Philip Hammond has revealed that Britain's economic growth forecast has been slashed dramatically and announced an extra £3 billion (€3.4 billion) to prepare for Brexit. Presenting his budget to MPs on Wednesday, the chancellor of the exchequer said that the British economy would grow by 1.5 per cent, not by 2 per cent as previously forecast.
Growth forecasts for the next few years have also been cut, to 1.4 per cent in 2018, 1.3 per cent in 2019 and 2020, 1.5 per cent in 2021 and 1.6 per cent in 2022. Mr Hammond said the revised forecasts from the independent Office for Budget Responsibility (OBR) reflected the fact Britain’s productivity growth remained disappointing.
“The OBR has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2 per cent a year, but it has remained stubbornly flat. So today they revise down the outlook for productivity growth, business investment, and GDP growth across the forecast period,” he said.
Mr Hammond said that his budget, which he described as balanced between maintaining fiscal discipline and increasing spending where necessary, was designed to prepare Britain for Brexit. He said that making progress on negotiations with the EU would be the government’s top priority for the next few weeks.
“We have already invested almost £700 million in Brexit preparations. And today I am setting aside over the next two years another £3 billion. And I stand ready to allocate further sums if and when needed. No one should doubt our resolve,” he said.
Under pressure to take action to tackle Britain’s housing crisis, the chancellor abolished stamp duty for first time buyers on all properties up to £300,000 and for the first £300,000 on properties up to £500,000. He committed a further £44 billion for housing through capital funding, loans and guarantees, and some changes to planning rules to encourage housebuilding.
The budget for a Northern Ireland Executive will increase by £660 million and the government will start negotiations for a Belfast City Deal, a bespoke package of funding and decision-making powers negotiated between central government and local authorities. Air passenger duty for all short-haul passengers will be frozen, keeping taxes on flights departing from Northern Ireland to £13 and early next year, the government will publish a call for evidence to consider the impact of VAT and air passenger duty on tourism in Northern Ireland. From April 2018, the National Living Wage in Northern Ireland will be increased from £7.50 to £7.83.