Budget 2017: Hammond avoids big giveaways as fiscal outlook improves

Written by Civil Service World on 8 March 2017 in News

Hammond avoids big tweaks to Whitehall budgets, but targets extra funding for social care and business rate relief

Phillip Hammond has avoided splashing the cash around in his first Budget as chancellor, despite a better-than-expected outlook for the public finances.

The latest forecasts from the Office for Budget responsibility show that the UK's deficit is now expected to come in at £51.7bn this year, down from the watchdog's £68.2bn estimate last November. 

But while the UK is now on track to borrow £26bn less than expected over the next five years, the country's budget deficit will remain stubbornly high – at £16.8bn – right into 2021/22, a far cry from ex-chancellor George Osborne's now-abandoned aim to have eliminated the deficit by the end of the current parliament.

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Hammond largely resisted the temptation to use the extra breathing space offered by the lower borrowing and higher growth to make giveaways, although he did grant a number of concessions on social care and business rates, two areas that have been the subject of pressure from the Tory backbenches.

Announcing his Budget in the House of Commons, Hammond said now was not the time to commit to "more unfunded spending in the future".

"Britain has a debt of nearly £1.7tn – almost £62,000 for every household in the country," he said.

"Each year, we are spending £50bn on debt interest – more than we spend on defence and policing combined. And borrowing over the forecast period is still set to be £100bn higher than predicted at Budget 2016.

"So the only responsible course of action is to continue with our plan undeterred by any short-term fluctuations. We will not saddle our children with ever-increasing debts."

The OBR said borrowing was, in part, lower than predicted because departments "appear to be underspending this year by more than expected", although it pointed out that Budget policy decisions would push public spending up again next year. 

On business rates, Hammond granted £300m to local authorities to allocate “discretionary relief” to those hardest hit by the first revalution of rates in seven years, and said any firms coming out of business rate relief as a result of the changes would have the increase in their bills capped at £50 a month.

Hammond also said the Treasury would bring in an extra £145m by 2021-22 by increasing national insurance contributions for self-employed workers.

The Budget contained no extra detail on the ongoing efficiency review being carried out by Whitehall departments, which have been asked to shear between 3-6% from their running costs in 2019/20 on top of the settlements agreed with the Treasury at 2015's Spending Review.

But the document for the first time revealed the operating budget of the new Department for Business, Energy and Industrial Strategy, which has a Departmental Resource Budget (DEL) of £2bn a year in 2016-17 and 2017-18, and then falls to £1.9bn by 2018-19 and £1.7bn in 2019-20.

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