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-Hammond: Brexit Uncertainty Damaging UK Economy; Can't Go On
By David Robinson
LONDON (MNI) - UK growth forecasts for the current year were cut to 1.2% by
the Office for Budget Responsibility from the 1.6% forecast in October,
Chancellor of the Exchequer Philip Hammond told Parliament Wednesday.
Unveiling his Spring Statement, comprising an updated set of forecasts from
the OBR, Hammond said that uncertainty was still hanging over the UK and "We
cannot allow that to continue: It is damaging our economy."
The OBR, like the BOE, bases its forecasts on the assumption that there
will be a smooth Brexit. On this basis, the OBR's growth forecasts were little
changed from October while it predicted a slight improvement in the public
finances. The assumption of a smooth Brexit contrasts with the reality of
lawmakers failing to endorse the Withdrawal Agreement with the EU in a vote
The following were key points from Hammond's presentation:
--The OBR made only slight adjustments to its growth forecasts, lowering
this year's projection but upping its 2021 figure. It cut its forecast for 2019
growth to 1.2% from 1.6% in its October projections. It left its 2020 growth
forecast unchanged at 1.4% and raised its 2021 forecast to 1.6% from 1.4%, with
growth then forecast to be running at 1.6% in 2023.
--The public finances, by contrast, were expected to come in a shade better
in this fiscal year than foreseen in October. In October the OBR had forecast
public sector net borrowing (PSNB-X) would be 1.2% of GDP in the 2018-19 fiscal
year. The OBR forecast it would be 1.1% of GDP this year, a stg3 billion
reduction compared to October. The OBR forecast PSNB-X would shrink steadily,
declining from stg29.3bn in 2019-20, to stg21.2bn in 2020-21, to stg17.6bn in
2021-22, to stg14.4bn in 2022-23 and to stg13.5bn in 2023-24.
--The OBR showed Hammond meeting his self-imposed fiscal goal, that the
structural budget deficit, cyclically adjusted net borrowing, should lie below
2% of GDP in 2020-21. Hammond revealed that the OBR forecast that the cyclically
adjusted deficit would be 1.3% in 2019/20 and would decline to just 0.5% by
2023-24, leavings stg26.6 billion of fiscal headroom against hi mandate in the
2020-2021 fiscal year, up stg15.4bn in October. Debt-to-GDP was shown declining
from 82.2% of GDP in the 2019-20 fiscal year to 79% in 2020-21 and on down to
73% in 2023-24.
--The OBR substantially raised its average earnings forecast from 2.5% to
3.1% for 2019 and to 3.0% for 2020 from 2.8%.
--There were no major fiscal announcements from the Chancellor.
He said that there would be a new stg3 billion affordable homes guarantee
scheme. He announced a review into the setting of the minimum wage. The Low Pay
Commission (LPC) has recommended a National Living Wage of 60% of median
earnings by 2020 and Hammond said that as well as endorsing this he was setting
up a review of the LPC's remit after 2020.
--MNI London Bureau; tel: +44 203-586-2223; email: firstname.lastname@example.org