Hammond’s comments come despite the fact UK GDP growth has been downgraded for 2019 from the 1.6% forecast during the Autumn Budget last year to 1.2% in the latest Office for Budget Responsibility figures, published alongside the Spring Statement.
Hammond put a positive spin on the figures, highlighting that cumulative growth over the next five years would be higher than the previous forecast. The OBR forecast GDP growth of 1.4% in 2020 and 1.6% thereafter.
He also pointed out 2018 was the strongest year for wage growth in a decade with pay rising 3.4%. It is forecast to remain above 3% in each of the five years forecast by the OBR, while inflation is set to remain close to the target of 2%. By 2023, the OBR expects to see 600,000 new jobs in the economy, he pointed out.
“A growing economy, a thriving labour market, inflation on target, a solid foundation on which to build Britain’s future,” he said.
A dividend for the UK…if it avoid no deal Brexit
The Chancellor made it clear that the UK needed to leave the European Union with a Brexit deal.
He said: “If we leave the EU with a deal, and an orderly transition to a future economic partnership, we will see a deal dividend – an economic boost from a recovery in business confidence and investment and a fiscal boost from a reduction in the minimum necessary level of fiscal headroom once the risk of a no deal exit is removed.”
He was confident the House of Commons would agree on a deal in the coming weeks and avoid a disorderly exit from the European Union. “Higher unemployment, lower wages, higher prices in the shops. That is not what the British people voted for in 2016.”
The deal dividend would give the UK “real choices”, he said. He said he is preparing to launch a spending review to be concluded in time for the Autumn Budget, which would assess how much the government could “prudently” spend, be it on public services, capital investment in British future prosperity and keeping taxes low while always continuing to keep debt falling.
Beyond extra spending already promised for the NHS, he said social care, local government, schools, police, defence and the environment could also see a boost to their budgets.
“Provided we do reach a deal to leave the European Union with an orderly transition and provided we avoid the disaster of a government led by the frontbench opposite, this country, for the first time in a decade will have genuine and sustainable choices about its future.”