Britain’s finance minister Philip Hammond has revealed how the UK’s economy is likely to feel the impact of the vote to leave the European Union in the coming years.
In his budget speech to parliament he spelt out the government’s plans to steer the economy through its departure from the EU.
Hammond started with the good news, the latest prediction from the Office for Budget Responsibility, the independent advisory body to the government.
He told fellow lawmakers in the British parliament: “Reflecting the recent strength in the economy, the OBR has upgraded its forecast for growth this year from 1.4 percent to 2.0 percent.”
However that is lower than a forecast of 2.2 percent made a year ago, before the unexpected Brexit vote.
The forecasts for growth in 2018 , 2019 and 2020 were lowered from last November’s outlook, with growth expected to return to 2.0 percent only by 2021.
“As we start our negotiations to exit the European Union, this Budget takes forward our plan to prepare Britain for a brighter future,” Hammond said. “It provides a strong and stable platform for those negotiations.”
The growth slowdown will impact moves to bring down Britain’s budget deficit, one of the biggest among the world’s rich nations.
Hammond is aiming to eliminate it at some point in the first half of the next decade, which means curbing borrowing and spending.
“The only responsible course of action … is to continue with our plan, undeterred by any short-term fluctuations,” he said in parliament. “We will not saddle our children with ever-increasing debts.”
JoMicheII</a> What Hammond has actually done is shift his stated target from a surplus of 0.5% in 2020 to a deficit of 2% of GDP in 2020. 4/9 <a href="https://t.co/5DbqI80oS8">pic.twitter.com/5DbqI80oS8</a></p>— Jo Michell (JoMicheII) March 8, 2017
Corporation tax cut
Hammond also unveiled big changes to the tax that companies will pay in the UK, saying: “A strong economy needs a fair, stable and competitive tax system, creating the growth that will underpin our future prosperity.”
From April this year corporation tax will be reduced from the current 20 percent to 19 percent and in 2020 it will fall to 17 percent.
LLP (@BPCollinsLaw) March 8, 2017
In addition the finance minister promised to simplify the scheme for companies to get tax credits for research and development: “To make the UK even more attractive for R&D we have accepted industry calls for a reduction in administrative burdens around the scheme.”
That scheme is one of the ways the government is hoping to support industry even as the plan for Britain to leave the European Union is making some companies wary about long-term investments.