UK Growth Forecasts Cut for the Next 5 Years
The Office for Budget Responsibility (OBR) had previously forecast that the economy would grow 2.4% this year, but is now predicting a rate of 2.0%. The amount the government is expected to have to borrow this year has fallen, but it has gone up for the next three.
MP John McDonnell notes that the cuts hit women hardest, stating that “The highest burden of the cuts in terms of services and in terms of increased taxes are falling on the lowest paid, but also in particular, women. 80% of the cuts are falling on women… It’s women with children, but also older women, those ones who have the caring responsibilities in their families.”
As noted by Robert Chote, Chairman of the Office for Budget Responsibility:
If the Chancellor had done nothing in his Budget today, the £10 billion surplus he was aiming for in 2019-20 in November would have become a £3 billion deficit. But the measures he has announced today almost exactly reverse this deterioration and get him back to a £10 billion surplus. He has achieved the bulk of this in five main ways:
• First, he has cut his planned limit on day-to-day departmental spending in 2019-20 by around £2 billion. This, together with almost £2 billion of new spending commitments announced in the Budget, will be funded by a £650 million cut in overseas aid and £3.5 billion of as-yet unidentified departmental cuts to be delivered by an ‘efficiency review’ that will report in 2018;
• Second, he has decided not to compensate public sector employers for an increase in the pension contributions they have to make. This reduces borrowing by £2 billion;
• Third, he has moved £1.6 billion of planned departmental capital spending out of 2019-20 and into the previous two years, which the Treasury describes as “accelerating investment plans”;
• Fourth, he has delayed by two years the decision he announced in July to make large companies pay corporation tax three months earlier than they do now. The Treasury says it is doing this “to give businesses more time to prepare”. It also shifts £6 billion of tax receipts into 2019-20 and £3.6 billion into 2020-21, out of the previous two years. But it has no impact on receipts thereafter;
• Fifth, as Iain Duncan Smith announced last week, the Government has tightened the eligibility criteria for disability benefits, after earlier reforms delivered only around 25 per cent of the savings it was looking for. This will reduce borrowing by £1.3 billion.