Brexit uncertainty clouds Chancellor’s economic view

Chancellor Philip Hammond, ahead of the 2019 Spring Statement

Brexit uncertainty dominated a low-key Spring Statement by Chancellor Philip Hammond, who admitted the Parliamentary deadlock meant “we are not where I wanted us to be”.

A vote on a no-deal exit will take place later today after the Government’s heavy defeat last night.

“I am acutely conscious that the House [of Commons] has other things on its mind today,” said Hammond, in his opening remarks. “Last night’s vote leaves a cloud of uncertainty.”

The impact of the Brexit challenges came through in the Office for Budget Responsibility’s forecasts for economic growth, with 2019 cut from 1.6% to 1.2%. However there were slight improvements in growth forecasts in two of the following four years.

But the Chancellor warned about the risk to the economy of Britain crashing out of the EU without a deal.

“The progress we have made will be a risk if we do not secure a smooth and orderly transition from the European Union,” said Hammond.

The Chancellor referenced the upcoming Spending Review several times, which will give a clearer view of the Government’s longer-term spending priorities. He said he will lead a three-year spending review “assuming a Brexit deal is agreed over the next few weeks”.

The Chancellor did touch on two small initiatives for the East Midlands region in his written statement.

He confirmed that Midlands Engine chairman Sir John Peace will oversee the development of proposals for a new delivery vehicle at Toton, which will include considering the case for a Development Corporation.

There was also £15m of investment from the Transforming Cities Fund, which is focused on small transport improvements. Derby and Nottingham will receive £7.2m between them and Leicester £7.8m.

Despite his desire to talk without particularly saying anything during his 35-minute speech, there were a handful of policy initiatives, including:

– requiring company audit committees to review and report on their payment practices

– completely exempting PhD-level roles from the visa caps

– science investments, led by £79m for a new supercomputer at Edinburgh University, £81m in a new Extreme Photonics Centre in Oxfordshire, and £45m to the European Bioinformatics Institute for genomics research

– a review of competition in the digital market, led by Barack Obama’s former chief economist Jason Furman

– a new £3bn Affordable Homes Guarantee scheme, to support delivery of around 30,000 affordable homes, with £717m from the Housing Infrastructure Fund to unlock up to 37,000 new homes on sites in West London, Cheshire, Didcot, and Cambridge.

Hammond had previously moved the Budget to the autumn, to allow for more time to prepare for changes before the beginning of a new tax year, and has consistently said the Spring Statement would not contain significant policy changes.