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The Guardian - UK
The Guardian - UK
Business
Andrew Sparrow and Graeme Wearden

Spring statement: Hammond sees better times ahead despite weak growth, as £37bn Brexit bill looms - as it happened

Watch live: Philip Hammond’s spring statement

Afternoon summary

That’s all from us today. Here’s our latest news story on the spring statement, and our round-up of the key points:

Thanks for reading, and for the comments. AS and GW

The chancellor did his best to make his speech sparkle, with a few rib-ticklers....

Our economics editor, Larry Elliott, says Philip Hammond has a lot more work to do:

Since he became chancellor in the summer of 2016, Hammond has sought to improve the UK’s productivity record through a range of measures including higher infrastructure spending, extra investment in research and development and a greater emphasis on vocational training.

But judging by its forecasts, the OBR thinks it will take many years for things to get better. It believes that the financial crisis and the deep recession that followed dealt a severe and lasting blow to Britain’s long-term growth rate, reducing it from around 2.25% a year to 1.5% a year

The OBR have also adjusted their house price growth forecasts, and now expected weaker growth from 2019 onwards.

UK house

The main organisation representing NHS trusts in England has welcomed Philip Hammond’s “encouraging” recognition that the health service needs more money, though wants “urgent” action on that front, in contrast to the chancellor’s decision to hold back any details -- and any extra cash -- until the autumn. Saffron Cordery, the deputy chief executive of NHS Providers, said:

It is encouraging that the chancellor has acknowledged funding pressures faced by the NHS which mean the service can’t deliver the levels of patient care set out in the NHS constitution [key waiting time standards such as A&E treatment within four hours and planned hospital care within 18 weeks]. This winter we have seen the impact of under-funding and a lack of staff. We need to see urgent steps put in train to ensure sustainable long term funding for health and social care, because the current situation is unsustainable. It is also vital that any deal that is reached on pay is fully funded, as promised in the budget.

The latest OBR forecasts for earnings are hardly Tiggerish.

The fiscal watchdog estimates that real earnings growth (pay minus inflation) will be subdued over the next five years, growing by just 0.7% per year.

Even more depressingly, growth in real household disposable income per person is expected to average only 0.4%.

That means families won’t feel much better off for a long time....

Updated

The Scottish government is complaining that it is not getting its fair share of the money set aside for Brexit preparations. In a statement Derek Mackay, the Scottish finance minister, said:

We are just over 12 months away from formally exiting the EU without a clearly agreed path in terms of our on-going access to key EU markets - this remains the biggest uncertainty hampering economic growth and investment and dragging our economy down.

The UK government have indicated they will allocate £3bn over 2018-19 and 2019-20 for expenditure on Brexit preparations, but that the Scottish Government will only receive 2.5%, or £37m, of the funding allocated in 2018-19. No details on 2019-20 funding have been provided.

It is deeply frustrating that money we are receiving is significantly short of a full Barnett share of the funding allocated at the UK level. Scottish Ministers will now carefully consider how these resources should be allocated to meet priority areas of expenditure and whether they are sufficient for the challenge ahead. We will not allow spending on Scottish public services to be diverted to meet the cost of a damaging UK Brexit.

The government is theoretically committed to get net migration below 100,000 per year “Theoretically”, because many ministers believe the target is unachievable. And the OBR does not believe it will be hit either. This is what it says in a passage about its Brexit assumptions.

Specifically, as regards the economy forecast, we assume that:

The UK adopts a tighter migration regime following departure from the EU than that currently in place, but not sufficiently restrictive to reduce net inward migration to the desired ‘tens of thousands’.

OBR: Help to Buy ISAs have flopped

Three years ago this week, George Osborne proudly announced a new Help To Buy ISA that would (he claimed) get first-time buyers scrambling onto the housing ladder.

Under the plan, the government would provide a £50 top-up for every £200 saved for a deposit on a home (up to a £12,000 deposit).

A classic pre-election vote-winner, you might think. However, it was later dubbed a ‘scandal’ after it emerged that the government wouldn’t actually chip in until the home had been bought.

And now, the OBR has slashed its forecasts for the cost of the scheme, as take-up has been much weaker than it expected.

The watchdog says:

The original costing estimated that cumulative Government expenditure would reach nearly £700m by the end of 2017-18. But take-up so far has been well below expectations and the total value of payments in the first 22 months of the scheme – to September 2017 – was just £104m.

We have revised down our forecast by a cumulative 23 per cent relative to our previous forecast. Compared to the original costing, cumulative spending is around 80 per cent (some £1.7bn) lower up to the end of 2019-20

This is from Sky’s economics editor Ed Conway.

It has attracted this comment from Rupert Harrison, chief of staff to George Osborne when he was chancellor.

This is from the Press Association’s Ian Jones.

Here are some comments from opposition MPs on the spring statement. MPs were responding in the House of Commons.

