Upbeat spring statement dangles carrot of more spending later this year

Chancellor Philip Hammond delivering his spring statement in the House of Commons.

Delivering his spring statement in the House of Commons today, the chancellor Philip Hammond rolled out a phrase he has used many times in the past, promising Britain that “our best days lie ahead of us”, as he delivered an upbeat economic assessment that he said would pave the way for a modest rise in public spending in the autumn.

Hammond highlighted a relatively modest improvement in the UK’s economic forecasts and hailed a “turning point” in the public finances. Provided these public finances continued to improve, Hammond said that this would give him the headroom to put more money aside for public services, prompting some observers to view the move as the government building up a pre-election warchest.

The Office for Budget Responsibility has increased their forecast for growth this year to 1.5% and expects inflation to fall over the next 12 months and wages to rise faster than prices over the next five years. However, for the first time in modern history, UK GDP growth is still expected to fall below 2% in every forecast year, from now to 2022, say the OBR.

There were some positives for construction with further measures announced to improve transport in English cities. £1.7bn was announced at the 2017 autumn budget for improving transport and half of this was given to combined authorities with mayors. Hammond announced that the government was now inviting bids from cities across England for the remaining £840m.

The chancellor also announced the first wave of funding for high-speed full-fibre broadband, providing over £95m for 13 areas across the UK to roll out the fastest, most reliable broadband to more homes and businesses. 

Hammond ended his brief speech by saying that he would use the budget this autumn to set out his expenditure expectations for 2020 and beyond, with a full spending review next year, after Brexit.

Shadow chancellor John McDonnell was dismissive of the chancellor’s statement, criticising what he described as the “indefensible spectacle” of a chancellor doing nothing to help struggling local authorities and the NHS. McDonnell said that local authorities across the country were in crisis and the chancellor hadn’t lifted a finger to help them.

The construction sector’s response to what is traditionally a low-key statement was mixed. Chief executive of the Association for Consultancy and Engineering, Nelson Ogunshakin, said: “The positive macro-economic picture is good news, although it must be said that the ongoing uncertainty around Brexit will not be helping the OBR to deliver accurate forecasts. The chancellor’s positive updates on some of his previously announced policies, including digital infrastructure, housing, as well as local transport, are all to be welcomed and the announcement that government funding has unlocked 215,000 new homes in the West Midlands and 27,000 affordable homes in London is also good news. 

“We hope that in the chancellor’s upcoming budget in the autumn, he will continue to recognise infrastructure investment as the key to unlocking regional growth, improving national productivity and creating jobs, notably in giving the green-light to key projects in the infrastructure project pipeline.”

Responding to news that London will receive an additional £1.7bn to deliver a further 27,000 affordable homes by 2021/22, Ben Rogers, director at the Centre for London think tank, said: “Today's announcement represents a substantial increase in affordable home funding for London - albeit from a previously announced national grant.  

“The funds announced today should enable boroughs and housing associations to drive ahead with developments which might not have been otherwise viable. But this is just one part of the jigsaw. We need to get better at addressing local opposition to new housing, building high quality high density development, developing effective partnerships between boroughs and equipping boroughs with the tools and capacity they need to drive development forward.”

Ed Cox, director of IPPR North, reacted with disappointment to the chancellor’s statement. “There was little regard for all parts of the north of England in today’s Spring Statement,” said Cox. “Whilst we are seeing the green shoots of growth in places like Manchester and Leeds, too many places in the north are still being left behind. We didn’t expect any big transport announcements but the woeful disparities in transport investment between London and the north remain. As Transport for the North bring forward their key priorities later in the year this government will be in the last chance saloon if it doesn’t put its money where its mouth is on the Northern Powerhouse.”

Tricia Nelson, EY’s head of transport, commented: “The government’s invitation for English cities to apply for a share of £840m of investment in transport is to be welcomed as another positive step forward for UK infrastructure. While the amount on the table is £840m, half of the £1.7m announced in November, the stakes are much higher than that. This is an opportunity to feed the increasing appetite of our cities for economic power via the improvement of our transport networks as we seek to rebalance UK economic growth. However, there must be a concerted effort by industry stakeholders to work collaboratively otherwise this significant investment will not maximised."

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