Chancellor Philip Hammond used this year’s Budget to declare that “austerity is finally coming to an end.” Note he did not say “over.”
Hammond scattered around more cash than expected – for schools, social care, defence, mental health and…..potholes. But these moves will largely be held up as gesture politics. £400 million extra for schools in this financial year to cover “the little extras” averages a mere £10,000 per primary school and £50,000 per secondary school. This will have minimal impact if it’s supposed to cover TAs, teachers, SEND support, crumbling buildings and the apprenticeship levy.
Changes to universal credit should mean that fewer people actually lose out when they move onto the new benefit and the £1 billion for the MoD to “boost our cyber capabilities and our anti-submarine warfare capacity” is a major win for Defence Secretary Gavin Williamson. But is it enough to convince the public that the Chancellor really means to “spend, spend, spend”?
Ultimately the main domestic event of this financial year is not today’s Budget but the Brexit negotiations. There was, in fact, very little mention of the other ‘B’ word in today’s Budget but the Chancellor will be all too aware that this statement will have to be ripped up in the event of a no deal with an emergency budget required in the new year.
Economic forecast from the OBR
- Growth is likely to move up slowly over the next five years: upgraded from 1.5% to 1.6% in 2019, and likely to be 1.4% in 2020, 1.4% in 2021, 1.5% in 2022, and 1.6% in 2023.
- 3m more people are in work since 2010 and employment is predicted to increase by 800,000 by 2023.
- Inflation is likely to be 2% next year and there will be sustained real wages growth in the next five years.
- The deficit is likely to be down to 1.4% next year and falling to 0.8% by 2023/24.
- Borrowing is £11.6bn lower than was forecast in March. It will fall from £31.8bn in 2019/20 to £19.8bn in 2023/24. This will enable the government to reduce the national debt and inject more money into the forthcoming Comprehensive Spending Review.
- National debt peaked at 85.2% in 17/18, fell to 83.7% this year and is likely to fall to 74.1% in 2023/24.
- An extra £500m has been allocated for departments to prepare for Brexit (bringing the current total to £4 billion) – this will be allocated across departments in forthcoming weeks.
- The Chancellor has said that he will take action during the year if the economic or fiscal outlook should change.