Hammond announces fiscal ‘windfall’ - that will be spent on NHS boost

29 Oct 18

The government has met both of its fiscal rules three years early marking a “turning point” in the UK’s economic recovery, chancellor Philip Hammond said today.

Setting out latest Office for Budget Responsibility forecasts, Hammond said the deficit is expected to be less than 1.4% next year and would fall to 0.8% by 2023-23. The first fiscal rule requires the structural deficit to be below 2% of GDP by 2020-21, while the second requires that debt be falling as a percentage of GDP by the same date.

Borrowing this year is expected to be £11.6bn lower than forecast by the OBR in the Spring Statement. Total borrowing would fall every year and reaching £19.8bn in 2023-24.

“We are no longer borrowing at all to finance current spending,” he told MPs.

He also said the OBR had confirmed that debt peaked in 2016-17 and was now falling, meaning the second fiscal rule had been met.

The OBR itself said there had been a “significant improvement in the underlying pace of deficit reduction” and that the government was on course to achieve a balanced budget by 2023-24.

However, it added that this improvement had been swallowed up by the extra spending promised for the NHS by the prime minister in June.

“The Budget spends the fiscal windfall rather than saving it,” the OBR said.

The growth outlook was also slightly improved on the March prediction. Growth was “resilient”, Hammond said, and set to come in at 1.6% this year, up from the 1.3% predicted in the spring. It would fall to 1.4% next year and in 2020, rising to 1.5% in 2022 and 1.6% in 2023.

Hammond also hailed a buoyant outlook for jobs, saying 800,000 new jobs would be created by 2023, according to OBR predictions. Real-terms pay growth would also be in evidence over the next few years.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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