Chancellor attempts to strike cautiously upbeat tone but OBR warns of extra borrowing over next five years. Philip Hammond conceded that Brexit will blow a £59bn black hole in the public finances over the next five years, as he outlined plans to boost investment in infrastructure and housing to equip the UK economy for life outside the EU.
In his first fiscal statement, the chancellor, who had supported remain, sought to strike a cautiously upbeat tone about the country’s prospects, saying the economy had “confounded commentators at home and abroad with its strength and its resilience” since the referendum result last June.
But the first official projections conducted after the vote of the likely impact of leaving the EU pointed to significantly weaker growth after Brexit.
The Office for Budget Responsibility (OBR) announced that there would be a cumulative £122bn of extra borrowing over the next five years, with £59bn of that as a direct result of Brexit. Other factors included weaker-than-expected tax revenues, and policy changes, including Hammond’s decision to spend more on infrastructure.
George Osborne was expecting to achieve a surplus of £11bn on the public finances by 2020-21; instead, the OBR is now forecasting a £21bn deficit – and public debt is expected to peak at more than 90% of GDP.
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