(Reuters) – Chancellor Philip Hammond delivered his first statement on budget policy since taking office in July following Britain’s vote to leave the European Union.
Below are excerpts from his statement to parliament, in the order in which they were delivered:
ON STRENGTH OF UK ECONOMY SINCE BREXIT VOTE
“An economy which has confounded commentators at home and abroad with its strength and its resilience since the British people decided, exactly five months ago today, to leave the European Union and chart a new future for our country.”
BUT BREXIT VOTE MAKES IT URGENT TO TACKLE WEAKNESSES
“But it’s a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses like the productivity gap, the housing challenge.”
WILL MAINTAIN COMMITMENT TO FISCAL DISCIPLINE
“Our task now is to prepare our economy to be resilient as we exit the EU.
“So we will maintain our commitment to fiscal discipline while recognising the need for investment to drive productivity and fiscal headroom to support the economy through the transition.”
OFFICE FOR BUDGET RESPONSIBILITY (OBR) GROWTH FORECASTS
“Today’s OBR forecast is for growth to be 2.1% in 2016; higher than forecast in March. In 2017 the OBR forecasts growth to slow to 1.4%, which they attribute to lower investment and weaker consumer demand, driven, respectively, by greater uncertainty and by higher inflation resulting from sterling depreciation.
“As the effects of uncertainty diminish, the OBR forecasts growth recovering to 1.7% in 2018, 2.1% in 2019 and 2020, and 2% in 2021. While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case.”
MONETARY POLICY HAS PLAYED ROLE IN SUPPORTING GROWTH
“Monetary policy has played an important role in supporting growth since the Referendum decision.”
WE WILL NOT ACHIEVE OUTRIGHT BUDGET SURPLUS BY 2019/20
“In view of the uncertainty facing the economy, and in the face of slower growth forecasts, we no longer seek to deliver a surplus in 2019-20.”
WILL ACHIEVE OUTRIGHT BUDGET SURPLUS AS SOON AS POSSIBLE
“But the Prime Minister and I remain firmly committed to seeing the public finances return to balance as soon as practicable while leaving enough flexibility to support the economy in the near-term.
“The public finances should be returned to balance as early as possible in the next Parliament.”
THREE NEW FISCAL RULES
“Today I am publishing a new draft Charter for Budget Responsibility, with three fiscal rules.
“First, the public finances should be returned to balance as early as possible in the next Parliament, and, in the interim, cyclically-adjusted borrowing should be below 2 percent by the end of this Parliament.
“Second, that public sector net debt as a share of GDP must be falling by the end of this Parliament.
“And third, that welfare spending must be within a cap, set by the Government and monitored by the OBR.”
TAX RECEIPTS HAVE BEEN LOWER THAN EXPECTED THIS YEAR
“Tax receipts have been lower than expected this year, causing the OBR to revise down projected revenues in future.”
OBR BUDGET DEFICIT FORECASTS
“The OBR now forecast that in cash terms, borrowing is set to be: 68.2 billion pounds this year; falling to 59 billion pounds next year; 46.5 billion pounds in 2018-19; then 21.9 billion pounds; 20.7 billion pounds, and finally 17.2 billion pounds in 2021-22.
“Overall public sector net borrowing as a percentage of GDP will fall from 4 percent last year to 3.5 percent this year, and will continue to fall over the Parliament, reaching 0.7 percent in 2021-22. This will be the lowest deficit as a share of GDP in two decades.”
UNDERLYING DEBT
“Stripping out the effects of the Bank of England interventions, underlying debt peaks this year at 82.4 percent of GDP and falls thereafter to 77.7 percent by 2021-22.”
UPWARD REVISION TO NET DEBT FORECASTS PARTLY REFLECTS BOE STIMULUS
“The OBR’s forecast of higher borrowing and slower asset sales, together with the temporary effect of the Bank of England’s action to stimulate growth, translates into an increased forecast for debt in the near-term.”
WILL FUND HIGH-VALUE INVESTMENTS WITH EXTRA BORROWING
“We choose in this Autumn Statement to prioritise additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising Britain’s productivity.
“And the key judgement we make today is that our hard-won credibility on public spending means we can fund this commitment, in the short-term, from additional borrowing while funding all other new policies announced in this Autumn Statement through additional tax and spending measures.
“That is the responsible way to secure our economy for the long term.”
NEW NATIONAL PRODUCTIVITY INVESTMENT FUND OF 23 BLN
“I can announce today a new National Productivity Investment Fund of 23 billion pounds to be spent on innovation and infrastructure over the next five years.”