From John McDonnell, the shadow chancellor:

I say to the chancellor: his complacency today is astounding.

We face – in every public service – a crisis on a scale we’ve never seen before.

Hasn’t he listened to the doctors and nurses, the teachers, the police officers, the carers and even his own councillors?

They are telling him they can’t wait for the next budget. They’re telling him to act now.

For eight years they’ve been ignored by this government. And today - they’ve been ignored again.

The chancellor has proclaimed that there is light at the end of the tunnel. But this shows just how cut off from the real world he is.

Last year growth in our economy was among the lowest in the G7 and the slowest since 2012.

Wages are lower now - in real terms - than they were in 2010 – and they’re still falling.

We face – in every public service – a crisis on a scale we’ve never seen before.

Hasn’t he listened to the doctors and nurses, the teachers, the police officers, the carers and even his own councillors?

They are telling him they can’t wait for the next budget. They’re telling him to act now.

From Ian Blackford, the SNP leader at Westminster:

The progress of this government in readying for Brexit has been nothing short of shameful.

The UK government’s own analysis tells us that under all scenarios, Scotland would suffer a relatively greater loss in economic output than the United Kingdom as a whole.

A no deal scenario would be significantly devastating, threatening to reduce growth by a massive 9% over 15 years.

Make no mistake that a hard Brexit is going to hit the pockets of families, is going to lead to a loss in tax revenue expectations. It’s therefore going to affect spending on public services, and yet the chancellor is silent on the risks to our economy.

From the Lib Dem leader Sir Vince Cable:

The spring statement was a non-event. The OECD [see 11.33am] gave us the clearer picture - that the economy is bumping along the bottom of the G20, well behind the likes of Australia, Canada and the euro area.

The OBR’s fresh forecasts are still a long way behind the figures estimated in March 2016 before the EU referendum.

It is time the government was honest with the public: there will need to be tax increases to pay for the NHS and social care, police and schools.

From the Green MP Caroline Lucas:

I have to say that the levels of hypocrisy from this government is quite extraordinary.

How can he pledge to be improving air quality while simultaneously boasting of undertaking the largest road building programme since the 1970s.

How can he say that the plastics crisis is urgent and then propose a deadline for the elimination of plastics in a quarter of a century’s time.

Where is the latte levy, where is the deposit scheme, where is the urgency from this action. Why is there such a gulf between government action and the words.

Nick Macpherson, former Permanent Secretary to the Treasury (the top civil servant), suggests Philip Hammond is right to keep his fiscal firepower in case the UK suffers an economic shock....

Treasury suggests 1p and 2p coins, and £50 notes, could be abolished

Last year my collaegue Anushka Asthana revealed that, when George Osborne was chancellor, he came close to abolishing 1p and 2p coins. The idea was blocked by David Cameron, who thought the public would disapprove.

Now Philip Hammond has revived the idea. One of the 13 consultations he has published is on cash and digital payments, and the document (pdf) makes it clear that the Treasury increasingly thinks these coins are pointless. In a section of the consultation document leading up to the question “does the current denominational mix (eight coins and four banknotes) meet your current and future needs?”, the document says:

In the normal course of the cash cycle, many denominations fall out of circulation, for example, by being placed into savings jars. Surveys suggest that six in ten 1p and 2p coins are used in a transaction once before they leave the cash cycle. They are either saved, or in 8% of cases are thrown away. To meet demand created by such losses from circulation, in previous years the government and the Royal Mint have needed to produce and issue over 500 million 1p and 2p coins each year to replace those falling out of circulation.

The document also suggests that £50 notes could be abolished too.

At the other end of the denominational scale the £50 note is believed to be rarely used for routine purchases and is instead held as a store of value. There is a significant overseas demand for £50 notes, with the notes used for some transactions, but mainly held as a store of value alongside other currencies such as the dollar and euro. There is also a perception among some that £50 notes are used for money laundering, hidden economy activity, and tax evasion ...

Though the value of the £50 note is low compared to other countries’ highest denominations, in order to attempt to tackle the hidden economy and illegitimate use of cash, and maintain the integrity of the currency, some countries have removed their highest value notes from circulation or replaced them with banknotes with more security features.

Updated

OBR: Fairly high chance of a recession before 2023

Although the OBR are forecasting slow growth over the next five years, they certainly aren’t ruling out something worse.

The watchdog points out that there have been seven recessions over the last 61 years, suggesting that there’s a 50:50 risk of one in the next five years.

Thus,

...the probability of a cyclical shock occurring sometime over our forecast horizon is fairly high.

The OBR also reminds us that neither the Treasury or the City actually forecast the great recession after the 2008 financial crisis:

As regards this final risk of an unexpected recession, it is salutary to remember that exactly 10 years ago – at the spring Budget of March 2008 – the Treasury forecast that the economy would grow by a cumulative 4 per cent in calendar years 2008 and 2009, whereas the latest outturn data show a drop of 4.6 per cent.

