On Wednesday, Chancellor Philip Hammond delivered his Autumn Statement to Parliament, the first major economic announcement since the UK voted to leave the European Union. He outlined measures to help “ordinary working-class families” and stressed that the best way to raise living standards are through a stable economy with fiscal discipline and better productivity. The key points of the Autumn Statement were as follows:
- Government will meet commitments to protect budgets for key public services, defence and overseas aid.
- The “triple lock”, linking the state pension to the higher of inflation, earnings growth or an increase of 2.5% per annum will be retained until the end of this Parliament.
- Forecast economic growth of 1.7% in 2018, 2.1% in 2019 and 2020, and 2% in 2021.
- £2.3 billion housing infrastructure fund, to help provide 100,000 new homes in high-demand areas, and £1.4bn to deliver 40,000 extra affordable homes.
- Fuel duty rise cancelled for seventh year in succession – at a cost of £850 million, saving the average car driver £130 and van driver £350 a year.
- £23 billion to be spent on innovation and infrastructure over five years.
- A ban on upfront fees charged by letting agents in England.
- The Autumn Statement will be replaced from next year, with Budgets happening in the autumn, and a “Spring Statement” introduced from 2018.
- The UK has shown remarkable resilience in the wake of its vote to leave the EU. Although the economy is expected to slow, the Office for Budget Responsibility still expects growth to be at least as good as that of Germany and better than both Italy and France.
However, Britain is set to face a number of challenges in the next two to three years as negotiations around Brexit continue. With other European countries also considering their place in the EU, there is the potential for further political uncertainty. In the face of such headwinds Hammond has taken a prudent approach in his first Statement, providing as much fiscal flexibility as possible. By adopting a frugal stance, he has left himself headroom for any necessary action later. The proposed fiscal mandate gives him scope for £26.5 billion more in structural borrowing in 2020-21 than his predecessor was aiming for last March, which is a reasonable war chest with which to fight future economic encounters.
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