Budget 2017: UK growth forecast cut by Hammond

Related Topics
Media caption,
The chancellor abolishes stamp duty on homes under £300,000 to help first-time buyers.

Chancellor Philip Hammond has given a sobering assessment of the economy, saying it is expected to grow more slowly than previously thought.

But he sought to rally Conservative MPs in his Budget by scrapping stamp duty for the first £300,000 spent by first-time buyers, a saving of up to £5,000.

The cut will apply to buyers in England, Wales and Northern Ireland.

Mr Hammond also promised £1.5bn to "address concerns" about the flagship universal credit scheme.

Labour leader Jeremy Corbyn said the government had a "record of failure".

At the start of his speech, Mr Hammond struck a positive note, saying the economy continued to "confound those who seek to talk it down" by creating jobs and continuing to grow.

But he then said productivity levels remained "stubbornly flat" with growth until 2021 expected to be lower than predicted in March.

It is the first time in a generation that growth is forecast to grow below 2% every year.

Mr Hammond's statement came with him under pressure from Eurosceptic Tory MPs and others calling for more spending to ease austerity.

The chancellor - who has been accused of being too pessimistic about life outside the EU - said £3bn would be spent on Brexit planning, and that the government would prepare for "every possible outcome"

What were the other key announcements?

  • Freezing alcohol duty apart from an increase in duty on high-strength white ciders
  • The price of 20 cigarettes goes up by 28p and by 41p for 30g of rolling tobacco
  • A promise to fund a pay rise for nurses if one is recommended by an independent panel
  • Refunds on VAT for Scottish emergency services
  • A one-off tax on new diesel cars that do not meet latest emissions standards
  • £28m for Kensington and Chelsea council for counselling and regeneration in the aftermath of the Grenfell Tower fire
  • Bringing forward a planned cut in business rate rises by two years to 2018
  • An extra £2.8bn for the NHS in England up to 2022
  • Support for electric cars including a £400m charging infrastructure fund
  • A new railcard offering discounts to those aged between 26 and 30

Housing - what's changing?

Image source, PA

Housing had been billed as one of the key themes of the Budget - and the chancellor promised the "next generation" that getting on the housing ladder would not be just a "dream".

Promising the government would deliver 300,000 new homes a year, he pledged £44bn capital investment and measures aimed at getting building projects started.

And towards the end of his speech he made the pledge on stamp duty, which is paid by people buying properties over a certain value.

Rates vary across the UK - in England, Wales and Northern Ireland it kicks in at £125,000 - and in Scotland, which has its own devolved tax - at £145,000.

The cut will only operate in Wales until the matter is devolved next April and stamp duty replaced by a land transaction tax.

Mr Hammond said his change would benefit 95% of first-time buyers.

But in its assessment, the Office for Budget Responsibility said the main gainers would be those who already own a home.

It also said it would lead to higher house prices and predicted it would only lead to an extra 3,500 first-time buyer purchases.

Among the £44bn package was a pledge to make it easier for councils to build in areas of high housing need.

There was also a threat to intervene with compulsory purchase orders if landowners and developers were found to be holding back on building "for commercial rather than technical reasons".

Mr Hammond said investing more money alone would simply inflate prices and make matters worse.

He added: "Solving the housing challenge takes more than money, it takes planning reform. We will focus on the urban areas where people want to live... building high quality, high density homes."

Gloomy economic forecasts

Image source, AFP

As well as spending announcements, the chancellor also uses his Budget to update MPs on the state of the economy.

And they cast a shadow on his other announcements, with the Office for Budget Responsibility predicting the economy would grow by 1.5% this year, down from the estimate of 2% it made in March.

Growth, it says, will drop to 1.3% by 2020 and then rise to 1.5% in 2021, lower in every year than was predicted in March.

Borrowing was predicted to be £8.4bn lower than in March, but long-term deficit predictions were hiked to £34.7bn in 2019, going down to £30.1bn in 2021.

Mr Hammond said he was still on track to hit his target to balance the nation's books by the middle of the next decade.

What were the universal credit changes?

Another high-profile announcement was on universal credit, which is the government's major reform to the way benefits are paid and is currently being rolled out across the UK.

Campaigners and MPs in all parties have been calling for changes to the way it is managed.

The £1.5bn will remove a mandatory seven-day wait after someone submits a claim, taking the overall wait down from six weeks to five.

Mr Hammond also said it would become easier for claimants to receive an advance.

Labour leader Jeremy Corbyn wasn't impressed

Media caption,
Jeremy Corbyn: "So much for tackling injustices"

Responding in the Commons, Mr Corbyn predicted the Budget would unravel, warning "misery" will continue for people across the country.

He cited falling wages and added that economic growth in the first three quarters of this year was the lowest since 2009.

The Labour leader also noted the lack of major social care policies in Mr Hammond's statement.

And he reacted angrily to a heckle from the Tory benches as he said elderly people were not receiving good enough care.

The BBC is not responsible for the content of external sites.View original tweet on Twitter

Addressing Conservative ranks, he shouted: "I hope the honourable member begins to understand what it's like to wait for social care stuck in a hospital bed while other people are having to give up their work to care for them."

What did the BBC's Laura Kuenssberg think?

Media caption,
Laura Kuenssberg's instant take on the Budget

It wasn't a drama - it wasn't a Budget that would inspire queues at the Box Office.

No surprise. When "Box Office Phil" was given that nickname, it wasn't because he has a reputation for delivering political thrillers.

What he tried to do was to act on concerns expressed at the general election and by rebels on the Tory backbenches as well as the Labour opposition.

A lighter moment

Media caption,
The chancellor tells MPs he is sticking to water as the prime minister hands him cough sweets - returning the favour from her party conference speech

What are people saying about it all?

SNP leader Nicola Sturgeon welcomed the news that the emergency services would no longer have to pay VAT - but stressed the Tory government must refund earlier payments to the two forces.

She set out her reaction to Mr Hammond's statement on Twitter:

The BBC is not responsible for the content of external sites.View original tweet on Twitter

Also on Twitter, the top doctor in NHS England was not convinced by the extra funds being allocated to the NHS:

The BBC is not responsible for the content of external sites.View original tweet on Twitter

The CBI said the Budget "balances support for people on squeezed incomes with vital action to help grow the UK out of austerity", and the Federation of Small Business said it was a "business-friendly Budget",

But the GMB union said it was a "let down", and that the public sector pay cap continued to bring "misery" to thousands of workers.

Liberal Democrat leader Sir Vince Cable criticised the £3bn being spent on leaving the EU, saying the cash was "disappearing down a Brexit black hole".

But on the other side of the EU debate, the Leave Means Leave campaign welcomed what it said was the "first time the chancellor has had anything positive to say about Brexit".

You might also be interested in:

More on this story