United Kingdom economy to grow slightly more quickly, Hammond predicts

SPRING STATEMENTMarch 12 2018 12:00pm The Times Spring statement Chancellor will get stuck into chewing gumnew Oliver Wright Policy Editor

SPRING STATEMENTMarch 12 2018 12:00pm The Times Spring statement Chancellor will get stuck into chewing gumnew Oliver Wright Policy Editor

Despite a strong global recovery, the British economy is now expected to grow by 1.5 percent this year, just a touch higher than a forecast of 1.4 percent in November, the independent Office for Budget Responsibility said.

The new forecasts for government borrowing as a percentage of GDP are 1.8% in 2018-19, 1.6% in 2019-20, 1.3% in 2020-21, 1.1% in 2021-22 and 0.9% in 2022-23.

The predictions, made by Office for Budget Responsibility, would put the United Kingdom among the slowest among major economies as global growth picks ups, and are also drastically more pessimistic than those from before the Brexit referendum.

In the wake of the upgraded forecasts, the Chancellor signalled he could turn on the spending taps for public services at his Budget later this year, along with a pending pay rise for NHS staff.

"But it is important not to put too much weight on early estimates of economic activity either side of the referendum, not least because the bottom-up measures of GDP growth in the National Accounts differ as to whether growth slowed down, speeded up or remained stable between 2016 and 2017". It's true that the country's debt burden is about to fall. The decision phase of the Brexit talks will shortly be upon us.

"We should not get carried away".

It estimates the total cost of the financial settlement with the European Union will be £37.1bn.

The average expected growth rate over the next five years is half the pace of before the 2007-09 financial crisis.

Hinting at a boost in public spending, the Chancellor said: "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".

Britain will spend almost half a decade - from 2040 to 2064 - paying off what it owes in pension liabilities, as illustrated another graph, shown below.

However, it warned that this so-called dividend should not be viewed in isolation.

However, the OBR has revealed today this sum will be paid off via staggered contributions lasting to the year 2064.

"Add to that the fact that employment levels remain robust, debt is coming down as a proportion of GDP, and it is hard not to come to anything other than the conclusion that growth in United Kingdom plc will be ok".

Not really, according to Paul Johnson, director of the Institute for Fiscal Studies.

Mr Hammond said there had been "solid progress towards building an economy that works for everyone" with growth every year since 2010.

He told the BBC: "The growth forecasts are about 1.5% growth each year for the next few years which is better than forecasting a recession, but it's an terrible lot worse than you might reasonably expect".

Moving on to the next slice of good news, the chancellor was able to confirm that inflation would "fall back to target over the next 12 months" - arguably giving the government and Bank of England some wriggle room to further delay monetary tightening.

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