Growth forecasts upgraded as chancellor points to “light at the end of the tunnel”
PUBLISHED: 13:52 13 March 2018 | UPDATED: 13:52 13 March 2018
The government’s official forecaster has upgraded projections for growth and predicted falling inflation, debt and borrowing, in a boost for chancellor Philip Hammond.
In his first spring statement to the House of Commons, Mr Hammond revealed that the Office for Budget Responsibility now expects state borrowing to be £45.2bn this year - some £4.7bn lower than predicted in November and £108bn lower than in 2010.
The government is set to run a “small” surplus on day-to-day spending in 2018/19, borrowing only for capital investment, said the Chancellor. And the Government is forecast to hit its borrowing target for 2020/21 with £15.4bn headroom.
Debt is forecast to be 1% lower than expected at the time of last autumn’s Budget, peaking at 85.6% of GDP in 2017/18, before falling gradually to 77.9% in 2022/23.
Mr Hammond said the forecasts confirmed “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. Light at the end of the tunnel”.
The OBR upgraded its prediction for GDP growth in 2018 from 1.4% to 1.5%. Growth in 2017 was 1.7%, compared with the 1.5% forecast by the OBR last year.
Forecast growth is unchanged at 1.3% in 2019 and 2020, before rising to 1.4% in 2021 and 1.5% in 2022, the Chancellor said.
Mr Hammond hinted at the possibility that austerity will be eased in this autumn’s Budget.
He told MPs: “If, in the autumn, the public finances continue to reflect the improvements that today’s report hints at, then ... I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers’ money is wasted.”
Mr Hammond rejected Labour “doom and gloom” over the state of the economy, saying the recession repeatedly forecast by shadow chancellor John McDonnell since 2010 had failed to materialise.
Instead, he said the economy had grown in every year of the Conservative-led governments, with manufacturing enjoying its longest unbroken run of growth for 50 years, three million additional jobs and higher levels of employment in every part of the UK.
This amounted to “solid progress towards building an economy that works for everyone”, he told MPs.
And he claimed that Labour plans would soak up all of the reduction in borrowing achieved over the past eight years, adding £350bn to debt and taking the figure over 100% of GDP.
The government had taken “another step on the road to rebuilding the public finances decimated by the party opposite, and one that they would again place at risk,” he told MPs.
Playing on his own reputation for gloom, he joked: “If there are any Eey-ores in this Chamber, they are over there. I, meanwhile, am at my most positively Tigger-like.”
But shadow chancellor John McDonnell labelled Mr Hammond’s “complacency” as “astounding” as he responded to the statement.
Mr McDonnell told the Commons: “We face in every public service a crisis on a scale we’ve never seen before.”
And referring to the chancellor’s Eeyore reference, shadow communities secretary Andrew Gwynne joked that Mr Hammond was “talking Pooh”.
Mr McDonnell said the chancellor had shown “astounding” complacency in failing to deliver a funding boost for public services like health, education, councils and the police in his 26-minute statement
Public services cannot wait eight months for the autumn Budget for an injection of funds, warned Mr McDonnell, adding: “For eight years they have been ignored by this government and today they’ve been ignored again.
“The chancellor has proclaimed today that there is light at the end of the tunnel. This shows just how cut off from the real world he is.”