Autumn Statement: Britain’s debt pile poised to rise amid Brexit hit and Philip Hammond spending spree
- Credit: PA
Britain is poised for austerity beyond the end of the decade as the Chancellor added to the country's debt mountain with an infrastructure spending spree in the wake of predictions Brexit will cost the economy £60bn over the next five years.
In his first Autumn Statement, Philip Hammond claimed to be confronting the economy's weaknesses head on with billions of pounds for roads, broadband and science - although there were few details in his green book about how much of the new money would be spent in our counties beyond the promise of a study for the four villages A12 bypass, now known as Suffolk's Energy Gateway.
Five months after the nation voted to leave the European Union, the Office for Budget Responsibility - an independent economic watchdog - said the economy would be £122bn worse than previously forecast by the end of the decade, which they said included a £60bn hit from the Brexit vote.
Instead of the previously forecast £10.4bn surplus Mr Osborne had been hoping to achieve in 2019/20, the UK will still have a deficit of £20.7bn at the end of a decade of austerity, it said.
Mr Hammond told MPs national debt will breach the symbolically important 90pc of GDP mark in 2017-18.
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Speaking in the House of Commons the Chancellor - a former Essex car salesman - said his task was 'to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow'.
But Labour's shadow chancellor John McDonnell said the Autumn statement proved Britain was facing Brexit 'unprepared and ill-equipped' and he highlighted the 'abject failure' of six years of Tory rule. He said the Tory handling of Brexit was 'chaotic' and offered no hope for future prosperity.
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The UK Independent Party's only MP Douglas Carswell dismissed claims debt levels were a reflection of Brexit, saying it was down to the failure of former Chancellor George Osborne to 'match his words with deeds and get a grip on public spending'.
The Office for Budget Responsibility predicted some £16bn of the financial black hole would be caused by lower immigration, though it added the figure, largely caused by the loss of taxes which migrants would otherwise pay to the Treasury, would be even higher if the Government achieved its ambition of reducing net migration to the tens of thousands.
But its calculations did not include any gains from ceasing contributions to the EU's Budget, currently running at around £13 billion a year.
Overall, the OBR predicted that potential economic growth over the five-year period would be 2.4 percentage points lower than if the UK had voted to Remain in the EU. It downgraded growth for next year from the 2.2pc predicted in March to just 1.4pc and for 2018 from 2.1pc to 1.7pc.
Eurosceptics hit out at the 'gloomy' OBR forecasts and insisted that post-Brexit Britain's economy will be stronger than predicted.
But Mr Hammond said the slowdown was due to 'lower investment and weaker consumer demand, driven, respectively, by greater uncertainty and by higher inflation resulting from sterling depreciation'.
Campaigners for a so-called 'soft Brexit' seized on the figures. Liberal Democrat and Norfolk MP Norman Lamb said: 'The OBR has set out in black and white the facts that Leavers can't bring themselves to hear – immigration is good for our economy, and hard Brexit will make our country worse off.
'This just underlines the fact that Britain after Brexit must remain open to talent from around the world, and stay an integral member of the single market.'
Amid an Autumn Statement light on announcements, Mr Hammond announced he would borrow £25.9bn over the coming five years 'to kick-start a transformation in infrastructure and innovation investment'.
His package of plans also included a number of measures to help the low-paid workers who are 'just about managing' - known in Whitehall as 'the Jams' - who Prime Minister Theresa May has identified as a priority.
<t> A rise in the minimum wage for over 25s - the so-called National Living Wage - from £7.20 to £7.50 in April 2017, worth over £500 to a full-time worker
<t> The continuation of the freeze in fuel duty, saving the average car driver £130 a year
<t> Banning fees charged by letting agents to tenants
<t> A reduction in the Universal Credit (UC) taper rate from 65pc to 63pc, allowing people to keep more of the benefit as they work. But critics said the UC reform failed to compensate for the losses low-paid workers will face from previously-announced cuts.
As part of his measures aimed at boosting the economy and tackling the country's productivity crisis, Mr Hammond promised:
<t> A new National Productivity Investment Fund of £23 billion to be spent on innovation and infrastructure over the next five years
<t> Additional investment in research and development, rising to an extra £2 billion per year by 2020/21
<t> A £2.3 billion Housing Infrastructure Fund aimed at delivering up to 100,000 new homes in high-demand areas and £1.4 billion made available to deliver 40,000 additional affordable homes
<t> An additional £1.1 billion investment in English local transport
<t> Investment of more than £1 billion in digital infrastructure and 100pc business rates relief on new fibre infrastructure
Mr Hammond said he had told the National Infrastructure Commission to make plans on the assumption that the Government would invest between 1pc and 1.2pc of GDP in economic infrastructure every year from 2020.
In order to help pay for the measures, Mr Hammond set out a range of tax hikes, including a crackdown on 'unfair' salary sacrifice schemes, a rise from 10pc to 12pc in insurance premium tax and a crackdown on tax dodges aimed at raising £2bn over five years.
Confirming that Whitehall spending squeezes will continue, Mr Hammond said plans set out in 2015 would remain in place.
The £3.5 billion of efficiency savings announced at the Budget are to be delivered in full, but departments which meet their targets would be able to reinvest £1 billion of efficiency savings in priority areas in 2019/20.
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