LONDON • Chancellor of the Exchequer Philip Hammond said yesterday that Britain's economy will grow faster than previously forecast, as he set the course for government spending, with Britain preparing to leave the European Union.
Opening his Budget speech in Parliament, he noted that the Office for Budget Responsibility (OBR) now sees this year's economic growth reaching 2 per cent, compared with the 1.4 per cent it predicted in November last year. That still lags behind the forecast of 2.2 per cent made a year ago, before Britain voted to quit the bloc.
The Budget deficit will be £51.7 billion (S$89.2 billion) for the 2016-17 fiscal year, Mr Hammond said, compared with the £68.2 billion forecast in November.
The OBR forecasts project a cut in borrowing of £23.5 billion over the next five years.
Remarking on spending, Mr Hammond said: "Some have argued that lower borrowing this year makes a case for more unfunded spending in the future. I disagree. Britain has a debt of nearly £1.7 trillion, almost £62,000 for every household in the country...So the only responsible course of action, Mr Deputy Speaker, is to continue with our plan."
Emphasising that Britain is well placed to weather the challenges as Prime Minister Theresa May prepares to trigger formal talks with the EU later this month, Mr Hammond said that the OBR projects economic growth of 1.6 per cent next year.
Gross domestic product is forecast to rise by 1.7 per cent in 2019.
Britain "has continued to confound the commentators with robust growth and a labour market delivering record employment", Mr Hammond told lawmakers in the House of Commons.
"As we start our negotiations to exit the European Union, this Budget takes forward our plan to prepare Britain for a brighter future," he said. "We are building the foundations of a stronger, fairer, more global Britain."
The pound was 0.2 per cent lower, at US$1.2180, as of 1.06pm London time (9.06pm Singapore time). It earlier fell to US$1.2139, the weakest since Jan 17, the day of Mrs May's major speech laying out her plans for Brexit.
In spite of the positive outlook presented by the Chancellor, households are starting to feel squeezed by soaring food and fuel costs - the result of the depreciating pound - and Britons are facing years of continued austerity as Mr Hammond seeks to balance the books in the next parliamentary term, which starts in 2020.
"We must focus relentlessly on keeping Britain at the cutting edge of the global economy," Mr Hammond said. "The deficit is down but debt is still too high. Employment is up but productivity remains stubbornly low."
Employment is set to continue to grow in every year of the forecast, he added, citing the OBR estimates.
There was help for small traders hit by increases in business rates, an issue that has been repeatedly raised by lawmakers from Mr Hammond's own Conservative Party. Measures included caps on charges, discounts for 90 per cent of pubs and a £300 million fund for local governments to assist the hardest-hit businesses.
In pre-announced measures, the Treasury said cash has been earmarked for schools and technical training.
Extra funding is also being channelled to innovation as part of measures to boost productivity.