‘Tigger’ Hammond tries to put the bounce back into UK economy
The UK chancellor’s upbeat spring statement was in defiance of dire economic forecasts
Britain’s chancellor of the exchequer Philip Hammond: Often referred to as Eeyore, after the depressed donkey in Winnie-the-Pooh, but on Tuesday said he felt more like the irrepressible Tigger. Photograph: Daniel Leal-Olivas/AFP/Getty Images
Philip Hammond’s determination to ensure a low-key spring statement was evident as soon as he exited the chancellor’s residence at No 11 Downing Street on Tuesday to make his way to the House of Commons.
Gone was the traditional red budget box, replaced instead by a slim red folder containing a speech that lasted just 26 minutes and contained no new tax or spending measures.
Britain has been alone among major economies in making major tax changes twice a year, and the introduction of the slimmed-down spring statement means the autumn budget will in future be the sole fiscal event for unveiling tax and spending plans.
The accountants might not be too happy, but the change has been widely welcomed for giving more certainty to businesses and allowing more time for consultation.
So Hammond’s set-piece on Tuesday was more of a political statement than a fiscal one. But there was still plenty for the economists to get their teeth into, in the shape of updated forecasts from the government’s independent forecaster, the Office for Budget Responsibility (OBR).
Promising Britain that “our best days lie ahead of us”, Hammond was relentlessly upbeat during the half-hour or so he was on his feet. He’s often referred to as Eeyore, after the depressed donkey in Winnie-the-Pooh, but on Tuesday said he felt more like the irrepressible Tigger. Economists were far less bouncy in their response to his statement, however.
While Hammond has set the scene for a modest boost to spending in the autumn budget, updated forecasts from the OBR remain dire. The forecast for GDP growth has been edged up to 1.5 per cent this year but revised down to 1.4 per cent in 2021 and 1.5 per cent in 2022, after an even more lacklustre 1.3 per cent in both 2019 and 2020.
“Forecasts are there to be beaten,” the chancellor cheerfully told MPs as he unveiled the figures, but even Tigger would have struggled to put a rosy glow on those numbers.
If the forecasts should prove correct, it would be the first time in modern economic history that Britain has seen five consecutive years of growth at 1.5 per cent or lower – the last time, apparently, was during the global recession of 1875 to 1879.
Public borrowing, meanwhile, is expected to be around £45.2 billion this year. This is some £4.7 billion less than expected but not as big an improvement as some economists had hoped for.
“Not much to be Tiggerish about here,” was how Paul Johnson, director of the Institute for Fiscal Studies (IFS), summed it up. “Growth forecasts dreadful compared with what we thought in March 2016, dreadful by historical standards and dreadful compared with most of the rest of the world,” he said.
And, of course, what happens over the coming years depends on what happens with Brexit. The OBR says it expects Britain’s Brexit divorce bill to be £37.1 billion, in the middle of the range already given by the government, with most of the cost – around 75 per cent – incurred by 2022.
However, Britain will still be paying off part of the balance in 2064 – almost half a century after it voted to leave the European Union.
While there were no new tax announcements, the treasury released a number of consultation documents, including one on how single-use plastics might be taxed and one on how to ensure multinational digital businesses pay a fair share of tax.
It has also launched a review of the role of cash in the new economy as we move increasingly towards cashless payments. This could ultimately mean the scrapping of 1p and 2p coins. These are costly to produce and, according to the treasury, 60 per cent of the coins are used only once before being put into piggy banks, falling down the back of the sofa or even thrown away.
It also wants views on the £50 note, which is widely perceived to be used more for money laundering or avoiding tax rather than for everyday transactions.
But with no actual tax changes, giveaways or clampdowns, Tuesday’s statement was more one for the politicians, economists and accountants rather than the general public. Any individuals seeking some good news on their own fiscal situations will have been sorely disappointed.
While the chancellor trumpeted a return to real wage growth as inflation falls back towards its 2 per cent target over the next 12 months, there’s precious little to celebrate.
According to the IFS’s calculations, real average earnings will grow by only 3.5 per cent over the next five years. And that means their level in 2022-23 would be virtually the same as in 2007-08.
Fiona Walsh is business editor of theguardian.com