As Chart 3.30 shows, only one of the 34 outside forecasters reporting their forecasts to the Treasury at the time predicted that real GDP would decline in either 2008 or 2009. In the Treasury’s latest survey, none of the 40 respondents expect real GDP to decline in either 2018 or 2019.

City growth forecasts in 2008....
City growth forecasts in 2008.... Photograph: OBR

Updated

Although the growth forecast for 2018 has been marginally revised upwards, the IFS’s Paul Johnson says, overall, the picture is still dreadful.

This chart illustrates one of his points.

UPDATE: Paul Johnson’s tweet has been retweeted by George Osborne. Osborne likes Philip Hammond, and so he probably retweeted it because he thought it reflected badly on Brexit, not on his successor.

Updated

Soft drinks levy set to raise half as much as originally thought

The OBR says the amount of money the government is expected to raise from the soft drinks levy - a tax on sugar in drinks coming into force this year - has halved. It says in its report:

We have once again revised down receipts from the soft drinks industry levy, which comes into effect in April. The latest revision averages £30 million a year and reflects the latest information on reformulation rates. We now expect the levy to raise around £240 million a year on average from 2018-19 onwards, less than half the government’s target of £500 million in 2019-20 when it announced it in March 2016.

The Treasury said this was a good thing because it showed that manufacturers have cut the amount of sugar in their drinks. A spokesman said:

This levy is about changing behaviour. It’s about making people healthier overall. It’s really positive that the industry has recognised this and engaged so much on this.

As the Press Association reports, from next month, the most sugary soft drinks - those with more than 8g of sugar per 100ml - are to be taxed at 24p per litre, while those with 5g of sugar per 100ml will pay 18p.

Economists: UK faces 'woeful' growth outlook, and Brexit uncertainty

City economists are giving their verdicts on today’s forecasts, and some are pretty gloomy....

Aberdeen Standard Investments chief economist Lucy O’Carroll says Britain faces ‘a decade of austerity’ at least.

“The Chancellor was always clear that today’s event was to be a modest one, and he kept that promise. But there is little to cheer by way of economic progress. A woeful growth outlook by past standards. Potentially massive dislocation for the economy just around the corner. And all subject to huge, Brexit-related uncertainties.

“Mr Hammond was keen to push a message about there being light at the end of the tunnel. It’s true that the country’s debt burden is about to fall. It’s also true that for the first time since the financial crisis the UK is borrowing only to invest, rather than to fund day-to-day spending.

“But the Chancellor has made it clear that we’ll remain in the tunnel for a while yet: there will be no fundamental reassessment of the UK’s spending needs until 2020. That will mean, in effect, a decade of austerity – unprecedented in the post-war period.

Hetal Mehta, senior european economist at Legal & General Investment Management, agrees that Hammond probably won’t relax the purse strings later this year

“After significant downgrades to growth and upward revisions to borrowing requirements just in November, the Office for Budget Responsibility has now revised up growth (for the near term) and taken down the borrowing forecasts over the next 5 years.

“That said we don’t expect Hammond to go on a spending splurge in the Autumn Budget. He will likely save the extra room for manoeuvre ahead of the next election and to cushion any downside risks emerging from the UK’s departure from the EU.”

Jonathan Riley, head of tax at Grant Thornton UK, says Hammond’s attempts to rebrand himself as a bouncy Tigger have a flaw....

“Today was upbeat, but by the autumn we will know whether we have a Brexit deal or whether the UK will be moving straight to World Trade Organisation rules. So while Philip Hammond was the only one at the government despatch box today, the donkey in the room, the Eeyore, is still Brexit.”

Sky News’s Faisal Islam and the New Statesman’s George Eaton are both unimpressed by today’s growth forecasts (with good reason!)

As the Resolution Foundation’s Adam Corlett points out with this graph, the OBR now thinks that the output gap is positive. That means there is no spare capacity - in fact, the opposite

And here is the Resolution Foundation’s Torsten Bell commenting on what this means.

In its analysis of the EU financial settlement (pdf) the OBR points out that, even though the government will stop making full contributions to the EU after Brexit, the government has committed to spend money on items that used to get funding through EU membership. In paragraph B.45 it puts figures on these commitments.

Farm support - around £3bn a year

Shared prosperity fund (a proposed fund to replace EU structural funds, which fund projects in deprived areas) - around £1bn a year

Overseas development assistance (putting money that went into the EU’s aid budget into the UK’s aid budget instead) - around £1bn a year

Science and education (contributions to allow the UK to continue participating in programmes like Erasmus, Creative Europe and Horizon 2020) - around 2bn a year

Regulatory agencies (participating in various EU agencies) - around £40m a year.

This chart compares how much the UK has been contributing to the EU (the light blue bars), with the amount it will pay after Brexit as part of the “divorce bill” (the dark blue bars) and the money it will spend on items that used to be funded by the EU (the yellow bars).

