After another convincing defeat for the Prime Minister’s Brexit deal last night, the Spring Statement was for many an afterthought – referred to by the Guardian as a ‘palate cleanser’ between meaningful votes. The Chancellor of the Exchequer, the Rt Hon Philip Hammond MP, has sought to limit spending and tax announcements to the Autumn Budget, and this was largely true today.
Amid great uncertainty about the UK’s future relationship with the EU, the Chancellor urged MPs to vote against a damaging no-deal Brexit this evening. He did reassure the House that preparations had been made in case of a no-deal, but was careful to emphasise that his positive predictions for UK public finances rest on an orderly exit from the EU.
Beyond Brexit, the Chancellor was optimistic, focusing on the UK’s positive economic growth and a sustainable fall in deficit and debt as a proportion of GDP which is predicted to continue throughout the remainder of this Parliament. In an attempt to build on his promise last autumn that austerity is coming to an end, he took the opportunity to announce some spending commitments in both his speech and accompanying Written Ministerial Statement.
The Chancellor welcomed recent Office for Budget Responsibility (OBR) predictions of 1.2 per cent growth this year, 1.4 per cent in 2020, and 1.6 per cent each year thereafter until 2023/4. Last year’s Budget underestimated growth and overestimated borrowing, meaning that there is slightly more room for increased public spending than anticipated. A further 600,000 new jobs are forecast by 2030, with 96 per cent of jobs created last year being full-time. Moreover, with inflation below the Bank of England’s target and expected to remain there, the OBR has revised its wage growth predictions; real wages are expected to rise further than was first thought. Mr Hammond described the OBR report as ‘another step on the road out of austerity’.
Borrowing this year will be £3bn lower than forecast last autumn, and the UK is on track to reduce its debt to 82.2 per cent of GDP next year and 73 per cent of GDP by 2023/4.
However, as the Chancellor noted, these forecasts depend on a smooth and orderly Brexit with a deal – an outcome which was last night cast into further doubt.
Housing and development
In the wake of the recent National Infrastructure Consultation, Mr Hammond reiterated the Government’s commitment to publishing a comprehensive strategy by setting out priorities for economic infrastructure.
Several specific funding commitments were announced. The £3bn Affordable Homes Guarantee Scheme will help deliver 30,000 affordable homes. £260m has been allocated for the Borderlands Growth Deal, which, combined with the £102m recently announced for Carlisle from the Housing Infrastructure Fund, will provide up to £362m of government funding for the Borderlands region.
£717m has been allocated from the Housing Infrastructure Fund to build 37,000 new homes in West London, Cheshire, Didcot, and Cambridge. The 10 English cities that will benefit from the £60m Transforming Cities Fund were also named.
The statement had plenty of good news for those invested in the Oxford-Milton Keynes-Cambridge Arc (‘CaMKOx’). On top of the allocated money for Didcot and Cambridge, the Government has released a new vision statement for CaMKOx, with a joint declaration reaffirming its commitment to major development in the Arc. It will also soon appoint a ministerial champion for the Arc. With the Chancellor also promising £81m for a new Extreme Photonics Centre in Oxfordshire and £45m for the European Bioinformatics Institute in Cambridgeshire, the Government has further committed to making this region a high priority for post-austerity investment.
Environment and biodiversity
The environment was another key theme for the Chancellor, who announced a review of the link between biodiversity and economic growth. In line with greater action on climate change, a biodiversity net gain will be required for new developments in England and the Future Homes Standard mandates the end of fossil fuel heating systems in new houses from 2025. Efforts will be made to decarbonise the gas mains supply and to ensure a zero-carbon public transport option is always available via carbon offsetting.
The Chancellor’s speech was accompanied by a Written Ministerial Statement by James Brokenshire, the Secretary of State for Housing, Communities, and Local Government. This responded favourably to the Letwin Review on the planning system, which argues that housing delivery could be improved by diversification on large sites. Mr Brokenshire announced additional planning guidance to support this, as well as a package of reforms to allow more change of use and upwards extension of buildings. He also referred to speeding up the planning process in the wake of the Rosewell report.
A consultation was published today on supporting private infrastructure investment in the UK once it has left the European Investment Bank.
The Chancellor announced that a three-year spending review will take place before Parliament breaks for summer recess so that its conclusions can be aligned with the next Autumn budget.
£100m was pledged for action against knife crime amid a wave of recent incidents.
This year’s statement largely offered what the Chancellor had promised and what observers had expected: a positive assessment of growth projections and a hint at future spending commitments. With Brexit casting doubt on the OBR’s optimism, however, the next 16 days may age many of these announcements quickly. Amid suggestions of an emergency summer budget in the event of a no-deal Brexit, the future is unclear.