“Economically productive infrastructure directly benefits businesses. But families, too, rely on roads, rail, telecoms – and, especially housing.”
GOVT TO INVEST 1.0-1.2 PCT OF GDP ON INFRASTRUCTURE FROM 2020
“I have written to the National Infrastructure Commission to ask them to make their recommendations on the future infrastructure needs of the country using the assumption that government will invest between 1 percent and 1.2 percent of GDP every year from 2020 in economic infrastructure covered by the Commission. To put this in context, we’ll spend around 0.8% of GDP on the same definition this year.”
WILL DOUBLE UK EXPORT FINANCE CAPACITY
“I am doubling UK Export Finance capacity to make it easier for British businesses to export.”
STEPS TO STOP UK TECH START-UPS BEING BOUGHT UP
“I am taking a first step to tackle the longstanding problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale by injecting an additional 400 million pounds into venture capital funds through the British Business Bank, unlocking 1 billion pounds of new finance for growing firms.”
FUNDING FOR AFFORDABLE HOUSING IN LONDON
“I can announce today that London will receive 3.15 billion pounds as its share of national affordable housing funding to deliver over 90,000 homes.”
ON PUBLIC SPENDING
“In 2010, public spending was 45 percent of GDP – this year it’s set to be 40 percent.
“Departmental spending plans set out in the Spending Review last autumn will remain in place, and departmental expenditure in 21-22 will grow in line with inflation.”
WILL MAINTAIN TRIPLE LOCK FOR PENSIONS
“We will meet our pledge to our country’s pensioners through the triple lock.”
WILL STICK TO BUSINESS TAX ROAD MAP SET OUT IN MARCH
“I know how much business values certainty and stability, and so I confirm today that we will stick to the business tax roadmap we set out in March. Corporation tax will fall to 17 percent, by far the lowest overall rate of corporate tax in the G20.”
CARBON PRICE SUPPORT WILL CONTINUE TO BE CAPED UNTIL 2020
“We will deliver the commitments we have made to the oil and gas sector; the Carbon Price Support will continue to be capped out to 2020.”
WILL ALIGN EMPLOYER AND EMPLOYEE NATIONAL INSURANCE RATES
“From April 2017 we will align the employee and employer National Insurance thresholds at £157 per week.”
INSURANCE PREMIUM TAX WILL RISE TO 12 PCT FROM JUNE
“Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT. In order to raise revenue, which is required to fund spending commitments I am making today, it will rise from 10 percent currently, to 12 percent from next June.”
WILL REDUCE DIFFERENCES BETWEEN TAX ON CASH EARNINGS AND ON BENEFITS IN KIND
“The Government will take action now to reduce the difference between the treatment of cash earnings and benefits. The majority of employees pay tax on a cash salary. But some are able to sacrifice salary and pay much lower tax on benefits in kind.”
WILL CHANGE TAX TREATMENT OF PAST BUSINESS LOSSES
“These measures, scored at Budget 2016, will help to ensure large businesses will always pay tax in years where they make substantial profits. They will also mean that businesses cannot avoid tax by borrowing excessively in the UK to fund their overseas activities. They take effect in April, and raise over 5 billion pounds from the largest businesses in the UK.”
PLANS TO RAISE THRESHOLD FOR INCOME TAX
“I can confirm today that, despite the challenging fiscal forecasts, we will deliver on our commitment to raising the allowance to 12,500 pounds, and the higher rate threshold to 50,000 pounds, by the end of this Parliament. Once 12,500 pounds has been reached, the personal allowance will rise automatically during the 2020s in line with inflation, rather than the National Minimum Wage as currently planned.”
WILL LOOK AT WHETHER RETAIL ENERGY MARKET FUNCTIONING FAIRLY
“We will look carefully over the coming months at the functioning of key markets, including the retail energy market, to make sure they are functioning fairly for all consumers.”
FUEL DUTY
“Today we stand on the side of the millions of hardworking people in our country by cancelling the fuel duty rise for the seventh successive year.”
WILL HOLD ANNUAL BUDGETS IN AUTUMN FROM 2017
“I am abolishing the Autumn Statement. No other major economy makes hundreds of tax changes twice a year, and neither should we. So the spring Budget in a few months will be the final spring Budget. Starting in autumn 2017, Britain will have an autumn Budget, announcing tax changes well in advance of the start of the tax year. From 2018 there will be a Spring Statement, responding to the forecast from the OBR, but no major fiscal event.”