The black diamonds also represent the “no referendum counterfactual” - what the UK would have spent if it had carried on in the EU. If the UK does go ahead with the “assumed spending in lieu of EU transfers” assumed by the OBR, there is no saving at all.

This does imply that the Vote Leave “£350m per week for the NHS” may be a long time coming ...

EU-related spending before and after Brexit
EU-related spending before and after Brexit Photograph: OBR

More detail of the OBR’s Brexit bill estimate:

Economics professor Jonathan Portes has dug into the OBR’s ‘Brexit bill’ work:

OBR puts Brexit divorce bill at £37.1bn

The Office for Budget Responsibility has estimated that Britain’s financial settlement with the EU will cost £37.1bn.

This figure is based on the ‘phase 1’ agreement which the UK agreed with member states last December, and is contained in an appendix to the OBR’s latest forecasts.

Almost half this bill relates to Britain’s commitments under the current EU budget (the multiannual financial framework or MFF) that ends in December 2020.

Around half is due to meeting Britain’s share of outstanding payments at the end of the current MFF (known as the “reste à liquider” or RAL). The remaining small fraction reflects pension liabilities less assets returned to the UK, the OBR says.

Most of the bill falls in the next few years, but the final cost drags on until the 2060s ...

Brexit bill estimates
Brexit bill estimates Photograph: OBR

This falls smack in the middle of the Treasury’s own forecasts, which put the divorce bill at between £35bn and £39bn.

The OBR also warns that it is “impossible” to quantify the full effect of Brexit on the public finances today:

One of the more direct and readily quantifiable ways that Brexit will affect the public finances is by reducing or stopping the UK’s contributions to the EU budget. But, soon after the referendum, the chancellor guaranteed funding for certain EU projects after the UK leaves the EU (eg in agriculture, science and structural fund projects), subject to various conditions.

And the prime minister has subsequently stated that the UK may continue to make contributions where it wishes to participate in some European programmes.

The government has not yet fully articulated its intentions in this area and, even if it had, the precise post-Brexit outcome remains subject to negotiation.

Updated

Treasury and OBR documents

The Treasury has published its spring statement documents on its website.

It has published 13 consultation documents - all available here.

Here is the Treasury’s own summary of what is in the autumn statement.

Here is the Treasury paper on corporate tax and the digital economy (pdf).

And here are are the preliminary findings of the Oliver Letwin review into planning and housing (pdf).

The Treasury has not published a red book, but the Office for Budget Responsibility has published its latest economic and fiscal outlook report. It runs to 243 pages and it is here (pdf).

OBR: little has changed really

The Office for Budget Responsibility has released its verdict on the UK economy.

And it points out that Britain’s economy isn’t in a much better place than four months ago, when the last budget was released.

The OBR says:

The economy has slightly more momentum in the near term, thanks to the unexpected strength of the world economy, but there seems little reason to change our view of its medium-term growth potential. And while the budget deficit looks likely to come in almost £5bn lower this year than we expected in November, the explanations for this imply smaller downward revisions for future years. As a result, the government’s headroom against its fiscal targets is virtually unchanged.

On Brexit, the fiscal watchdog says there’s been less damage than feared:

The vote to leave the European Union appears to have slowed the economy, but by less than we expected immediately after the referendum – thanks in part to the willingness of consumers to maintain spending by reducing their saving. But it is important not to put too much weight on early estimates of economic activity either side of the referendum, not least because the bottom-up measures of GDP growth in the national accounts differ as to whether growth slowed down, speeded up or remained stable between 2016 and 2017.

And on productivity, the OBR warns that recent improvements may not last.

The biggest surprise in the economic data released since November is that productivity growth – measured as output per hour – has been much stronger than expected. But that reflects a much weaker path for average hours worked, rather than stronger output or weaker employment growth.

The fall in average hours over the second half of 2017 is the largest since mid-2011 and second largest since the financial crisis. But in 2011 the fall in hours and associated pick-up in productivity growth proved to be erratic and were soon reversed. We assume for now that the same will be true on this occasion.

OBR verdict
OBR verdict Photograph: OBR

Updated

More from the IFS’s Paul Johnson:

McDonnell says today’s statement could have been a turning point. But it is a missed opportunity.

The Conservatives chose to cut budgets for the super-rich, he says.

He says we were never all in this together.

He says today we have had the “indefensible spectacle” of the chancellor congratulating himself on marginally improved forecasts, while refusing to help councils.

McDonnell says asking NHS workers to give up a day’s holiday (reportedly a government proposals as part of the pay negotiations) is mean-spirited.

And he says the government is today trying to get MPs to vote to take away free school meals from 1 million pupils.

(That’s a reference to one of the votes coming up this afternoon on statutory instruments. The government contests McDonnell’s interpretation. There is a briefing on the issue here.)

