In today’s Spring Budget Chancellor Philip Hammond announced the forecast for UK GDP in 2017 has increased to 2 per cent, revised up from the 1.4 per cent figure forecast in November’s Autumn Statement.
However, this is still lower than the 2.2 per cent forecast by the Office for Budget Responsibility announced in last year’s March Budget.
The growth forecasts for 2018, 2019 and 2020 have been cut to 1.6 per cent, 1.7 per cent and 1.9 per cent respectively, having already been revised down in the Autumn Statement, while the outlook for GDP growth in 2021 remains the same at 2 per cent.
Hammond says the forecast for 2021 remains the same, but “the path by the way we get there has changed.”
The Chancellor says the economic forecast is “broadly unchanged”, adding that the UK is seeing faster economic growth than most of Europe, second only to Germany, while unemployment is at an 11-year low, with 2.7m more people in work than 2010.
Inflation is forecast to reach 2.4 per cent this year, according to the Office for Budget Responsibility, falling to 2.3 per cent in 2018 and 2 per cent in 2019, Hammond says.
“Real wages continue to rise in every year of our forecast,” he adds.
The Chancellor says the OBR has substantially revised down its short-term forecast of Public Sector Net Borrowing.
Forecasts are now £51.7bn for 2016, £53.8bn for 2017, £40.8bn for 2018, £21.4bn for 2019, £20.6bn for 2020 and £16.8bn for 2021.
Borrowing is set to fall from 3.8 per cent of GDP last year to 2.6 per cent this year, then 2.9 per cent, 1.9 per cent, 1 per cent and 0.9 per cent in the next four years, before reaching 0.7 per cent in 2021-22.
Debt rose to 86.6 per cent of economic output this year and is expected to peak at 88.8 per cent next year – 1.4 percentage points lower than the November forecast – before falling to 79.8 per cent in 2021-22.
Hammond says he is sticking to the plan laid out in November. “In the Autumn Statement we set out a plan for finances to balance by the next Parliament, underpinned by fiscal rules.”
He adds: “There is no room for complacency as we prepare for our future outside of the EU. We can’t rest on our past achievements. The deficit is down but debt is still too high.”
Today marks the final Spring Budget and the first of two Budgets this year. In November Hammond announced a Spring Statement from 2018, stating it would no longer be a “major fiscal event” but rather a response to forecasts from the Office for Budget Responsibility.