MNI POLICY: UK Gov't Keeps Fiscal Headroom For No Deal Brexit

--UK 2018/19 Borrowing At stg25.5Bn Vs March Forecast stg37.1Bn

     LONDON (MNI) - Following are key points from the UK government's Autumn

Budget Statement delivered by Chancellor of the Exchequer Philip Hammond Monday,

together with the underlying forecasts from the Office for Budget Responsibility

(OBR):

     --On Track To Comfortably Meet Fiscal Borrowing Goal; Rosier 2018/19

Outturn

     Better-than-expected revenues and more modest spending saw the OBR lower

its central borrowing forecast and Hammond said the government was on track to

meet its fiscal goal of ensuring structural borrowing is below 2% of GDP in

2020-21.

     The OBR predicted that public sector borrowing would total stg25.5bn come

the end of the current fiscal year, a stg11.6bn improvement on the stg37.1bn it

originally forecast in March.

     The Office of National Statistics (ONS) reported year-to-date borrowing of

stg19.9bn in September, the lowest April-September outturn in 16 years, the

half-way point of the fiscal year.

     --Chancellor Keeps Fiscal Headroom Beyond Target To Guard Against Brexit No

Deal

     In the event of a no deal Brexit, the budget forecast will be de-railed.

However, Hammond said he would maintain fiscal headroom in order to pump in

stimulus if needed.

     "I shall maintain the headroom to my fiscal rules broadly as set out in the

Spring Statement ... retaining firepower to intervene if the economy needs more

support in the coming months," he said. The headroom amounts to stg15.4bn,

beyond the 2% target required under the fiscal rules.

     --Forecasts show Debt-to-GDP (Debt/GDP) Steadily Declining

     The new forecasts also have implications for the total debt figure. The

March estimates showed Debt/GDP peaking in fiscal year 2017/2018 at 85.6% and

being on a gradual downtrend to 77.9% for fiscal year 2022/2023. The Autumn

statement showed it peaking in 2016/2017 at 85.2% of GDP and moving down to

74.1% in 2023-2024.

     Autumn's forecast points to the UK economy meeting its target to get debt

falling 3 years early. "We are no longer borrowing at all to finance current

spending. And today the OBR confirm that our national debt peaked in 2016/17 ...

at 85.2% of GDP ... and then falls in every year of the forecast from 83.7% this

year; to 74.1% in '23-'24 ... that's lower in every year than forecast at the

Spring Statement ... and it means that we meet our target to get debt falling 3

years early," he said.

     --Growth Forecast Upgraded.

     Alongside better borrowing figures, the OBR also revised up its

near-term/medium-term GDP forecast path. The economy was seen expanding 1.6% in

2019, up from the 1.3% estimated at the time of the spring budget. It was then

predicted to rise 1.4% in 2020 (up from 1.3% in the Spring forecast), and at

1.4% and 1.5% respectively in 2021 and 2022 (both unchanged). Growth is forecast

at 1.6% for 2023.

     The upgrade brings the OBR's projections more in line with those of the

Bank of England, which in its August Quarterly Inflation Report (IR) estimated

growth of 1.4% in 2018, rising to 1.8% next year, before softening to 1.7% in

2020.

     --OBR Figures Too Late for MPC.

     The OBR's latest borrowing projections come too late for the Bank's

Monetary Policy Committee, which is set to update its forecasts later this week.

While the November IR, out Thursday at 1200GMT, will exclude the most up-to-date

borrowing projections MPC members will be able to discuss them at the policy

meeting.

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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