Updated

John McDonnell's response

John McDonnell, the shadow chancellor, is responding to Hammond.

He says Hammond’s complacency is “astounding”. Public service workers like doctors and nurses need Hammond to act now.

Hammond says there is light at the end of the tunnel. That shows how cut off he is, McDonnell says.

He says this is a government that single-handedly destroyed the solar panel industry.

Hammond talks about the fourth industrial revolution, but Britain has the lowest rate of industrial robot use in the OED.

He says Tory MPs can shout all they want, but people out there know the crisis in our communities.

Hammond makes great play of reducing debt. But he has put £700m on the national debt, he says.

He says the Tories said the deficit would be eliminated by 2015.

George Osborne has been tweeting about achieving three years late a deficit target Osborne actually abandoned.

More details of the plastic waste consultation:

Hammond is now winding up, saying he wants the UK to be a force for good, and a country everyone can be proud of.

Hammond says he will publish a call for evidence on whether the tax relief for agricultural diesel contributes to air pollution.

And he will consult on tax cuts for low-emission vans.

And he will consult on what can be done to reduce the use of plastics.

This is not intended to raise revenue; it is about changing behaviour.

Revenue raised will be invested in remedies.

And he is committing £20m now to help universities deliver solutions.

  • Hammond announces consultation on using tax increases to reduce plastic use, with £20m set aside now to help universities develop solutions.

Hammond says he will consult on a new VAT collection mechanism for online payments.

And he will consult on how to encourage digital payments.

Hammond turns to housing.

There is an investment programme of £44bn, he says.

He says Oliver Letwin’s review of the planning system and its impact on housing has reached its initial findings. He will publish Letwin’s statement. The full report will be published at the time of the budget.

Here’s some reaction to the chancellor’s comments on NHS funding:

More from the IFS’s Paul Johnson:

He was commenting on this:

Updated

Hammond lists some infrastructure projects the government is funding.

He says he is today inviting cities to bid for money from a new transport fund announced in the budget.

Updated

Here’s some reaction to the new growth figures, from Grant Thornton’s Adam Jackson ...

... and liveblog reader Adrian Jenkins.

Updated

Hammond says the ONS has been asked to work on a better assessment of human capital, so investment can be better directed.

Updated

Hammond says the education secretary will release up to £80m to help small firms take on apprentices.

Hammond says the government is committed to training. Next month the construction skills fund will be open for bids.

Hammond says “substantial progress” has been made in the Brexit talks.

He looks forward to another step forward at next week’s EU summit.

He says the Treasury will today publish information about how £1.5bn set aside for Brexit planning will be spent.

He says he will also announce how some of the £190m set aside for improving full-fibre broadband access will be spent.

Updated

Hammond says the government will champion those who create jobs and wealth, not demonise them.

McDonnell is open about his desire to undermine the market economy, he says.

Hammond says the government reject that approach.

He will go on supporting British businesses, he says.

  • Hammond says next business rates valuation will be brought forward to 2021.

He says there will be a review of how late payments can be avoided.

Hammond says at this year’s budget he will set a path for spending from 2020, with a spending review taking place in 2019.

If in the autumn the public finances continue to reflect the improvements today’s OBR report hints at, he will be able to increase public spending.

  • Hammond says he is on course to increase public spending in the autumn budget.

Hammond says there will be more pay for NHS staff if management and workers reach a deal on a pay agreement.

Taxes have been cut for working people, he says.

Fuel duty has been frozen for the eighth successive year.

Updated

Growth forecasts up this year, but down in 2021 and 2022

Here are the Office for Budget Responsibility’s new forecasts, compared with the ones a few months ago:

  • 2018: 1.5%, up from 1.4% expected in November’s budget
  • 2019: 1.3%, unchanged compared with November’s budget
  • 2020: 1.3%, unchanged compared with November’s budget
  • 2021: 1.4%, down from 1.5% expected in November’s budget
  • 2022: 1.5%, down from 1.6% expected in November’s budget

As you can see, growth is expected to be a little faster than previously forecast this year, but slower in 2021 and 2022.

Updated

From the IFS director, Paul Johnson:

Updated

Hammond says there is light at the end of the tunnel.

But we must make sure it is not the shadow chancellor’s train heading to a train wreck.

He says he is not naive enough to think he has abolished the economic cycle.

He says Tories want to get rid of the deficit to give the next generation a chance.

But he does not think every available penny must be spent on debt reduction. And he does not agree with the “fantasists” from Labour who want to spend it all.

Updated

Hammond reads out the borrowing figures:

2.2% in 2017-18

1.8% in 2018-19

1.6% in 2019-20

1.3% in 2020-21

1.1% in 2021-22

0.9% in 2022-23

He says in 2018-19 there will be a surplus on the current account.

Updated

Hammond says the OBR expects inflation, at 3% above target, to fall to target (2%) over the next 12 months.

