Public finances ‘on the road to recovery’

13 Mar 18

The economy is expected to grow more strongly than expected this year and the public finances will continue on the road to recovery, chancellor Philip Hammond revealed in his inaugural Spring Statement.

Setting out latest Office for Budget Responsibility economic and fiscal forecasts today, Hammond said there was “light at the end of the tunnel”.

Economic growth this year is now expected to hit 1.5%, up from the 1.4% predicted at the Autumn Budget in November.

Growth is then expected to drop to 1.3% in both 2019 and 2020 before picking up modestly again to 1.4% in 2021 and 1.5% in 2022.

Growth in 2017 was 1.7%, the OBR has confirmed, up from the 1.5% forecast at the Budget.

“Forecasts are there to be beaten,” Hammond told MPs.

“We did it in 2017. We should make it our business to do so again.”

He added that the public finances had reached a turning point, seeing the first sustained fall in debt for 17 years.

While debt as a percentage of GDP is expect to rise to 86.5% in 2018-19, it will then begin dropping, falling to 77.8% by 2021-22.

Borrowing for 2017-18 is expected to come in at £45.2bn, down from the £49.9bn forecast in November and by 2021-22 is expected to have more than halved to £21.4bn.

The OBR said the slightly improved economic position was driven by the unexpected strength of the world economy, but the medium-term outlook remained broadly the same.

Productivity growth was much stronger than expected, the OBR noted. “But that reflects a much weaker path for average hours worked, rather than stronger output or weaker employment growth,” it said.

The Resolution Foundation branded the statement a “sugar rush Spring Statement”, full of short-term good news but little for the long term.

“The £4.7bn improvement in Britain’s public finances this year is welcome, but smaller than expected, and the chancellor’s £16bn of headroom against his main fiscal rule remains largely unchanged,” said director Torsten Bell.

“But looking further ahead the OBR offers very little good news. The big challenges facing Britain of weak pay and productivity growth remain largely unchanged.”

Today’s Spring Statement is the first since the chancellor announced the move to a single annual fiscal event ­– the Autumn Budget.

The Spring Statement provides economic and fiscal updates but no major tax or spending changes.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and

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