Philip Hammond has unveiled a gloomier outlook for the UK economy as forecasts predict slower growth and higher Government borrowing.
Striking a positive note during his Autumn Budget, the Chancellor said the UK economy had managed to “confound those who seek to talk it down” by creating jobs and continuing to grow.
However, Britain’s fiscal watchdog revised down its growth predictions as the nation looks set to struggle with “stubbornly flat” productivity and weaker business investment.
In its independent forecasts, the Office for Budget Responsibility (OBR) downgraded gross domestic product forecasts (GDP) from 2% to 1.5% for this year.
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It also cut the GDP outlook from 1.6% to 1.4% in 2018, from 1.7% to 1.3% in 2019, from 1.9% to 1.3% in 2020, and from 2% to 1.5% in 2021, before expanding by 1.6% in 2022.
The Chancellor said the Government would “look forwards not backwards” as the UK economy embarks “on a path to a new relationship” with the European Union that will be “full of new challenges and… new opportunities”.
On the public finances, the OBR has pencilled in borrowing to be £8.4 billion lower this year at £49.9 billion compared with its forecasts in the Spring Budget.
While it also revised down deficit predictions from £40.8 billion to £39.5 billion in 2018, the watchdog hiked its long-term borrowing forecasts.
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It revised the deficit up from £21.4 billion to £34.7 billion in 2019, from £20.6 billion to £32.8 billion in 2020, and from £16.8 billion to £30.1 billion in 2021.
The OBR expects borrowing to sit at £25.6 billion in 2022.
Mr Hammond added: “Thanks to the hard work of the British people, that deficit has been shrinking and next year will be below 2%.
“But our debt is still too high and we need to get it down.
“Not for some ideological reason, but because excessive debt undermines our economic security, leaving us vulnerable to shocks; because it passes the burden unfairly to the next generation, and because it cannot be right to spend more on our debt interest than we do on our police and our armed forces combined.”
Focusing on debt, the OBR expects it to peak at 86.5% of GDP this year, before falling to 86.4% in 2018, 86.1% in 2019, 83.1% in 2020, 79.3% in 2021, and 79.1% in 2022-23.
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The move would mark the first sustained debt decline in 17 years, the Chancellor said.
Responding to the Budget announcement, Labour leader Jeremy Corbyn said it was a “record of failure with a forecast of more to come”.
He said: “Economic growth has been revised down, productivity growth has been revised down, business investment revised down. People’s wages and living standards revised down.
“What sort of strong economy is that? What sort of fit for the future is that?
“You may recall, Mr Speaker, that the deficit was due to be eradicated by 2015, then that moved to 2016, then to 2017, then 2020, and now we are looking at 2025.
“They are missing their major targets, but the failed and damaging policy of austerity remains.”