Hammond says the OBR report out today forecasts rising growth.

But forecasts are there to be beaten, he says.

Hammond says universities are discovering new inventions, our culture spreads across the globe, and the tech sector is attracting investment from around the world.

And he lists some leading apps – including “Matt Hancock”.

Updated

Labour’s Yvette Cooper says Britain’s NHS cannot wait for the autumn budget – it needs more funds right now.

Updated

Hammond says the wages of the lowest paid are up by almost 7% since 2015.

There is solid progress towards building an economy that works for everyone.

He says he rejects Labour’s “doom and gloom” about the economy.

If there are any Eeyores in the chamber (the Daily Mail’s nickname for him), they are on the Labour side, he says.

Updated

He says he won’t be producing a red book.

But he can’t speak for John McDonnell - a joke about the time the shadow chancellor brandished Mao’s red book at the despatch box.

Updated

Philip Hammond's spring statement

Philip Hammond starts his statement by saying he is pleased to make his first spring statement.

The UK was the only major economy to make major tax changes twice a year.

This system gives businesses more certainty, he says.

From Sky’s Faisal Islam

Good afternoon. I’m joining the blog to cover the statement with Graeme.

Philip Hammond is due to stand up at 12.30pm. But his speech will be very short. The Resolution Foundation has tweeted this:

The foundation is ignoring the fact that Hammond has repeatedly said this statement will not be a “fiscal event” – Treasury speak for an announcement that involves actual decisions and tax changes. Instead the spring statement will be more consultative.

(This was supposed to be the intention when Gordon Brown started delivering “pre-budget reports” in the autumn, but these quickly became mini budgets, not opportunities to float tentative proposals.)

Updated

Paul Johnson, the head of the Institute for Fiscal Studies, points out that any improved borrowing forecasts today need to be compared with the pre-Brexit vote predictions:

Updated

Philip Hammond has just left Downing Street, and is heading to parliament to deliver the spring statement.

There’s no ‘red box’ moment – the chancellor was carrying a red folder instead, and didn’t hang around for many photos.

Philip Hammond

Updated

Philip Hammond will start delivering the spring statement in 30 minutes (and wrap up before 1pm, if the hints of a short speech are true).

We’ll be collating the key points here, as well as tracking the details and reaction in this blog.

Dr Faiza Shaheen, the director of the thinktank Class (Centre for Labour and Social Studies), wants Philip Hammond to boost investment and help workers today.

Councils are almost bankrupt, workers are overworked and underpaid, and we are losing the race with our competitors in the G7.

Britain can’t afford more of the same failed dogma, especially given the uncertainty of Brexit. We need to see the public sector pay cap lifted, public services properly funded, and more borrowing for investment.

They’ve also provided a buzzword bingo game, to play along with:

Updated

It may not be a full budget, but that’s not stopped the painter Kaya Mar from his traditional appearance outside Downing Street, satirising our political class:

Cabinet meeting at Downing Street in London.

Updated

OECD: Britain suffering from Brexit uncertainty

s been handed a curate’s egg by the Organisation for Economic Co-operation and Development this morning.

The OECD has raised its forecast for UK growth this year, but only to 1.3%. It then slows to 1.1% in 2019. That’s weaker than last November’s budget forecasts (which could be revised up today).

In contrast, the global economy is expected to grow by 3.0% this year, with the eurozone expanding by 2.3%.

The OECD says Brexit uncertainty and falling real wages are hurting UK growth, saying:

High inflation continues to damp real household income growth and consumer spending, and business investment is slowing, amidst continued uncertainty about the future relationship between the United Kingdom and the European Union.

Updated

Prof John Maloney, an economist from the University of Exeter, believes Philip Hammond could invest more in public services and infrastructure.

He explains:

This is a good time to invest, with rates of interest so low, so it would make sense for the chancellor to take the brakes off a bit. But, as he has said, there are still economic challenges, and at the most he is likely to have only up to £10bn extra to play with because of a recent increase in productivity.

He could use it to increase spending, but also to cut taxes or let the deficit shrink faster. He could also cancel any spending cuts or tax rises pencilled in for the future.

Updated

Philip Hammond’s message to Britain today will be “the deficit is dead, long live the debt”, says Torsten Bell, the head of the Resolution Foundation thinktank.

In a blogpost, Bell explains how the elimination of the current budget deficit changes the landscape, but doesn’t end Britain’s problems.

He writes:

Let’s start with the dying bit. The chancellor will read out the obituary for the deficit that public finances data have written since the autumn. In short, improved tax receipts mean borrowing this year looks set to come in between £7 and £11bn lower than the £49.9bn projected by the Office for Budget Responsibility back in November.

The result is that the current budget deficit (excluding capital expenditure) disappeared on a 12-monthly basis at the end of last year. The thing that has, rightly or wrongly, dominated British economic debate this decade is no more.

