In the 2019 Spring Statement, Philip Hammond made numerous references to Brexit and the impact decisions made now could have on the UK economy moving forward. He said the decision by MPs to reject Theresa May’s Brexit deal for a second time on Tuesday evening had left “a cloud of uncertainty hanging over our economy”. Mr Hammond warned that a disorderly Brexit would deal a “significant” blow to economic activity in the short term.
But it was not all doom and gloom from Philip Hammond. He painted a picture of what could be achieved. Philip Hammond dangled a £26billion deal dividend in front of MPs as he demanded they take an immediate No Deal Brexit off the table. If there is a deal, the money would go on increased spending on public services, capital investment and keeping taxes low.
The latest figures from the Office for Budget Responsibility (OBR) forecast that the UK economy will grow at the slowest pace since the financial crisis this year. The OBR cut its 2019 growth forecast to 1.2%, the weakest growth rate since 2009. This is a significant cut from the 1.6% expansion predicted by the government’s economic watchdog last October.
After that growth is expected to rebound. The Chancellor said the economy would continue to grow in every year to 2023 – at a faster rate than Germany – if the deal is agreed, even with a slowdown this year.
Healthy public finances
The government is expected to borrow £22.8bn this financial year to plug the gap between the money it spends on public services and the tax revenues it collects. This is almost £3 billion lower than the £25.5bn predicted by the OBR in the October Budget.
The watchdog expects the improvement in the public finances to continue in future years, helped by stronger tax receipts and lower spending on debt interest. While borrowing is expected to rise to £29.3bn next year, it is then predicted to fall over the next four years.
At times it sounded as if the Spring Statement was a plea from the Chancellor to his fellow Parliamentarians to think about protecting the economy as they approach their historical votes on the future of the UK’s relationship with the EU.
Parliament duly obliged his wish to reject a No Deal Brexit but can an orderly Brexit be delivered.