Hammond announces £122bn borrowing post Brexit

Bloomberg

Chancellor of the Exchequer Philip Hammond said the UK economy will grow more slowly than previously forecast in 2017 and the government will need to borrow more over the next five years, as he laid out the framework for a post-Brexit Britain.
Outlining his first Autumn Statement to Parliament on Wednesday, five months to the day after Britain voted to leave the European Union, Hammond said the Office for Budget Responsibility now sees 2017 growth of 1.4 percent instead of the 2.2 percent forecast in March. Borrowing will also increase, Hammond said, with an extra 122 billion pounds ($151 billion) to be raised by the 2020-21 financial year compared with predictions in March.
The June vote to leave the EU was a decision that “will change the course of Britain’s history,” he told lawmakers in the House of Commons. “But it’s a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses,” including a productivity gap, housing and a “damaging imbalance in economic growth and prosperity,” he said. “Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow.”
Hammond is seeking to help low and middle-income families and chart a course for fiscal discipline amid heightened uncertainty. With the budget deficit due to be 68.2 billion pounds in 2016-17 compared with the 55.5 billion pounds projected by then Chancellor George Osborne in March, the deteriorating economic outlook leaves Hammond little room for major fiscal giveaways. He has pledged to focus on the needs of “ordinary working-class families” as he seeks to address the concerns of those who feel left behind by globalization.

Cracks Appearing
The economy has proved unexpectedly resilient to the June referendum result, and the OBR revised its 2016 growth forecast to 2.1 percent from 2 percent. But cracks are already appearing. Employment growth is slowing and household incomes are starting to come under pressure as the falling pound spurs inflation.
The government is no longer trying to deliver a surplus by 2020, Hammond said, but pledged to “balance the books” early in the next parliament.
“Monetary policy has played an important role in supporting growth since the referendum decision, but a credible fiscal policy remains essential for maintaining market confidence and restoring the economy to long term health,” Hammond said. “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. 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.”
GDP growth will be 1.7 percent in 2018, compared with the 2.1 percent forecast in March, and will accelerate to 2.1 percent in 2019 and 2020 in line with the predictions in March, Hammond said, citing OBR data.

Budget Charter
The chancellor outlined a new Charter for Budget Responsibility, committing the government to return the public finances to balance as soon as possible, to cyclically adjusted borrowing at less than 2 percent by 2020 and to a cap on welfare spending set by the government and monitored by the OBR.
He also announced the creation of a National Productivity Investment Fund, with the aim of boosting the U.K.’s lagging productivity by making 23 billion pounds available for innovation and infrastructure over the next five years.
“The productivity gap is well known, but shocking nonetheless,” Hammond told lawmakers. “It takes a German worker four days to produce what we make in five, which means, in turn, that too many British workers work longer hours for lower pay than their counterparts. Raising productivity is essential for the high-wage, high-skill economy that will deliver higher living standards for working people.”

UK to invest $1.2bn in broadband 

Bloomberg

The British government said on Wednesday that it plans to improve its broadband and broader digital infrastructure with a big multiyear investment.
Philip Hammond, Britain’s chancellor of the exchequer, the U.K. equivalent of other countries’ treasury secretary or finance minister, gave his fall budget statement in front of the parliament’s House of Commons. It was his first budget speech, and the first since the Brexit vote. The minister typically uses the fall update to discuss the state of the economy and outline the government’s spending plans.
As had been expected in recent days, Hammond, among other things, announced the government would invest more than $1.24 billion (£1 billion) by fiscal year 2020-2021 in “digital infrastructure,” designed to increase broadband speeds and availability. Under his plan, 2 million additional households could get access to full-fiber broadband.
“This will bring faster and more reliable broadband for homes and businesses across the U.K., boost the next generation of mobile connectivity and keep the U.K. in the forefront of the development of the Internet of Things,” the autumn statement said. The news comes amid rising online, including mobile, video usage.