The Centre for Policy Studies said the OBR’s figures showed that ‘sluggish is the new normal’, with no return to the above-2 per cent returns to which the UK had been used. Instead, the UK faces the first five-year period since World War Two where growth will not exceed 1.5 per cent a year.
The OBR edged its GDP growth outlook higher to 1.5 per cent in 2018, from 1.4 per cent, allowing Hammond to project a surplus in 2018-19, with debt projected to peak this year and narrow to 77.9 per cent of GDP, down from 79.1 per cent, by 2022-23.
The Debt Management Office (DMO) is targeting £103bn gilt sales in 2018-19, the lowest since 2007-08.
Market reaction was muted, with 10-year gilt yields edging lower by 1bp to 1.47 per cent and 2-year yields unchanged at 0.83 per cent. Sterling firmed by around 0.4 per cent to the US dollar and 0.2 per cent to the euro.
Axa IM senior economist David Page says: “Today’s OBR outlook shows further marginal improvement in the outlook for the UK finances. However, we caution that with the number of challenges still faced by the UK economy, both economic and political, the Chancellor was wise to keep his powder dry at today’s statement. Political pressures will build on him to be more generous at the Budget later this year.”
Centre for Policy Studies director Robert Colvile says: “Sluggish is the new normal. In November, Britain’s growth prospects were cut sharply, as the OBR finally accepted that productivity growth would not bounce back to pre-crisis levels. Its latest forecasts present a slightly rosier picture – but the upgrade does not even come close to compensating for the downgrade.
“The OBR predicts that over the next five years, growth will come in at 1.5 per cent per cent or below – a period of sustained sluggishness unmatched since the Second World War, at a time when the world economy is expected to be growing relatively briskly. Employment growth of 500,000 over the next four years sounds impressive, but is much slower than in previous years – in large part because we have historically high employment rates already.
“Forecasts are, as the Chancellor reminded us, there to be beaten. But while the British economy is doing far better than the gloomy pre-Brexit forecasts suggested, it is hardly poised for rip-roaring growth.”
Aegon pensions director Steven Cameron says: “We’d been told to expect no new policy announcements in the Chancellor’s first ‘Spring Statement’ and that’s precisely what we got.
“While Brexit is grabbing almost all Government’s attention, it’s still disappointing not to have heard even a little on other longer-term Government priorities in a number of key areas. The Government announcement earlier this week that 10 million Brits can expect to live to age 100 is a stark reminder of just how important it is to tackle the issue of social care funding. A growing number of us will need some form of long term care in later life and funding implications are huge. To allow people to start planning for their share, the Government needs to advance urgently its proposals on how much the state will pay and how much individuals will need to fund for themselves.
“Similarly, while automatic enrolment means 9 million extra employees are saving for their retirement through workplace pensions, the self-employed are excluded. With the Chancellor saying the Conservatives are the champions for small businesses, we need new policies to stop self-employed becoming second class citizens in retirement.”
“However, as we enter the new tax year, there are a raft of changes announced previously. These include the first increase to the pension lifetime allowance since 2016, increases in auto-enrolment minimum contributions, changes to tax bands, changes to income tax rates for those in Scotland, and cut in the tax-free dividend allowance. For many, there will be benefits in seeking financial advice.”
