Posted November 24, 2016 Ashley Chadwick
Phillip Hammond has just delivered his first Autumn Budget Statement as Chancellor. It did not contain any major surprises and was overall pessimistic in tone as forecasts and expectations have been lowered as a result of Brexit. Borrowing is set to rise and tax receipts have fallen.
Hammond has created £27 billion buffer to absorb any fiscal shocks caused due to the uncertainty surrounding Brexit. The Office for Budget Responsibility has suggested Brexit would cost taxpayers £59bn over the next five years. As a result of this, austerity would need to be extended until 2021, which will be in the next parliament, whilst also suggesting pensions may not be uprated as generously after 2020.
Forecasts showed a cut to growth. With 2016 growth expected to be 2.1%, 2017 slashed down to 1.4%, with 1.7% growth in 2018. Government borrowing by 2021 is set to be £122 billion higher than expected. Split half between increased spending and extra borrowing due to Brexit.
Prior to the statement, a lot of talk was focussed on those who are ‘Just About Managing’ or JAMs as they are now known. However, there was little to bring them any joy, for the seventh year fuel duty was frozen, but will be covered by a rise in insurance premium tax. There will be an increase in infrastructure spending over the next few years, mainly on Housing and Roads, to help alleviate house price rises.
This will also be his last Autumn Statement, as from 2017 it will become the main Budget, meaning he will also be delivering his first and last Spring Budget next year, as that will become more akin to a statement to respond to the OBR forecasts.
Hammond’s calm delivery did a lot to hide the bad news that formed the budget. Britain is set for a tough time in the wake of Brexit, growth and tax revenues are down and inflation and borrowing are up. Much of this is on the back of uncertainty of Brexit and depending on deals reached once Article 50 is triggered the forecasts could be even worse.