Once again, Chancellor Philip Hammond has demonstrated his commitment to the principle of the Spring Statement as a low-key event, at least in terms of tax and public spending announcements.
With none of the pomp and circumstance of the Autumn Budget, Hammond stuck in large part to summarising key points from the updated economic forecast from the Office for Budget Responsibility (OBR). Though he presented the numbers with a flourish, the OBR was mildly pessimistic in its own presentation, especially around a reduced estimate for growth in 2019, down from 1.6% to 1.2%.
In political terms, however, the real substance of the speech was – like seemingly everything else in 2019 – focused on Brexit. Landing the day after the second ‘meaningful vote’ on Prime Minister Theresa May’s proposal for the terms of the UK’s exit from the EU (defeated only slightly less comprehensively than in January), and only a few hours before a follow-up vote on whether to leave with no deal (no-deal was rejected by only four votes), this was perhaps inevitable.
The Chancellor used his 35-minute speech to hammer home the likely economic impact of leaving the EU without a deal – “significant disruption in the short and medium-term and a smaller, less prosperous economy in the long-term”.
He also took the opportunity to reiterate that planned investment in public services – schools, hospitals, infrastructure – was on the assumption of an orderly exit from the EU, and that it would be back to the drawing board otherwise.
The Chancellor stopped short of firming up plans for a ‘full fiscal event’ (that is, an emergency Budget) in the summer in the event of no-deal, and instead confirmed the launch of a full three-year spending review, to feed into the scheduled Autumn Budget.
Key Points at a Glance
Here are some of the key points that were announced:
- Income Tax Allowance - The personal income tax allowance is set to rise to £12,500 next year.
- Benefits Freeze - It was announced that the 4 year freeze on increases in benefit payments will end next year.
- Subdued Growth - Revised forecast of 1.2% growth for 2019 then 1.4% in 2020, 1.6% in 2021, 2022 and 2023.
- Lower Borrowing - £3bn lower in 2018-19 than forecast at the autumn budget with borrowing to be £29.3bn in 2019-20, then £21.2bn in 2020-21, £17.6bn in 2021-22, £14.4bn in 2022-23 and £13.5bn in 2023-24.
- Debt - Debt is forecast to be 82.2% as a share of GDP in 2019-20 then to fall to 79% in 2020-21, 74.9% in 2021-22, 74% in 2022-23 and finally 73 % in 2023-24.
- Brexit - The previously announced £15.4bn headroom in the public finances that could be used in a no-deal Brexit has increased to £26.6bn.
- Immigration - Paper landing Cards will begin to be abolished at UK points of entry from June including airports and Eurostar terminals, for countries including the US, Australia, Canada,South Korea and Japan.
- Immigration - PhD level roles will be completely exempt from visa caps.
- Housing - £3bn in funding announced to help deliver 30,000 affordable homes.
- Housing - £1bn announced for small and medium-sized builders of homes and £117m from the housing infrastructure fund to unlock up to 37,000 new homes in Cheshire,London, Didcot and Cambridge.
- Climate Change - Fossil Fuel heating systems will be banned in all new houses from 2025.
- Period Poverty - The chancellor says he will make free sanitary products available in secondary schools in England from the next school year.
- Policing - The chancellor says he will make available immediately an additional £100m over the course of the next year, ringfenced to pay for extra police overtime targeted specifically at knife crime.
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