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[...] As the effects of uncertainty diminish, the OBR forecasts growth recovering to 1.7% in 2018, 2.1% in 2019 and 2020, and 2% in 2021.
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.
The OBR acknowledges that there is a higher degree of uncertainty around these forecasts than usual. Despite slower growth, the UK labour market is forecast to remain robust. [...]
In view of the uncertainty facing the economy, and in the face of slower growth forecasts, we no longer seek to deliver a surplus in 2019-20. [...]
Today I am publishing a new draft Charter for Budget Responsibility, with three fiscal rules:
First, the public finances should be returned to balance as early as possible in the next Parliament, and, in the interim, cyclically-adjusted borrowing should be below 2% by the end of this Parliament.
Second, that public sector net debt as a share of GDP must be falling by the end of this Parliament.
And third, that welfare spending must be within a cap, set by the government and monitored by the OBR. [...]
Combining these pressures with the impact of forecast weaker growth, and taking account of the measures I shall announce today, the OBR now forecast that in cash terms, borrowing is set to be:
£68.2 billion this year; falling to £59 billion next year; £46.5 billion in 2018-19; then £21.9 billion; £20.7 billion, and finally £17.2 billion in 2021-22.
Overall public sector net borrowing as a percentage of GDP will fall from 4% last year to 3.5% this year, and will continue to fall over the Parliament, reaching 0.7% in 2021-22.
This will be the lowest deficit as a share of GDP in two decades.
The OBR expects cyclically adjusted public sector net borrowing to be 0.8% of GDP in 2020-21, comfortably meeting our target to reduce it to less than 2% …
And leaving significant flexibility to respond to any headwinds the economy may encounter.
The OBR’s forecast of higher borrowing and slower asset sales, together with the temporary effect of the Bank of England’s action to stimulate growth, translates into an increased forecast for debt in the near-term.
The OBR forecasts that debt will rise from 84.2% of GDP last year to 87.3% this year, peaking at 90.2% in 2017-18 as the Bank of England’s monetary policy interventions approach their full effect.
In 2018-19, debt is projected to fall to 89.7% of national income - the first fall in the national debt as a share of GDP since 2001-02.
And it is forecast to continue falling thereafter.
Stripping out the effects of the Bank of England interventions, underlying debt peaks this year at 82.4% of GDP and falls thereafter to 77.7% by 2021-22.
[...] with our debt forecast to peak at 90% next year, and a deficit this year of 3.5%, I have reached my own judgement. [...]
So we choose in this Autumn Statement to prioritise additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising Britain’s productivity. [...]
I can announce today a new National Productivity Investment Fund of £23 billion to be spent on innovation and infrastructure over the next five years. [...]
Since 2010 the government has put a business-led recovery at the heart of our plan, we’ve cut corporation tax from 28% to 20%, sending the message that Britain is open for business.
The additional investment in productivity and infrastructure that I have announced underscores that message…. And the raft of investments in the UK announced since the referendum – by Softbank, Glaxo, Nissan, Google and Apple amongst others, confirms it.
My priority as Chancellor is to ensure that Britain remains the number one destination for business – creating the investment, the jobs and the prosperity to protect our long-term future.
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.
We will deliver the commitments we have made to the oil and gas sector;
the Carbon Price Support will continue to be capped out to 2020;
and we will implement the business rates reduction package worth £6.7 billion. [...]
[...] we will launch a new, market-leading savings bond through NS&I.
The detail will be announced at the Budget, but we expect our new Investment Bond will have an interest rate of around 2.2% gross and a term of 3 years.
Savers will be able to deposit up to £3,000, and we expect around 2 million people to benefit.
[...]
Mr Speaker I am abolishing the Autumn Statement.
No other major economy makes hundreds of tax changes twice a year, and neither should we.
So the spring Budget in a few months will be the final spring Budget.
Starting in autumn 2017, Britain will have an autumn Budget, announcing tax changes well in advance of the start of the tax year.
From 2018 there will be a Spring Statement, responding to the forecast from the OBR, but no major fiscal event. [...]
OBR Economic and fiscal outlook – November 2016