OBR: Little has changed really
The Office for Budget Responsibility has released its verdict on the UK economy.
And it points out that Britain’s economy isn’t in a much better place than four months ago, when the last Budget was released.
The OBS says:
The economy has slightly more momentum in the near term, thanks to the unexpected strength of the world economy, but there seems little reason to change our view of its medium-term growth potential. And while the budget deficit looks likely to come in almost £5 billion lower this year than we expected in November, the explanations for this imply smaller downward revisions for future years. As a result, the Government’s headroom against its fiscal targets is virtually unchanged.
On Brexit, the fiscal watchdog says there’s been less damage than feared:
The vote to leave the European Union appears to have slowed the economy, but by less than we expected immediately after the referendum – thanks in part to the willingness of consumers to maintain spending by reducing their saving. 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.
And on productivity, the OBR warns that recent improvements may not last.
The biggest surprise in the economic data released since November is that productivity growth – measured as output per hour – has been much stronger than expected. But that reflects a much weaker path for average hours worked, rather than stronger output or weaker employment growth.
The fall in average hours over the second half of 2017 is the largest since mid-2011 and second largest since the financial crisis. But in 2011 the fall in hours and associated pick-up in productivity growth proved to be erratic and were soon reversed. We assume for now that the same will be true on this occasion.
OBR verdict Photograph: OBR
More from the IFS’s Paul Johnson:
Crucial OBR judgment: they believe the economy is running 0.3% above potential – despite years of poor growth economy in danger of over heating. One reason why better borrowing figures this year don’t translate into better figures in medium term.
McDonnell says today’s statement could have been a turning point. But it is a missed opportunity.
The Conservatives chose to cut budgets for the super-rich, he says.
He says we were never all in this together.
He says today we have had the “indefensible spectacle” of the chancellor congratulating himself on marginally improved forecasts, while refusing to help councils.
McDonnell says asking NHS workers to give up a day’s holiday (reportedly a government proposals as part of the pay negotiations) is mean-spirited.
And he says the government is today trying to get MPs to vote to take away free school meals from 1 million pupils.
(That’s a reference to one of the votes coming up this afternoon on statutory instruments. The government contests McDonnell’s interpretation. There is a briefing on the issue here.)
at 9.12am EDT
John McDonnell’s response
John McDonnell, the shadow chancellor, is responding to Hammond.
He says Hammond’s complacency is “astounding”. Public service workers like doctors and nurses need Hammond to act now.
Hammond says there is light at the end of the tunnel. That shows how cut off he is, McDonnell says.
He says this is a government that single-handedly destroyed the solar panel industry.
Hammond talks about the fourth industrial revolution, but Britain has the lowest rate of industrial robot use in the OED.
He says Tory MPs can shout all they want, but people out there know the crisis in our communities.
Hammond makes great play of reducing debt. But he has put £700m on the national debt, he says.
He says the Tories said the deficit would be eliminated by 2015.
George Osborne has been tweeting about achieving three years late a deficit target Osborne actually abandoned.
More details of the plastic waste consultation:
On environmental issues Philip Hammond says the Government is making a call for evidence on single use plastics, the supply chain, alternatives and recycling opportunities #SpringStatement
Hammond says Treasury launching a “call for evidence” to look at options on reducing single use plastics – including taxes. Shout from Labour benches of “get on with it!”
Hammond is now winding up, saying he wants the UK to be a force for good, and a country everyone can be proud of.
Hammond says he will publish a call for evidence on whether the tax relief for agricultural diesel contributes to air pollution.
And he will consult on tax cuts for low-emission vans.
And he will consult on what can be done to reduce the use of plastics.
This is not intended to raise revenue; it is about changing behaviour.
Revenue raised will be invested in remedies.
And he is committing £20m now to help universities deliver solutions.
- Hammond announces consultation on using tax increases to reduce plastic use, with £20m set aside now to help universities develop solutions.
Hammond says he will consult on a new VAT collection mechanism for online payments.
And he will consult on how to encourage digital payments.
Hammond turns to housing.
There is an investment programme of £44bn, he says.
He says Oliver Letwin’s review of the planning system and its impact on housing has reached its initial findings. He will publish Letwin’s statement. The full report will be published at the time of the budget.
Hammond lists some infrastructure projects the government is funding.
He says he is today inviting cities to bid for money from a new transport fund announced in the budget.
at 8.59am EDT
Here’s some reaction to the new growth figures, from Grant Thornton’s Adam Jackson …
#SpringStatement #GDP figures: compared to November 2017 forecast, today OBR forecasts 0.1% increase in 2018; same GDP growth rate for 2019 and 20; and then a 0.1% lower GDP growth in 2021 and 2022. So slight improvement this year outweighed by slight decrease in 2021 and 2022. https://t.co/sI9u1lpHCy
… and liveblog reader Adrian Jenkins.
Growth forecasts higher in the short term but a little worse in 2021 and 2022. To misquote Sven Goran Eriksson – first half good, second half not so good https://t.co/zb2RJdbrCf
at 8.55am EDT
Hammond says the ONS has been asked to work on a better assessment of human capital, so investment can be better directed.
at 8.59am EDT
Hammond says the education secretary will release up to £80m to help small firms take on apprentices.
Hammond says the government is committed to training. Next month the construction skills fund will be open for bids.
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