LONDON — The U.K. chancellor announced a downgrade in growth forecasts and additional Brexit contingency funds as he set out the country’s budget Wednesday.
Philip Hammond told MPs he will set aside an extra £3bn over the next two years to prepare for “every possible outcome” ahead of Brexit. That is on top of £700,000 already promised for Brexit preparations.
He also said that the independent Office for Budget Responsibility had downgraded its forecast for GDP growth in 2017 to 1.5 percent, cut from 2 percent as predicted in their previous forecast in March. The OBR now forecasts GDP growth will be 1.4 percent in 2018 and 1.3 percent in 2019, before picking up to 1.5 percent in 2021.
The budget is seen by many in Westminster as a make or break moment for the chancellor, who has found himself under increasingly heavy fire from all wings of the Conservative Party over his performance since taking over from George Osborne last year.
Brexiteers have been openly critical of his push for a “soft” exit from the EU, with some agitating for him to be replaced with a “true Brexit believer” to steer the economy through Britain’s exit from the bloc in March 2019.
However, he has also come in for criticism from more left-leaning Tory MPs who want him to loosen the purse strings — effectively ending the austerity program that has been in place since 2010 — in a bid to counter the rise of Jeremy Corbyn’s Labour Party.
In his last budget statement in March this year, Hammond blindsided MPs by raising taxes on self-employed people, sparking a furious public backlash. Within a week he was forced to abandon the policy after it was shown to break a key Cameron manifesto pledge not to raise income tax, VAT or national insurance.
MPs and aides privately acknowledge he cannot afford another blunder on this scale. Days before Wednesday’s statement, however, the chancellor landed himself in further trouble after claiming “there are no unemployed people” in the U.K., despite 1.4 million people being out of work.
In a move designed to appeal to younger voters, who overwhelmingly backed the opposition Labour party in June’s general election, the chancellor announced policies designed to help young people get on the housing ladder and other measures including an expansion of discounts on rail travel for those aged 30 and under. Stamp duty — a fee levied on house purchases — will be abolished in the U.K. for all first-time buyers of houses worth under £300,000, Hammond said.
The chancellor said the measure would help “young first-time buyers” ensure they had enough cash up-front to put their first foot on the property ladder.
The new measures will also cut stamp duty charges on the first £300,000 of all properties worth under £500,000. Hammond said the plan would mean a reduction in stamp duty for 95 percent of first-time buyers and no stamp duty at all for 80 percent.