Finance Minister Philip Hammond has outlined cautious spending plans to a nation bracing for the shock of Britain’s departure from the European Union amid a steady worsening in economic forecasts.
Britain’s Treasury chief revealed yesterday a deteriorating outlook, as a slowing economy and stubborn deficit mean there is little money to increase public spending in the face of demands from teachers, firefighters and the military. Adding to the pressure is the government’s need to preserve state coffers for potential Brexit turmoil.
Hammond offered £3 billion over two years to prepare for Brexit, and some relief for first-time home buyers, but otherwise sidestepped eye-popping initiatives.
“We are at a turning point in our history,” Hammond told the House of Commons. “And we resolve to look forwards, not backwards, to build on the strengths of the British economy.”
The Chancellor had been under pressure to appear upbeat about the economy’s prospects after Brexit. Prime Minister Theresa May’s weakened government was hoping for excitement without controversy – particularly since anything too revolutionary might get voted down.
He tried to paint an optimistic vision of a “global Britain” that would embrace the technological revolution and capitalize on the opportunities presented by leaving the EU. He promised an approach that would be “balanced” amid pleas to end austerity.
And though Hammond did his best to sound cheerful, the section of the speech that he himself described as “economicky” revealed the painful truth. The economy is slowing.
The independent Office of Budget Responsibiltiy now expects to see economic grow of 1.5 percent in 2017, 1.4 percent in 2018, and 1.3 in 2019 and 2020, before picking back up to 1.5, and finally 1.6 percent in 2022. By contrast, the neighbouring eurozone is booming, with annual growth of about 2.5 percent at last count.
At the same time, British public finances are weakening. Public borrowing rose more than expected in October, driven by higher borrowing costs. Borrowing is at a similar level to that before the 2007-2008 financial crisis, the House of Commons said.
Public sector net debt now totals 87.2 percent of gross domestic product, compared with less than 40 percent in 2007, the Office for National Statistics said Tuesday.
The Office of Budget Responsibility has warned that it will also cut its forecast for productivity over the next five years. That is expected to mean lower tax revenues for the state and make it harder for Hammond to ease austerity and boost public sector pay.
Opposition leader Jeremy Corbyn was quick to challenge the result.
“Our country is marked by growing inequality and injustice. We were promised, with lots of hype, a revolutionary budget,” he said. “The reality is nothing has changed. People were looking for help from this budget and they’ve been let down, let down by a government that like the economy they’ve presided over is weak and unstable and in need of urgent change.”