Against the context of a slowing UK economy, the independent Office for Budget Responsibility (OBR) has lowered forecast 2017 GDP growth to 1.5% (0.5% lower than the UK government’s 2% March forecast). The Chancellor has opted for a fire-fighting approach that puts out fires in certain areas but lacks much of a grand plan.
The OBR is still forecasting a smooth adjustment post “Brexit” (i.e. from March 2019) with no cliff edge effects. This looks optimistic as the odds of a “no deal” have risen in recent months. Furthermore if as recently suggested by Brussels, the UK/EU trade deal resembles the EU/ Canada deal and covers only goods, then this would have a major impact on the UK post “Brexit” due to the UK’s surplus in services.
On welfare spending, Chancellor Philip Hammond has pledged £1.5bn to address the backlog in Universal Credit Scheme and an extra £2.8bn for the NHS, equating to a total £7bn rise in NHS funding. The “NHS is under pressure right now” said the Chancellor.
New Budget items include:
Tobacco duties have been kept at 2% above inflation equating to a total increase of over 5%.
Overall this is a neutral budget with limited net impact ahead of key Brexit negotiations over 2018.
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