But does that mean the chancellor will simply announce job done and that the public finances can retire from dominating our political economy? Far from it. Instead the central purpose of his speech tomorrow is almost certain to be kickstarting the debate that is likely to dominate fiscal policy for the next decade in the way the deficit has in the last – what is the level of public debt that Britain should be aiming for?

And as this chart shows, a fiscal shock such as the next recession would drive debt up again...

.

Updated

There’s less of a media presence outside the House of Commons today, compared with the full-blown budget.

That reflects the fact we’re not expecting tax and spending changes today.

Updated

Kirsty Blackman, the SNP’s spokesperson on the economy, says the chancellor needs to do more to help struggling families.

Speaking on Sky News, Blackman says:

We’ve still got one of the slowest growth rates in the G7. Things still look pretty bad.

The uncertainty of Brexit means inflation is going up (as the weaker pound makes imports pricier) while public sector pay is not keeping pace, she adds.

Updated

We can expect Hammond to highlight one recent milestone today – UK tax receipts are now covering day-to-day spending.

Ian Jones of the Press Association has tweeted the details:

Updated

The shadow foreign secretary, Emily Thornberry, wants the chancellor to back plans for a £1.3bn tidal power lagoon in Swansea Bay, off the south coast of Wales.

In a video clip filmed during a trip to Wales, she says:

It’s about time we got some good news on the tidal lagoon.

Come on Philip Hammond, give them what they want.”

If built, the scheme could generate enough electricity for 150,000 homes, and pave the way for similar green energy projects. However, the government has reportedly cooled on the idea.

Updated

The spring statement is being overshadowed by the Salisbury nerve agent attack, after Theresa May told MPs yesterday that Russia was probably responsible.

Rex Tillerson, the US secretary of state, has strongly backed May this morning – that’s significant, as the White House declined to blame Russia yesterday. Moscow has until midnight to respond to the UK.

My colleague Andy Sparrow is tracking that story in his Politics Live blog; he’ll be along here later when Hammond’s speech begins.

Updated

Millennial railcard shambles

A woman looks at laptop.

Philip Hammond’s attempt to help younger travellers is backfiring his morning.

From today, 26-30 year olds can sign up to trial the new £30 “millennial railcard”, which offers one-third off rail journeys in the UK. Hammond announced it in last November’s budget, saying 4.5 million people will benefit.

However, only 10,000 are being released today, prompting a digital scrum as people try to sign up. And, predictably, the railcard website is failing to cope with the rush, leaving people disappointed and unhappy.

Hannah Maundrell, the editor in chief of money.co.uk, says the basic idea is sound:

Travelling by train can be very expensive and for younger people whose pay packets are already stretched it can be a massive financial burden. After the price hikes to rail fares in January, a 26-30 rail card could ease some financial pressure from millennials, especially those who rely on trains on a daily basis. There are some restrictions however this should offer at least some relief to financially stretched commuters who are currently stung by sky-high rail fares.

Updated

In other current affairs news (ho ho), the opposition whips’ office has been plunged into darkness by a power cut:

The political blogger Guido Fawkes is providing support at this difficult time:

Updated

IDS: reverse universal credit cuts

One of the architects of the government’s welfare changes is urging Philip Hammond to put more money into universal credit, reversing recent cuts.

Iain Duncan Smith says working families need more help, as my colleague Anne Perkins explains:

The former work and pensions secretary Iain Duncan Smith has warned the chancellor that he risks undermining the whole purpose of welfare reform if he fails to reverse cuts to universal credit (UC) in his spring statement.

Philip Hammond is under mounting pressure from across the party to use better than expected tax revenues to reverse cuts made after the 2015 election. Research by the Joseph Rowntree Foundation shows that 340,000 people could be taken out of poverty by reversing the cuts to work allowances.

‘I think he’s under a lot of pressure. There are a lot of colleagues around who would like to see the money restored to UC as a step in the right direction,’ said Duncan Smith. ‘Hammond has got more money to spend. But will he? He says no … The answer to that is, we’ll see.’”

Universal credit bundles a series of benefits into a single payment; the scheme is struggling to hit the aim of making work pay more than welfare.

The government is currently moving free school meals on to universal credit, meaning families earning less than £7,400 per year will qualify. Labour say this means 1 million children will miss out – they’ll try to block the move in a vote later today.

Updated

Labour: it's time to end austerity

John McDonnell MP.

Overnight, John McDonnell, the shadow chancellor, has challenged Philip Hammond to end the ‘misery’ caused by the government’s austerity programme.

McDonnell said:

Today the chancellor has a choice. He can choose to act and end the misery faced by many, or he can do nothing and continue to favour a privileged few.

Our public services are at breaking point and many of our local councils are near bankruptcy. He needs to listen to the calls from across the political spectrum, including the Tory council leader in his own constituency, to end the financial crisis in our public sector.

