Chancellor of the Exchequer, Philip Hammond, delivered his first Spring Statement to Parliament on 13 March 2018. In a break with recent tradition, the chancellor did not use the financial statement midway between Budgets to present a ‘mini-Budget’ or pre-Budget report.
The chancellor’s Spring Statement 2018 is a response to the Office for Budget Responsibilities’ (OBR’s) latest economic and fiscal forecasts and provides an opportunity to set out government priorities and consultations ahead of the Autumn Budget later this year.
Projections for growth
Mr Hammond upgraded projections for growth and predicted falling inflation, debt and borrowing in his 26-minute statement. He claimed the UK economy had reached a turning point and there was ‘light at the end of the tunnel’.
The UK economy will grow faster this year than previously forecast and the deficit will be some £5 billion lower, with the overall economic and fiscal picture ‘broadly the same’ according to the OBR.
Future spending rises
He ruled out an immediate end to austerity but hinted at possible spending rises in the future, announcing to the House of Commons that growth was forecast to be 1.4% this year, 0.1% higher than forecast by the OBR in November, with the forecast for 2019 and 2020 unchanged at 1.3%.
Mr Hammond said debt would fall as a share of Gross Domestic Product (GDP) – the main measure of UK economic growth based on the value of goods and services produced during a given period – from 2018/19, which would be the start 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’.
Public sector borrowing
Mr Hammond revealed that public sector net borrowing in 2017/18 would be £45.2 billion, down from the £49.9 billion forecast in November and as a share of GDP that would be 2.2%, lower than the 2.4% previously expected.
He also hinted at possible spending increases to come in his Autumn Budget when he will ‘set an overall path for public spending for 2020 and beyond’ with a detailed spending review in 2019.
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