new £3bn fund to support the delivery of 30,000 affordable homes will also be set up as well as free sanitary products for schools and around £100mln in extra funding for police forces to help tackle knife crime.

However, with the 'no deal' vote expected later today, the Spring Statement already seems to be shrinking into the background.

Philip Smeaton, chief investment officer of Sanlam UK, said the Statement was "little more than a blip on the political radar".

"Philip Hammond came to the House of Commons with positive news on tax receipts meaning that the government is on course to have a smaller deficit in this financial year. While in theory this should give the chancellor greater wriggle room, he was at pains to point out that the purse strings won’t be loosened until there is greater clarity around the UK’s future relationship with the EU."

Smeaton added, that the statement had "a very clear motive; to dangle the prospect of a ‘deal dividend’ in-front of those MPs who may still change their mind and vote for Theresa May’s withdrawal agreement if it comes back for a third time".

--Adds analyst comment--

1.25pm: And that's it...

The Chancellor has ended his Spring Statement, saying the UK is "a proud successful nation...a brighter future is within our grasp". 

1.20pm: Free sanitary products for next school year and £100mln for police

The chancellor has also said that in the next school year funding will be provided to give schoolgirls access to free sanitary products.

There would also be an extra £100mln available for police forces over the next year to help tackle knife crime.

1.15pm: Housing

Hammond has said 220,000 new homes were built last year, with the government looking to release land to reduce pressure on the housing supply.

He has also announced a £3bn scheme to build 30,000 affordable homes and £717mln to unlock up to 37,000 new houses in West London, Cheshire, Didcot, and Cambridge.

There will also be an end to fossil fuel systems in new homes as part of a climate change effort.

1.10pm: Digital investments

Digital investments have also made an appearance, with £79mln earmarked for the Archer-2 supercomputer at Edinburgh, £45mln for the European Mathematics Institute, and £81mln to develop new types of laser technology.

The UK Competition and Markets  Authority (CMA) is also to undertake a review of the digital advertising market.

1.05pm: Brexit war-chest rises to £26.6bn

Hammond has also said the government’s Brexit warchest has grown to £26.6bn from £15bn thanks to the OBR’s lower borrowing forecasts.

12.57pm: Hammond promises to launch three-year spending review before summer

Assuming a Brexit deal is agreed, Hammond says he will launch a three-year spending review before summer to be completed alongside the Autumn Budget.

He adds that there will be a “deal dividend” which will give the UK more fiscal headroom as well as improving business confidence.

He also says no-deal could lead to “higher unemployment, higher prices, and lower wages”, but added that he believed the UK could secure a deal.

12.51pm: Chancellor begins Statement speech

Philip Hammond has kicked off his Spring Statement a little later than planned by highlighting “other pressing matters” in the commons today, namely the vote on a no deal Brexit later.

He says the vote last night has “left a cloud” over the country but the economy “remains robust”, with growth forecast for the next five years.

Hammond adds that the OBR expects the UK economy to grow every year in the next 5 years. 1.2% this year, 1.4% in 2020, and by 1.6% for each of the final three years of its forecasts. However, one caveat is the 2019 growth forecast had previously been lowered from 1.6% previously.

He also said 100,000 more jobs are expected to be added by 2023, with wage growth of 3% or higher in every year of the forecast period.

Borrowing is also expected to fall to £13.5bn by 2023/24.

--Adds previous growth forecast for 2019--

12.00pm: Chancellor to appear amid Brexit chaos

While last nights vote on the Brexit deal is likely to cast a heavy shadow, the Spring Statement from Chancellor Philip Hammond is due as planned at around 12.30pm.

However, given the Statement has now been effectively sandwiched between Tuesday’s vote on the deal and a one later today over whether the UK should leave in a ‘no deal’ Brexit, the chancellor may end up as little more than a footnote this week.

READ: Spring Statement 2019 - What to expect from Philip Hammond as Brexit looms

Hammond is expected to take a similar approach to his Spring Statement last year, focusing on the health of the UK economy as opposed to any significant policy changes which are normally saved for the Autumn budget.

There could also be a silver lining in the gloom in the form of improved public finances after official figures showed January had the largest monthly surplus in public finances since records began in 1993. Although what happens to the surplus will depend on whether Brexit happens with or without a deal.

Joshua Mahony, senior market analyst at IG, said the statement “could not come at a worse time” following the rejection of Theresa May’s deal as the chancellor will have his hands “largely tied given the huge uncertainty looming”.

"Everyone expects Parliament to reject a no-deal Brexit and approve an extension to article 50, but it may not be as simple as that. Ultimately whether the UK leaves without a deal is down to the EU, who must agree an extension which could come in the form of an unpalatable length of time or with strings attached."

Check back here for rolling coverage of the Spring Statement when it begins at 12.30pm.

--Embeds tweet--

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