Spring Statement 2018: ‘light at end of tunnel’

Chancellor Philip Hammond took just 30 minutes to cover the key points of his first Spring Statement, which included higher than expected growth forecasts in the short term, a surplus in the current account in 2018/19, and the announcement of a raft of consultations in areas including the digital economy, cashless payments, and single-use plastics

Hammond said the Spring Statement reflected the decision to move to having a single fiscal event in the autumn, and as such there was no red book and his focus was on the economic outlook and fiscal progress since last year’s two Budgets.

The Chancellor reported the Office for Budget Responsibility (OBR) had revised its forecast up for 2018 from 1 .4% to 1.5%. Growth is unchanged at 1.3% in 2019 and 2020 – before picking up to 1.4% in in 2021 and 1.5% in 2022.

Inflation is expected to return to its 2% target over the next 12 months. Borrowing is forecast to be £45.2bn this year, which is £4.7bn lower than forecast last November and £108bn lower than 2010.

Borrowing as a percentage of GDP is 2.2% GDP, and is predicted to fall to 1.8% in 2018-19, 1.6% in 2019-20, 1.3% in 2020-21, 1.1% in 2021-22, and reach 0.9% in 2022-23.

Hammond said that in in 2018-19 there will be a surplus on the current account.

‘We are seeing the first fall in debt in 17 years, which marks a turning point in our nation’s recovery from the financial crisis a decade over. There is light at the end of the tunnel,’ Hammond said.

He indicated that if the public finances continue to improve, ‘there is capacity to enable further increases in public spending and investment in the years ahead.’

The Chancellor said the revaluation of business rates previously announced will be brought forward to 2021 and the promised move to triennial review will take effect from then.

The departmental allocations of the £1.5bn of Brexit preparation funding for 2018/19 will be announced imminently, along with the first allocations of the £190m funding for full fibre high speed broadband, and a £25m fund for 5G testbeds. There will also be £50m of funding from April to help employers roll out new T level work placements, as well as £80m of funding to support small businesses in engaging apprentices.

The Spring Statement included a number of announcements of consultations, including a call for evidence to help the least productive businesses learn from the most productive and a consultation on late payment issues.

There is to be a consultation on improve tax system self-funding training by employees and the self employed, while the ONS is to develop more sophisticated measure of  human capital so future investment better targeted.

In addition, Hammond announced a call for evidence on ensuring online platforms help user pay right amount tax, with a consultation on a new VAT collection mechanism for online sales, ‘so the tax reaches the Treasury’.

There is a call for evidence on ways to encourages cashless and digital payments, while ensuring cash remains available to those who need it, and a consultation on the use of non-agricultural red diesel tax relief’s contribution to poor air quality, as well as proposals to reduce vehicle excise duty for the cleanest vans.

As widely expected, Hammond made references to the problems of plastic littering and the threat to the ocean, and announced a call for evidence on ways to tackle what he called a ‘complex issue’, looking at the whole supply chain for single use plastic, alternative materials, reusable options and recycling opportunities.

Report by Pat Sweet

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