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Spring Statement “exposes the challenges facing the UK”, says ICAEW

Responding to the Chancellor’s Spring Statement, ICAEW chief executive Michael Izza says positive forecasts should be seen in the context of stronger global growth.

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Philip Hammond

April 2018

Reacting to Philip Hammond’s speech, Michael Izza said that although positive, the Office of Budget Responsibility (OBR) growth forecast of 1.4% for 2018 needed to be seen in the context of stronger global growth. The IMF expects the eurozone to grow by 2.2%, the US to grow by 2.7% and China to grow by 6.6% this year, all exposing the challenges facing the UK.

“As the Chancellor himself pointed out, these are only forecasts and forecasts are there to be beaten or indeed challenged,” Izza said. “And whilst the outlook looks better than it did in November, the challenge we face as a country is first to meet those forecasts. Otherwise, the light at the end of the tunnel will never get closer.”

At the same time, the ICAEW Tax Faculty produced a round-up of the key elements of the Statement. It said that the Chancellor’s message was upbeat, but the OBR took a rather more cautious approach: growth was higher than forecast at the time of the 2017 Autumn Budget and the forecast deficit for 2017/18 was revised down from £49.9bn in Autumn 2017 to £45.2bn, a reduction of £4.7bn.

However, the OBR’s view is that much of the improvement in borrowing since November is cyclical, with the forecast for the structural deficit little changed on average and just £0.3bn better by 2020/21. Clearly, the UK’s structural deficit has improved since 2010 but real longer-term improvements appear to be harder to achieve.

The costs of Brexit

The OBR has sought to put a cost on Brexit and this is set out in Annex B of the OBR’s report. The final total cost is quoted as £37.1bn, with £16.4bn payable up to 2020 and potentially £18.2bn over the following eight years to 2028, with a few billion pounds elsewhere. As compared to the overall UK finances, the numbers while significant are not huge sums, and much of it is already committed expenditure under existing obligations.

The consultations

10 new consultations and three updates on previous consultations were published on 13 March 2018. In addition, a written ministerial statement gives details of what consultations and consultation responses will be published in the coming months.

The government has also published a consultation tracker, to show the status of current and closed policy consultations through their lifecycles.

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