Fiscal watchdog slashes United Kingdom growth forecast to lowest since financial crisis

Britain’s Chancellor of the Exchequer Philip Hammond is seen outside Downing Street ahead of a Brexit vote in London

Britain’s Chancellor of the Exchequer Philip Hammond is seen outside Downing Street ahead of a Brexit vote in London

In documents released alongside Chancellor Philip Hammond's Spring Statement, the Office for Budget Responsibility (OBR) said growth in the United Kingdom and global economies had slowed since October's Budget, leading to a downgrade in its short-term forecasts.

The growth prediction for 2020 was kept at 1.4%, and the OBR sees an acceleration in the following year.

"This would absorb nearly half the government's current headroom of 1.2 per cent of GDP against the fiscal mandate, as well as making a balanced budget harder to achieve", it added, responding to finance minister Philip Hammond's spring budget statement.

The projections allowed Philip Hammond, the chancellor, to bank £26.8 billion in lower borrowing over the next five years, which he pledged to use to cut taxes and raise public spending if parliament agreed a Brexit deal.

He added: "I need to be straight with the House: a no-deal Brexit would deliver a significant short- to medium-term reduction in the productive capacity of the British economy".

Philip Hammond could have ended austerity earlier than planned if Britain had voted to remain in the European Union, while crashing out without a deal would erase his spending power for boosting public services, the Institute for Fiscal Studies has warned.

Parliament last night rejected Prime Minister Theresa May's proposed Brexit plan for a second time, little more than two weeks before the scheduled date of departure from the EU.

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Hammond said borrowing and debt are both forecast to be lower in every year than at last year's budget. "And when we do, the British people will fully expect us to fire-up our economic plan, to seize the opportunities as confidence in our economy returns".

MPs were expected to vote later today against a no-deal Brexit and then vote on Thursday in favour of the government seeking a delay to Britain's departure, now scheduled for March 29.

New half-yearly fiscal forecasts showed that Britain's public finances were in better shape than in October, when Hammond gave his full, annual budget statement, even against the backdrop of a weaker outlook for the country's economy.

"Higher unemployment; lower wages; higher prices in the shops".

Britain's leading tax and spending thinktank said the chancellor's fiscal headroom - described by Hammond as a "deal dividend" - could be effectively wiped out under a no-deal Brexit.

He remarked: "By once again declining to set totals for the forthcoming spending review, [the chancellor] deferred making some of the biggest non-Brexit decisions of the parliament".

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