Chancellor Philip Hammond has presented his first Spring Statement to the House of Commons – The Manufacturer summarises in brief the Statement's key points.
Overall, Chancellor Hammond stated that the UK economy continues to grow, to create jobs and to beat expectations.
And he declared, the economy has grown for five consecutive years, and exceeded expectations in 2017, with manufacturing having had the longest period of expansion in 50 years.
Furthermore, the Chancellor reported that employment has increased by 3 million since 2010, which is the equivalent of 1,000 people finding work every day.
The unemployment rate is close to a 40-year low. Reportedly, there is also a joint record number of women in work – 15.1 million. The Office for Budget Responsibility (OBR) predict there will be more than 500,000 more people in work by 2022.
The OBR also expects inflation to fall over the next 12 months, and wages to rise faster than prices over the next five years.
Public finances & borrowing
The UK’s public finances have reached a turning point, with borrowing down and the first sustained fall in debt for 17 years.
Borrowing has fallen by three-quarters since 2010. In 2009-10 the UK borrowed £1 in every £4 that was spent. The OBR expect that we will borrow £1 in every £18 this year.
Even so, the UK’s debt remains too high, equal to around £65,000 per household; this makes the economy vulnerable to future shocks and, so Hammond, imposes a significant burden on future generations.
The cost of debt interest payments is around £50bn each year – more than the amount spent on the police and armed forces combined.
The government has a balanced approach to get debt falling while funding our vital public services, keeping taxes low, and investing in Britain’s future.
Improving transport in English cities
At Autumn Budget 2017, £1.7bn was announced for improving transport in English cities. Half of this was given to Combined Authorities with mayors. The government is now inviting bids from cities across England for the remaining £840 million.
Improving the UK’s digital connectivity
Autumn Budget 2017 launched a £190m Challenge Fund to help roll out full-fibre to local areas – providing the fastest, most reliable broadband to more homes and businesses. Spring Statement 2018 allocates the first wave of funding, providing over £95m for 13 areas across the UK.
The Chancellor reported that digital businesses create value in a unique way, relying on the participation and engagement of their users. This is not always reflected in where such multinational businesses pay tax on their profits.
The government has set out its thinking on how the tax system can change to give a fair result for digital businesses.
The role of cash in the new economy
Digital technology has changed the way people shop, sell, and save. While cash will continue to be an important method of payment, more people are moving towards digital payments every year.
The government is seeking views on what more it can do to:
- support people and businesses who use digital payments
- ensure that those who need to are able to pay with cash
- prevent the use of cash to evade tax and launder money
Supporting people to get the skills they need
Improving people’s skills benefits both individuals and the wider economy. To support upskilling and retraining, the government is seeking views on extending the current tax relief to support self-employed people and employees when they fund their own training.
Reactions to the Spring Statement:
Shadow Chancellor John McDonnell responded to the Statement: “Wages are lower now – in real terms – than they were in 2010, and they’re still falling.
“The gap in productivity between this country and the rest of the G7 is almost the widest for a generation.
“UK industry is 20 to 30% less productive that in other major economies. And why? Well, part of the reason is that investment by this government, in real terms, is nearly £18bn below its 2010 level. And this is a government that cut R&D funding by £1bn in real terms.
“Sespite all the promises the government continues to fail to address regional imbalances in investment: London will receive almost five times more transport investment than Yorkshire & Humber.
“This is a government that single-handedly destroyed our solar industry: 12,000 jobs were lost as a result of subsidy cuts.
“The Chancellor talks about the Fourth Industrial Revolution, but Britain has the lowest rate of industrial robot use in the OECD. And the government has put just £75m into its Artificial Intelligence programme – less than a tenth of the US government’s commitment.”
Peter Urwin, professor of applied economics at Westminster Business School, said: “Despite immense pressure to loosen the purse strings, Philip Hammond ensured his Spring Statement was a non-event. Although, at first glance, conditions may have seemed right for increased spending.
“Since November, the Office for Budget Responsibility (OBR) has brightened its fiscal outlook, giving the Chancellor an ‘unexpected’ £10bn, while productivity picked up in the second half of 2017, and better economic news since January raised growth forecasts for 2018.
“However, this recent economic good news is only a slight revision, rather than a fundamental rethink. The OBR feels the productivity boost looks odd; the ‘extra’ £10bn is money we didn’t borrow, rather than money we actually have, and revisions to 2018 growth are minimal, simply reversing the over-confidence of last year’s forecasts.
“The ‘upside’ is therefore minimal, but the ‘downside’ is substantial; the Chancellor knows a Brexit hit will arrive at some point.
“As the government’s current position in talks with the EU is continued obfuscation on free movement, the Northern Ireland border and trade, the ‘hit’ has likely been kicked into 2019. The powder is being kept dry for this battle.”
Helen Munday, chief scientific officer at Food and Drink Federation, said: “FDF fully recognises that more needs to be done to reduce litter and drive up recycling across all materials, including plastics, and this needs to encompass increasing the capture of used packaging both on-the-go and in the home.
“We therefore welcome the opportunity to contribute to the Government’s public consultation process and welcome the launch of the innovation fund to develop the technologies and appropriate approaches to reduce plastic waste.
“It is important that any financial investments be made where they can be most effective in driving change, such as reform of the current UK producer responsibility system for packaging.
“Additionally, it is vital that these innovations and other actions take full account of the important role of plastics in protecting and preserving food products throughout the food and drink supply chain.
“Plastics have become an integral part of ensuring food safety and help to prevent and minimise food waste, and those roles must be filled to ensure a safe, affordable, and sustainable food and drink value chain.”
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