Chancellor of the Exchequer, Philip Hammond, delivered his second Spring Statement on 13 March 2019 at an inauspicious time, following a dramatic rejection of the Government’s Brexit deal the previous evening. He commented: “Last night’s vote leaves a cloud of uncertainty hanging over our economy, and our most urgent task in this House is to lift that uncertainty”.
The Chancellor reported the Office for Budget Responsibility’s (OBR) forecast for the UK economy, which show nine consecutive years of growth in Gross Domestic Product (GDP). OBR predict growth for 2019 of 1.2%, down from 1.6% in the Autumn Budget.
At the same time, the country’s cyclically adjusted budget deficit is predicted to fall to 1.3% of GDP in 2020 and is estimated to fall to 0.5% by 2023, whilst CPI inflation will remain close to its 2% target for the duration of the forecast period.
Borrowing is forecast to fall from £29.3bn in 2019/20, £21.2bn in 2020/21 and to £13.5bn in 2023/24, its lowest level in 22 years, if achieved.
Employment and wages
Official figures show that, over the past nine years, employment in the UK has grown by 3.5 million. The OBR believe this figure will increase by a further 600,000 by 2023. The unemployment rate is now at its lowest recorded level since 1975, at 4.0% of the working population. The OBR expect this trend to continue for the next five years.
The Chancellor was happy to announce that the Government had overseen the building of 220,000 new homes in 2018. The plan includes a five year £44 billion housing programme, raising annual housing supply to 300,000 by the mid-2020s, the Help-to-Buy Equity Loan Scheme and the abolition of Stamp Duty for most first-time buyers. These measures have combined to restore the proportion of first-time buyers to above 50% for the first time in a generation. A new £3 billion Affordable Homes Guarantee Scheme was also announced, which will support delivery of 30,000 homes.
Public spending and technology
The Chancellor announced new important spending initiatives as well as emphasising the previous announcement of an additional funding of £34 billion per year for the NHS.
New spending included:
“We lead the world” in climate change, boasted the Chancellor, as he announced the UK is reducing the carbon intensity of our economy faster than any other G20 economy.
He intends to introduce a Future Homes Standard that will ensure that new homes are not permitted to utilise fossil fuel heating systems from 2025.
He also stated that a stated that comprehensive global review of the link between biodiversity and economic growth is being launched this year.
Philip Hammond closed his Spring Statement with these words:
“We have huge opportunities ahead of us: our capital is the world’s financial centre; our universities are global powerhouses of discovery and innovation; our businesses are at the cutting edge of the tech revolution. And we have shown that we are not shy, as a nation, of the tasks that lie ahead.
“We are addressing the environmental challenges that threaten our planet; we are building the homes that the next generation desperately need. We are investing in our future, tackling the productivity gap and embracing technological change, rising to its challenges and seizing its opportunities.
“Our potential is clear; our advantages are manifest; we are the fifth largest economy in the world. A proud, successful, outward-looking nation, with no limit to our ambition and no boundaries to what we can achieve. A brighter future is within our grasp; a Britain the next generation will be proud to call their home.”
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