As expected, Philip Hammond’s first and last Summer Budget delivered numerous but all modest adjustments to overall government spending. This has been reflected in markets with both sterling and Gilts little changed from before his speech. Beyond the peppered insults towards the leader of the opposition, the most notable mentions were the changes to the OBR’s forecasts.
Today, 5 months to the day since the EU referendum, Chancellor of the Exchequer Philip Hammond has delivered the first Budget of the Theresa May Government; the first Autumn Statement to the Commons in light of Brexit. In brief: GDP growth forecasts lower by 0.8% and 0.4% for 2017 and 2018; planned borrowing to increase by £122bn for the next 5 years; some slender support for renters and affordable housing; some mollifying policies for the ‘just about managing’ or JAMS increasing the ‘national living wage’ and tempering some of the Universal Credit reforms; corporate tax will be cut to 17% along with a wide range of new tax reforms; and new fiscal targets of a 2% deficit with debts falling by 2020. Markets saw inflation expectations surge higher; also sterling rallied to 1.2435 during the statement but then fell to 1.2360 before the end of the statement as US data came out.
“A double dissolution occurs when both the Senate and the House of Representatives are shut down (dissolved), in order for a federal election to take place. A double dissolution election is different to regular elections, when only half the Senate seats are contested. In a double dissolution, the Governor-General dissolves both the Senate and the House of Representatives at the same time, meaning every seat in both chambers is contested. This is the only time that all senators stand for election at the same time (see Federal Elections). A double dissolution can only happen when there is a deadlock between the two houses of Parliament; it usually occurs at the request of the Prime Minister.” Australian Parliamentary Education Office Factsheet.
How does a developed western country with the second largest absolute current account deficit in the world and government debt at over 80% of GDP arrange its near term expenditure, revenue and economic drivers to simultaneously avoid a recession, woo a disenfranchised public and bolster investor confidence (even ignoring risks surrounding a possible Brexit)? According to George Osborne, Chancellor of the Exchequer, in his budget address earlier today it involves: further cuts in government spending (following reduced OBR growth and productivity forecasts), closing tax loopholes for multinationals and internet merchandisers, taxing sugary drinks, a more competitive corporate tax rate of 17%, developing infrastructure and other investment to support an anticipated “Northern Powerhouse” and a cocktail of benefits for savers and the “next generation”. Also, in a likely attempt to woo Scots, Mr Osborne boasted in “the broad shoulders of the United Kingdom” that enables him to cut the supplementary charge on oil and gas from 20% to 10% and effectively end the petroleum revenue tax.