Hammond pleads with MPs to lift Brexit ‘cloud of uncertainty’
The Chancellor talked up the economy but the OBR cut growth forecast.
Philip Hammond has pleaded with MPs to back a Brexit deal to lift the “cloud of uncertainty” hanging over the economy as the Budget watchdog slashed this year’s growth forecast.
The Chancellor said the Office for Budget Responsibility has forecast growth of 1.2% this year – a downgrade from the 1.6% forecast at the Budget in 2018.
Delivering his Spring Statement after MPs rejected Theresa May’s Brexit deal for a second time on Tuesday night, the Chancellor said the issue was “damaging our standing and reputation in the world”.
Despite the Brexit uncertainty, Mr Hammond set out plans for:
– £100 million this year for police forces in England to pay for overtime aimed at addressing the “epidemic” of knife crime
– A £3 billion affordable homes guarantee scheme, to support delivery of around 30,000 homes
– A “Future Homes Standard” setting out the end of fossil-fuel heating systems in all new houses from 2025
– The provision of free sanitary products in secondary schools and colleges in England from the next school year.
But Mr Hammond warned that economic progress would be put at risk unless MPs took the threat of an imminent no-deal Brexit off the table in the vote on Wednesday evening.
In an impassioned statement he said: “Last night’s events mean we are not where I hoped we would be today.
“Our economy is fundamentally robust. But the uncertainty that I hoped we would lift last night, still hangs over us.
“We cannot allow that to continue. It is damaging our economy and it is damaging our standing and reputation in the world.
“Tonight, we have a choice. We can remove the threat of an imminent no-deal exit hanging over our economy.
“Tomorrow, we will have the opportunity to start to map out a way forward towards building a consensus across this House for a deal we can, collectively support, to exit the EU in an orderly way to a future relationship that will allow Britain to flourish, protecting jobs and businesses
“A brighter future is within our grasp. Tonight, let’s take a decisive step towards seizing it and building a Britain fit for the future; a Britain the next generation will be proud to call their home.”
The OBR forecast growth of 1.2% this year, 1.4% next year and 1.6% in the following three years.
Mr Hammond said: “Cumulative growth over the five years is now slightly higher than the Budget forecast.”
The Chancellor said there was “good news” on the public finances, with borrowing this year 1.1% of GDP – £3 billion lower than forecast at the Autumn Budget – and forecast to reach £13.5 billion in 2023/24, its lowest level in 22 years.
Debt is forecast to be lower in every year than predicted at the Budget, falling to 82.2% of GDP next year, then 79%, 74.9% and 74% in the following years and 73% in 2023/24.
OBR figures handed Mr Hammond a £11 billion windfall, in what Treasury sources described as an “extraordinary” indication of how well the economy is performing.
Better-than-expected income tax and national insurance revenues, resulting from wages outstripping inflation, mean the Chancellor is on track to meet his targets with a “headroom” of £26.6 billion to spare, rather than the £15.4 billion forecast at the time of the autumn Budget.
Mr Hammond said this cash could go towards Government priorities like public services, capital investment, low taxes and debt reduction, unless it was soaked up responding to a no-deal Brexit.
The Chancellor said he will decide in the Spending Review later this year how to share the proceeds from any Brexit “deal dividend”.
But he warned: “Leaving with no deal would mean significant disruption in the short and medium-term and a smaller, less prosperous economy in the long-term, than if we leave with a deal.
“Higher unemployment; lower wages; higher prices in the shops. That is not what the British people voted for in June 2016. ”
Announcing the emergency funding for police forces struggling to cope with violent crime, Mr Hammond acknowledged “action is needed now”.
He said police funding was already due to rise by up to £970 million from April but it would take time to recruit and train extra officers.
Mr Hammond said: “The Prime Minister and I have decided, exceptionally, to make available immediately to police forces in England an additional £100 million over the course of the next year, ring-fenced to pay for additional overtime targeted specifically on knife crime and to fund new Violent Crime Reduction Units to deliver a wider cross-agency response to this epidemic.”
The Chancellor’s announcements were dismissed by shadow chancellor John McDonnell who said: “We have just witnessed a display by the Chancellor of this Government’s toxic mix of callous complacency over austerity and … mishandling of Brexit.”
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