Hammond slammed for 'complacency' over Spring Statement
The Spring Statement has been met with scorn by economists and the opposition today, as John McDonnell accused the chancellor of merely shifting the burden from the treasury to the wage packets of individual public sector workers. The Chancellor kept his promise of announcing no new fiscal measures in the Spring Statement, a move that has infuriated Conservative backbenchers, who fear a wipeout in local elections in May.
In his response to the Spring Statement, McDonnell said:
“The Chancellor has declared today that there’s light at the end of the tunnel. This shows just how cut off from the real world he is. Last year, growth in our economy was among the lowest of the G7. The OBR have just predicted we will scrape along the bottom for future years. Wages are lower now than they were in 2010 - and they’re still falling.’
“I ask the Chancellor: will he listen to Conservative Council leaders? Like his own in Surrey? Who said – and I quote – “we are facing the most difficult financial crisis in our history. The government cannot stand idly by while Rome burns”.
“I ask him: how many more children have to come into care? How many more councils have to go bust? And how many more have to run out of reserves before he wakes up to this crisis and acts?Today’s statement could have been a genuine turning point but it is – depressingly – another missed opportunity.”
The Resolution Foundation has also warned that cuts to benefits due next month will leave 11 million families worse off. The OBR noted that there is little fundamental change from their last report - except that higher spending is being driven by a fall in savings. Assuming that the fundamental economic outlook remains unchanged (a fairly contentious assumption), austerity will continue until 2022/23. Business investment has also been revised down for this year, and over the next two years.
Shockingly, the OBR believes the economy is currently experiencing a positive output gap. Or, in the words of economist Duncan Weldon - “This is about as good as it gets.” Given the likely economic impact of a hard brexit and the continuing fall in wages, the future of the British economy under Hammond looks bleak.
The Director of the Institute for Fiscal Studies Paul Johnson agreed with the downbeat assessment. He described the growth forecasts as "dreadful compared with what we thought in March 2016, dreadful by historical standards, and dreadful compared with most of the rest of the world."