Three Bits Of Bad News Buried In Philip Hammond’s Spring Statement
Philip Hammond tried hard to focus on the positives as he delivered his spring budget statement.
His Commons address on Tuesday was on the short side, lasting just 26 minutes, but he promised “light at the end of the tunnel” with the UK’s economy growing faster than expected.
The Office for Budget Responsibility (OBR) revised up its growth forecast for 2018 from 1.4% to 1.5%, while borrowing is forecast to be £45.2bn this year, £4.7bn lower than forecast in November – and £108bn lower than in 2010.
But it’s not all plain sailing for the chancellor and we’ve picked out three things that could cause headaches in the coming year:
1. Phasing out 1p and 2ps
Consider emptying your coin jars now, because 1p and 2p pieces may become obsolete in the not-too-distant future
The Treasury has launched a consultation on the mix of coins in circulation as ministers consider the future of cash off the back of a rise in contactless and digital spending.
And while there are no current plans to scrap the shrapnel, it comes hot on the heels of the binning of old five and ten-pound notes and there are hints the £50 could also be phased out.
It generally costs authorities more to handle coins and many are only used a couple of times before they’re thrown away or stashed in a piggy bank.
2. Growth spike is short-term
The Resolution Foundation has been quick to point out that any revised growth is simply a short-term “sugar rush”.
The think-tank says the medium-term financial outlook for the UK is largely unchanged from the “bloodbath” of forecast downgrades back in November, when growth for 2021 and 2022 was revised down to 1.4% and 1.5% respectively.
The economy is also forecast to grow 20% slower than the Euro Area between 2017 and 2022.
Resolution Foundation director Torsten Bell said: “The big challenges facing Britain of weak pay and productivity growth remain largely unchanged.
“By opting against any major policy announcements, the chancellor has delivered on his promise. But that means families facing the prospect of weak pay growth and more welfare cuts next month will have to wait for the autumn budget for any much-needed relief.”
3. Wages stay low
Real wages are still lower than they were in 2010 – with shadow chancellor John McDonnell pointing out the UK is the only major country in which wages have fallen despite the economy growing.
Growth in real household disposable income per person is expected to average less than half a per cent a year and the Living Wage has also been revised down, missing the £9 originally promised by the government.
Union bosses have also criticised Hammond’s decision not to provide any new funding for public sector pay, branding it an “insult”.
Public and Commercial Services union general secretary Mark Serwotka said: “Despite claiming in the autumn budget that the pay cap was lifted, there is no evidence to back that up.
“Any extra increases being floated are mainly coming out of existing budgets, resulting in further cuts to services. Civil servants, not covered by a pay review body, are yet to receive a formal offer.
“Our members – and all public service workers – deserve an above inflation pay rise.”