The Office for Budget Responsibility has upgraded its growth forecast from 2% to 2.1% this year but then revised its 2017 growth to 1.4%, down from the 2.2% previously expected.
It expects growth to be at 1.7% in 2018, 2.1% in 2019 and 2020, and 2% in 2021, revealed chancellor Philip Hammond as part of the Autumn Statement today.
“While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case,” he said.
The government has abandoned its aim for a budget surplus by 2019 given the slowdown in growth and Hammond instead said public finances should be returned to balance as early as possible in the next parliament.
“I know how much business values certainty and stability, and so I confirm today that we will stick to the business tax roadmap we set out in March. Corporation tax will fall to 17% – by far the lowest overall rate of corporate tax in the G20,” he said.
He committed to reducing the burden of business rates by £6.7bn over the next five years and that the communities secretary will lower the transitional relief cap from 45% to 43% next year and from 50% to 32% the year after.
He confirmed that the national living wage for workers aged over 25 will rise from £7.20/hour to £7.50, which will give the average full-time worker an annual pay rise of more than £500.
He also announced a new National Productivity Investment Fund of £23bn to be spent on innovation and infrastructure over the next five years, in a bid to increase productivity for British workers.
He said he would double UK export finance capacity to make it easier for British businesses to export overseas.
“I am taking a first step to tackle the longstanding problem of our fastest-growing technology firms being snapped up by bigger companies, rather than growing to scale by injecting an additional £400m into venture capital funds through the British Business Bank, unlocking £1bn of new finance for growing firms,” he added.
Finally, Hammond said he is abolishing the Autumn Statement and next year’s spring Budget will be the last. After that there will be an autumn budget and a spring statement to respond to forecasts from the OBR.