During a week in which the Brexit uncertainty that has prevailed for so long, reached crunch point, Chancellor Philip Hammond used his Spring Statement speech to warn that leaving the European Union without a deal in place would strike a “significant” blow to the UK economy.
In today’s Spring Statement, which he has explained before stands to deliver no more than the legal obligation to present the Office for Budget Responsibility’s (OBR) forecasts for the economy, Mr Hammond didn’t bother to even attempt to pull any proverbial “rabbits” out of his Chancellor’s hat.
What he gave was a run-down of the economy, which revealed that it will grow at the slowest pace since the financial crisis, if the official forecasts prove to be accurate.
While the OBR expects any economic weakness to be temporary, it has cut its 2019 growth forecast, from the 1.6% predicted by them at the time of the Budget, last October, to 1.2%. That is expected to rise to 1.4% in 2020, followed by growth of 1.6% in each of the proceeding three years.
However, while this makes it the weakest growth since 2009, the OBR also revised down its government borrowing forecasts against a backdrop of rising wages and a healthy jobs market. Borrowing this year will be £3 billion lower than was previously forecast. Overall Mr Hammond said the economy was (presumably despite the Brexit effect) “remarkably robust”.
Of course, Brexit raised its head more than once during the Chancellor’s speech; not least when Mr Hammond used it to spell out the dire impact of a no deal exit.
Amid all the uncertainty that makes producing accurate forecasts, never mind planning a three year spending review (due to be announced alongside the autumn Budget) nigh on impossible, Mr Hammond was certain about one thing - that a no deal Brexit will deliver significant short to medium term consequences for the UK economy.
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He said the UK economy was at risk if we don’t manage to get a “smooth and orderly exit” from the EU.
If we do though, he talked of a “deal dividend” that - while sketchy on the detail for now - would see more money going into public services and tax cuts. He even hinted that there could be an extra £26.6 billion to spend; almost double the £15.4 billion suggested by the OBR back in October.
But then the OBR caveated its forecasts with a reminder that it produced them against a backdrop of “considerable uncertainty” and based on “government policy at the time we finalised our forecast”.
So, much like with Brexit all we and the Chancellor can do for now is wait and see what happens over the next three days - or even over the next three months or so, if the uncertainty persists for longer.
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