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Hammond's Autumn Statement reveals bleak impact of Brexit

Philip Hammond has laid bare the economic gloom facing the nation, as forecasts reacting to Brexit projected a major downgrade in UK growth and a staggering £220bn rise in the national debt.

The Chancellor's first major economic statement since June's shock referendum result unveiled a series of plans aimed at boosting productivity and helping low-income workers.

The standout measures in his Autumn Statement included a fuel duty freeze, a rise in the National Living Wage and measures to ease cuts to Universal Credit.

Philip Hammond announced his first Autumn Statement would be his last. Credit: PA

But the revised economic forecasts as a result of the EU exit vote showed the Government face a tough route to meet Mr Hammond's aim of making the economy "match fit" for the "new chapter" ahead.

Mr Hammond announced the Office for Budget Responsibility (OBR) has slashed the GDP growth forecast from 2.2% this year to 1.4% in 2017, only rising back above 2% by 2019.

2.2%
GDP growth forecast for 2016.
1.4%
GDP growth forecast for 2017.

The OBR's projected post-Brexit impact on the national debt then revealed a huge hike in borrowing ahead.

As expected Mr Hammond confirmed he will abandon predecessor George Osborne's aim of achieving a budget surplus by 2019/20.

ITV News Political Editor Robert Peston tweeted:

Mr Hammond refused to put a date on when he would return public finances to balance, but said he was committed to delivering it "as soon as practicable".

Mr Hammond said the £3.5 billion of efficiency savings announced by Mr Osborne at the Budget would still be delivered in full.

Here's more detail on the gloomy economic forecasts:

Slashed GDP growth forecast and public spending levels

Former chancellor George Osborne looked on as Philip Hammond announced a major new direction for the Treasury. Credit: PA

Chancellor Philip Hammond said the Office for Budget Responsibility (OBR) has slashed the GDP growth forecast for 2017 from 2.2% to 1.4%, as well as forecasting growth of 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021.

Public spending this year will be 40% of GDP - down from 45% in 2010.

ITV News Deputy Political Editor Chris Ship noted national debt as a percentage of GDP is forecast to rise to record levels.

Sharp rise in borrowing

The increase in the nation's debt is caused by the considerable rise in borrowing, which is forecast by the OBR to reach £68.2 billion this year before falling annually to £17.2bn in 2021-22.

£59bn
2017/18
£46.5bn
2018/19
£21.9bn
2019/20
£20.7bn
2020/21
£17.2bn
2021/22

The sharp rise in borrowing came as Mr Hammond confirmed a major new investment plan - one of a number of key announcements:

£23bn of funding on innovation and infrastructure

A new National Productivity Investment Fund of £23 billion will be spent on innovation and infrastructure over next five years, including:

  • New research, development and innovation investment rising to an extra £2bn per year by 20-21
  • An additional £1.1bn of investment in English local transport networks
  • Investment of more than £1 billion in digital infrastructure and 100% business rates relief on new fibre infrastructure to make UK "a world leader" in 5G.

New housing and fee changes

The Government aims to build up to 100,000 new homes in high-demand areas. Credit: PA

Mr Hammond announced a combined £3.7bn spend on new housing, while confirming the anticipated change in letting agents fees.

  • £2.3bn Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in areas of high demand
  • A further £1.4bn to deliver 40,000 additional affordable homes
  • Upfront fees charged by letting agents in England to be banned "as soon as possible".

Minimum wage and welfare

A 30p increase in the National Living Wage will take effect in April 2017.

Mr Hammond confirmed the National Living Wage will increase in April next year.

  • The National Living Wage will rise from £7.20 to £7.50 in April 2017.
  • Universal credit taper rate to be cut from 65% to 63% from April at a cost of £700 million.

ITV News Social Affairs Editor Penny Marshall said the Government is trying to tweak benefits to show they are not as "nasty" as the last administration but many issues still remain.

ITV News Health Editor Rachel Younger said those working in a struggling social care system may disagree with Mr Hammond that his Autumn Statement gives "help to those who need it now".

Corporation tax and tax-free allowance

Mr Hammond announced changes to personal tax and corporation tax.

  • Income tax free personal allowance to rise to £12,500 and the higher rate threshold will increase to £50,000 by the end of the Parliament.
  • Corporation Tax cut as planned to 17%, which Mr Hammond said is "by far the lowest" of G20 nations.

Tax avoidance crackdown

Mr Hammond announced a range of measures to target tax avoidance, particularly among multi-nationals.

  • Measures to stop multi-nationals avoiding tax to raise £5 billion from the largest businesses in the UK.
  • Measures to crackdown on inappropriate tax avoidance to raise around £2 billion over the forecast period.
  • Government to raise £630 million by removing tax benefits of disguised earnings for the self-employed and employers.

More prison officers

Philip Hammond announced the Ministry of Justice has been permitted to increase prison officers by 2,500. Credit: PA

Also notable was the increase in the number of prison officers, reversing plans by former Justice Minister Michael Gove.

  • The Ministry of Justice has been given permission to employ a further 2,500 prison officers "to tackle urgent prison safety issues".

No more Autumn Statements

Mr Hammond ended his first Autumn Statement by announcing it would be his last - but quickly added a new Spring Statement would replace it as the Treasury's key annual address outside of the Budget.

McDonnell: Statement shows 'abject failure'

Responding to the Autumn Statement, Shadow Chancellor John McDonnell said Mr Hammond had placed on record the "abject failure of the last six wasted years".

He said the slashing of growth and deficit targets offers "no hope for the future".

Claire Evans, personal tax partner at Deloitte, said: "This was an Autumn Statement with few tax changes, but many spending announcements, costing some £5-8 billion annually.

"For individuals, the Autumn Statement was relatively uneventful. As previously announced the personal allowance will increase to £11,500 and the higher rate threshold will increase to £45,000 in 2017/18 in England and Wales.

"The Chancellor has upheld his predecessor's commitment to increase the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020, but there is no word on exactly how and when the current rates and bands will be changed.

"For savers, we had confirmation that the band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2017/18 where it has been for a number of years. This band helps those whose non-savings income is less than £16,000 in 2016/17, and of these, pensioners will be the main group to benefit."

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