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"Tigger-Like" Hammond Cheered By Raised View On UK Growth

13 Mars 2018

The Government is expected to borrow £45.2billion this year - almost £5billion less than previously forecast, allowing ministers to spend more without breaking the bank.

"A shorter valuation period undoubtedly has benefits in terms of the speed at which value changes are passed on to ratepayers and it should avoid the massive step change we saw in 2017", said Alex Probyn, president of United Kingdom business rates at real estate advisor Altus Group.

He was pleased to declare that this will be the "first sustained fall in debt in 17 years".

He said public service workers, including doctors and nurses, need Hammond to take action. He told MPs that there was "definitely light at the end of the tunnel".

The OBR also forecast that CPI inflation, which stands at 3%, would fall back to its 2% target by the end of 2018. "Alongside this, the government would like to explore how the same economic incentives can drive innovation, for example by stimulating businesses to develop and integrate new technology, or by encouraging growth in the recycling industry by addressing barriers to investment".

The shadow chancellor labelled Mr Hammond's "complacency" as "astounding" during the Spring Statement, before sounding warnings over the state of the United Kingdom economy.

After a slightly better performance in 2017 than it had expected when it last reported in November, the OBR now thinks growth will be 1.5% in 2018, up from the 1.4% previously predicted.

One option would be to allow economic growth to bring this 80% debt to GDP figure down over time - simply by letting the denominator (that is, GDP) rise.

A trade war with the U.S. would not help the Eurozone economy to maintain its recent bullish momentum in 2018, especially if domestic politics continue to worry investors.

However, the revisions indicate growth will slow in 2021 and 2022.

Output per working hour rose by 0.8% in the three months to December following a 0.9% rise in the previous quarter, according to the Office for National Statistics. The body left its forecasts unchanged for 2019 at 1.3%. On most metrics (borrowing, debt, growth and inflation), the Chancellor delivered better news on the outlook, but the improvements were marginal.

The markets, though, warmed to Hammond's speech and sterling rose slightly against the dollar, no doubt fuelled by comments hailing the United Kingdom as an "outward looking free trading nation" whose "best days are ahead of us".

He said "substantial progress" has been made in Brexit talks.

Industry experts and technology leaders have urged Philip Hammond to endorse the need for more skills training and support for workers, to enable United Kingdom businesses to compete in the increasingly competitive digital economy.

He defended the Government's spending plans, adding: "He reels out the same old bogus statistics on regional distribution, I think he's got the briefing from Russia Today". The former - as well as the prospect of lower debt issuance in 2018/19 - is widely expected and hence we would expect any positive impact in gilt and GBP markets to be fairly short-lived'.

Image copyright Getty Images What did the fiscal watchdog say on Brexit?