The Autumn Statement: What’s Next For Britain’s Economy?
This week, we saw Philip Hammond’s first Autumn Statement as Chancellor. In the lead up to Wednesday, rumors swirled around Westminster over what it would contain. Would the government be forced to cut back on its promise for a surplus by 2020? Did it have a reasonable plan for Brexit? And how would it affect the British economy? How would the Chancellorship of Philip Hammond differ to his predecessor George Osborne?
Image courtesy of: Paul Toxopeus, flickr.com
When Philip Hammond took to the box on Wednesday, it was clear that he was having to strike a fine balance between countering worries about the impact of Brexit on the British economy, and being cautious in uncertain times. He stated that although the Office of Budget Responsibility had concluded that Britain would grow at a rate of 2.4% less than if we had remained in the EU, fundamentally Britain would still continue to grow at 2.0% from next year.
This announcement that Britain’s growth would continue was warmly received in the chamber, as were several other announcements such as the government committing £1.4 billion to the creation of up to 100,000 new homes, the freeze on fuel tax duty and measures to help ‘Jams’, those who are ‘just about managing’. These measures included raising the national living wage from £7.20- £7.50, as well as increasing the income tax threshold from £11,000 in 2016, to £11,500 next year. The Jam group defined as those earning between 18-21k, will also benefit from a ban on estate agents charging upfront letting fees.
This year, there was also some good news for British business, such as the announcement that Corporation Tax would be lowered to 17pc, giving Britain the lowest Corporation Tax rates out of any G20 country. The government will also double the UK’s export finance capability, as well as announcing a lower business rates package, which the Chancellor described as “complicated, but ultimately good news”.
In further good but not unexpected news, Philip Hammond also promised the allocation of huge sums to help Britain’s ailing road and train networks, in an effort to stimulate the economy. But where exactly would all the money would be coming from to pay for these infrastructure projects?
The Chancellor announced that the UK’s borrowing would be increasing significantly in the next few years, with borrowing in 2017 equal to 87.7% of GDP (an increase from 84% this year). There were also further announcements that Britain’s borrowing rate was likely to peak to 90% of GDP by 2018, and that the government would be ditching the pledge put forward by David Cameron’s government that Britain would aim for a surplus by 2020 with the Chancellor now stating they would aim for a surplus as “when can be reasonably expected”.
Overall this year’s Autumn Statement seemed to be about really two things; the government attempting to grasp some sort of control over the titanic impact Brexit has caused and how to respond to it, and demonstrating to the markets, global businesses and banks that Britain is open for business and worthy of significant investment.
However, there are still unanswered questions about what the government’s plan is towards Brexit as we approach the window for enacting Article 50, and how long Britain can continue to rely on continued rates of borrowing when the national debt already totals £1.8 trillion.