Yesterday Philip Hammond announced the Spring Statement, as expected it was rather dull and low key, but it did have some positive news. Economic growth is likely to be higher than expected, and inflation and borrowing were likely to fall by the end of the year. He said, “The UK economy was at a turning point and there was ‘light at the end of the tunnel’.”
Ian Blackford, SNP leader in Westminster, stated: “The light at the end of the tunnel is a hard Brexit, which is going to cut jobs and prosperity in this country.”
The main message from the statement was one of a balanced approach, with a falling deficit and the possibility that austerity would cease. Yet don’t expect a windfall in government spending, with Brexit looming on the horizon, any additional money will be kept for any potential pitfalls that may occur as a result of leaving the EU. Hammond announced that £3 Billion would be set aside for Brexit especially in case of a potential no deal, which is seen by many as prudent planning, DEFRA will be allocated in the region of £310 million for this scenario.
During the referendum the Treasury has said that the country would see massive job cuts as a result of Brexit, yet this hasn’t happened and yesterday the Chancellor stated that employment is expected to rise in the UK over the next 5 years. He reminded everyone that the UK now enjoys higher employment and lower unemployment today than the country did in 2010.
The governments growth forecast has been revised upwards marginally for 2018 from 1.4% to 1.5%. Public sector borrowing would be lower than expected for the year. All of this has meant that the UK debt is to fall as a share of the GDP, which is the first fall in 17 years.
Philip Hammond stated in his speech: “I am pleased today to report to the house on a UK economy that has grown in every year since 2010. An under Conservative leadership now has a manufacturing sector enjoying its longest unbroken run of growth for fifty years.”
There was some good news for the country’s workforce, the living wage will rise in April up to £7.83 per hour and the tax-free allowance will see a rise from £11,500 up to £11,850. Wages are expected to see some growth over the next 5 years and inflation is expected to fall over the next 12 months down to 2% from 3%.
One of the big concerns for many rural businesses is the lack of digital connectivity, whether by computer or mobile device its become an issue for many trying to operate a business in the modern world. So, it was good news when Philip Hammond announced funding, extending full fibre broadband, as well as pushing forward with 5G test pilots. Poor signal services in many rural areas have become detrimental for modern businesses trying to be competitive. So, this announcement will be seen by many as great news.
The chancellor also announced a call for evidence on how to use taxes to address the issue of single use plastic waste. One suggestion put forward is a levy on disposable coffee cups, several other possible options are also being discussed to tackle the issue.
There was some reassuring news for small businesses, with proposals to bring forward the next business rates revaluation from 2022 to 2021. Mr. Hammond also announced that the government will consult on a possible new VAT regulation threshold, as the current threshold may actually be obstructing small companies from expanding their business and improving productivity. He also pledged £80 million to support those businesses wanting to recruit apprentices.
Overall this statement wasn’t dynamic or exciting, but most experts weren’t expecting anything too exciting. It was a play it safe Spring Statement which is to be expected with Brexit on the horizon. The economy isn’t performing fantastically but at the same time its not dead in the water. Its slowly and steadily plodding along, with some gradual gains being picked up along the way. One of the positives to come out of this was the possibility that austerity measures may no longer be needed in the next couple of years and we may even see some spending to boost the economy. There will be no fundamental reassessment of government spending needs until 2020. By which time the country will have been in austerity for 10 years.