The Government will publish its Autumn Statement on 23 November 2016, the first of Chancellor Phillip Hammond’s tenure. The Autumn Statement is the second of the two important economic statements that the Chancellor of the Exchequer gives each year.
This year’s Statement has special significance as it follows previous Chancellor George Osborne’s departure and occurs at a time of great economic uncertainty after the result of June’s EU referendum and the impending Brexit.
There are a variety of concerns for Hammond to consider and balance. For example, several leading business groups are calling for investment to help the economy stay strong following the Brexit vote. However, the Office for Budget Responsibility is expected to give a downbeat prediction for economic growth, which in turn will affect Government revenues from tax receipts. Further, the Chancellor will reportedly tell MPs that Britain could face a £100 billion black hole in its finances because of Brexit. Chancellor Hammond has a choice of responses: imposing deeper spending cuts, continuing austerity or borrowing more to balance the books
Labour called on Hammond not to extend austerity past 2020 whilst Shadow Chancellor John McDonnell said the Government’s approach to Brexit – one he labelled as shambolic – was in danger of infecting the economy at a time when gloomy forecasts about the UK’s growth prospects for the next year show Britain badly needs higher public spending and investment.
Hammond had previously dropped Osborne’s plans to cut corporation tax and has promised to invest heavily in homes and transport, focusing on smaller-scale projects. Prime Minister Theresa May had already abandoned the previous Chancellor’s plans to achieve a budget surplus by 2020, believing the EU Referendum result would have a negative impact upon the UK economy.
The Statement is expected to see tightening of public sector day-to-day budgets. However, the Government is expected to allocate more money for building and infrastructure projects. The Heathrow expansion and £5 billion boost for housing suggest that the Chancellor is willing to pursue investment in infrastructure.
Hammond is expected to announce an increase in spending as part of a national infrastructure plan investing in the nation’s roads, railways and flood defences. All of these are said to be in disrepair after years of under-investment.
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