Chancellor Philip Hammond has admitted that the Brexit vote’s blow to the economy would force the government to borrow £122bn more than hoped as he pushed back government plans to balance the books in his autumn statement, reports The Guardian.
In the government’s first major economic announcement since the vote in June to leave the EU, the new chancellor said the economy was faring well in the wake of the referendum result but growth would slow markedly next year on the back of weaker business spending and a squeeze on household budgets from rising living costs.
Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow,” said Hammond, who replaced George Osborne as chancellor in the political crisis that followed the referendum.
Labour said Hammond’s statement was an admission that the government’s long-term economic plan had failed. John McDonnell, the shadow chancellor, said it showed “the abject failure of the last six wasted years”.
Hammond unveiled three new rules of his own: for borrowing to be below 2% of GDP by the end of the parliament; for public sector net debt to be falling by the same time; and for welfare spending to remain within an OBR-monitored cap.
The economy would grow 2.1% this year, faster than the 2.0% forecast in March, Hammond said as he unveiled a new outlook from the government’s independent forecaster, the Office for Budget Responsibility (OBR).
The OBR now expects government borrowing this financial year alone will be £68.2bn, well above the previous estimate of £55.5bn. A forecast for the public finances to be back in surplus by the end of the decade was abandoned and in total the new forecasts amount to £122bn of extra borrowing over the next five years compared with the outlook before Britain voted to leave the EU.
Hammond used his first set-piece speech as chancellor to announce measures to drive up the UK’s woeful productivity growth with a £23bn innovation fund and investment in rail, telecoms and housing.
There were also give aways for “just managing families” and relief for motorists hit by rising pump prices as Hammond cancelled a planned rise in fuel duty.