Philip Hammond must use today to act and end austerity. Our country cannot afford for him to continue to ignore the problems facing working households in our country. If his statement is one of boastful self-praise and not a recognition of the devastation faced by many in our country then he will have failed.

If the chancellor refuses to act, then the next Labour government will end austerity and build a high-wage, high-skill economy for the many, not the few.

Updated

Interestingly, the BBC’s Laura Kuenssberg reports that the cabinet has been discussing how to get more money into the NHS.

That could include ring-fencing a new tax increase specifically for healthcare (a ‘hypothecated’ tax).

She writes:

Several senior sources say that, at the end of January, the cabinet discussed ways of getting more money into the health service in the long term.

That included the foreign secretary’s by now familiar argument about the hoped-for but disputed Brexit dividend.

But more intriguingly for a Conservative government, I’m told that the cabinet discussed the possibility of tax rises to fund more spending for the NHS, even a hypothecated tax, as spelled out by senior MPs like Nick Boles.

However, we’re not expecting any NHS spending changes today.

Updated

Our economics editor, Larry Elliott, has identified the five key things to watch out for in today’s spring statement.

That includes slightly improved growth forecasts, as Larry explains:

Hammond is likely to say that the outlook for growth is marginally better than it was three months ago. In November, the OBR said it was expecting the economy to expand by 1.5% in 2017 and by 1.4% in 2018. The latest official figures from the Office for National Statistics show that growth was actually 1.7% in 2017 and the consensus among City, business and academic economists is that something similar is likely in 2018.

In the past, chancellors have used their statements to boast about the UK outperforming other economies, but that won’t happen on this occasion given that Britain grew more slowly than all the other G7 countries in 2017 bar Italy.

UK GDP forecasts

Updated

Copies of the spring statement have arrived at Downing Street this morning:

Hammond expected to target plastic waste

Rubbish left on a beach.

Philip Hammond is also likely to launch several consultations today, which could lead to reforms and policy changes in the autumn budget.

This could include an examination into how the tax system can be used to tackle the growing problem of plastic waste. This could build on the existing 5p levy on plastic bags.

Other areas include the taxation of the UK’s digital economy, tax simplification, artificial intelligence (AI) and the VAT system faced by small businesses.

Introduction: Hammond to deliver first spring statement

Chancellor of the Exchequer Philip Hammond on ITV’s ‘Peston On Sunday’ TV show yesterday
Chancellor of the Exchequer Philip Hammond on ITV’s ‘Peston On Sunday’ TV show yesterday Photograph: Ken McKay/ITV/REX/Shutterstock

Good morning. Philip Hammond is about to create a little bit of history, when he unveils the UK’s first ever spring statement.

But in truth, today’s statement will be as notable for what’s not in it – we’re not expecting any tax and spending changes, and the whole speech could be over in 20 minutes or so.

That’s because the chancellor of the exchequer, having moved the budget to the autumn, is determined to only have one fiscal event this year.

So without any fiscal fireworks, Hammond will be focusing on an upbeat assessment of the state of the British economy today.

He’s expected to reveal that the UK economy could grow a little faster than expected this year, while borrowing is undershooting forecasts thanks to strong tax receipts.

City experts predict that borrowing this financial year could be revised down by £7bn, to £43bn, while next year’s could be trimmed from £40bn to £34bn.

The forecast for economic growth this year is expected to be increased, from the lacklustre 1.4% forecast in November.

Hammond can also boast that, for the first time since the financial crisis, Britain is bringing in enough tax to cover day-to-day spending.

There are many places in the UK crying out for more investment – from the NHS and schools to transport infrastructure and the military. The chancellor, though, is expected to resist calls to ease austerity, and keep any extra fiscal powder dry until autumn’s budget.

As Hammond put it on Sunday:

There is light at the end of the tunnel, because what we’re about to see is debt starting to fall, after it’s been growing for 17 continuous years. That’s a very important moment for us.

“But we are still in the tunnel at the moment.

We have to get debt down. We’ve got all sorts of other things we want to do. We’ve taken a balanced approach over the last couple of fiscal events, using the flexibility we had to continue paying down debt but also to provide additional support to our public service.”

He’s also tweeted a colourful explanation of what to expect:

After Hammond sits down Britain’s fiscal watchdog, the Office for Budget Responsibility, will give its verdict on the chancellor’s plans and the state of the UK economy.

Importantly, the OBR is also expected to release its estimate of the cost of Brexit, including a forecast of yearly payments from the UK to the EU. That could end up being the big story of the day...

Here’s the agenda:

  • 12.30pm GMT: Chancellor of the Exchequer Philip Hammond delivers the spring statement
  • 1pm (estimated) GMT: Office for Budget Responsibility releases its latest Economic and Fiscal Outlook
  • 3pm GMT: Office for Budget Responsibility press conference

Updated

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