Budget 2017: UK growth forecast cut by Hammond
Chancellor Philip Hammond has given a sobering assessment of the economy, saying it is expected to grow more slowly than previously thought.
But he sought to rally Conservative MPs in his Budget by scrapping stamp duty for the first £300,000 spent by first-time buyers, a saving of up to £5,000.
The cut will apply to buyers in England, Wales and Northern Ireland.
Mr Hammond also promised £1.5bn to “address concerns” about the flagship universal credit scheme.
Labour leader Jeremy Corbyn said the government had a “record of failure”.
At the start of his speech, Mr Hammond struck a positive note, saying the economy continued to “confound those who seek to talk it down” by creating jobs and continuing to grow.
But he then said productivity levels remained “stubbornly flat” with growth until 2021 expected to be lower than predicted in March.
It is the first time in a generation that growth is forecast to grow below 2% every year.
Mr Hammond’s statement came with him under pressure from Eurosceptic Tory MPs and others calling for more spending to ease austerity.
The chancellor – who has been accused of being too pessimistic about life outside the EU – said £3bn would be spent on Brexit planning, and that the government would prepare for “every possible outcome”
What were the other key announcements?
- Freezing alcohol duty apart from an increase in duty on high-strength white ciders
- The price of 20 cigarettes goes up by 28p and by 41p for 30g of rolling tobacco
- A promise to fund a pay rise for nurses if one is recommended by an independent panel
- Refunds on VAT for Scottish emergency services
- A one-off tax on new diesel cars that do not meet latest emissions standards
- £28m for Kensington and Chelsea council for counselling and regeneration in the aftermath of the Grenfell Tower fire
- Bringing forward a planned cut in business rate rises by two years to 2018
- An extra £2.8bn for the NHS in England up to 2022
- Support for electric cars including a £400m charging infrastructure fund
- A new railcard offering discounts to those aged between 26 and 30
Housing – what’s changing?
Housing had been billed as one of the key themes of the Budget – and the chancellor promised the “next generation” that getting on the housing ladder would not be just a “dream”.
Promising the government would deliver 300,000 new homes a year, he pledged £44bn capital investment and measures aimed at getting building projects started.
And towards the end of his speech he made the pledge on stamp duty, which is paid by people buying properties over a certain value.
Rates vary across the UK – in England, Wales and Northern Ireland it kicks in at £125,000 – and in Scotland, which has its own devolved tax – at £145,000.
The cut will only operate in Wales until the matter is devolved next April and stamp duty replaced by a land transaction tax.
Mr Hammond said his change would benefit 95% of first-time buyers.
But in its assessment, the Office for Budget Responsibility said the main gainers would be those who already own a home.
It also said it would lead to higher house prices and predicted it would only lead to an extra 3,500 first-time buyer purchases.
Among the £44bn package was a pledge to make it easier for councils to build in areas of high housing need.
There was also a threat to intervene with compulsory purchase orders if landowners and developers were found to be holding back on building “for commercial rather than technical reasons”.
Mr Hammond said investing more money alone would simply inflate prices and make matters worse.
He added: “Solving the housing challenge takes more than money, it takes planning reform. We will focus on the urban areas where people want to live… building high quality, high density homes.”
Gloomy economic forecasts
As well as spending announcements, the chancellor also uses his Budget to update MPs on the state of the economy.
And they cast a shadow on his other announcements, with the Office for Budget Responsibility predicting the economy would grow by 1.5% this year, down from the estimate of 2% it made in March.
Growth, it says, will drop to 1.3% by 2020 and then rise to 1.5% in 2021, lower in every year than was predicted in March.
Borrowing was predicted to be £8.4bn lower than in March, but long-term deficit predictions were hiked to £34.7bn in 2019, going down to £30.1bn in 2021.