Hammond promises 'deal dividend' if Brexit agreement is secured

Hammond talks up UK economy despite Brexit 'cloud'

Hammond could have ended austerity earlier without Brexit – IFS

For, despite Mr Hammond's bullishness about the robust of the economy compared to other G7 countries, the Chancellor could not gloss over the fact that economic growth this year has been reduced to 1.2 per cent - a significant downgrade - and that future improvements to the funding of schools and other key services, frequently and vociferously demanded by MPs of all parties, are contingent on a Brexit resolution of sorts. Previously the OBR had predicted growth of 1.4% for 2021 and 1.5% in 2022.

The IFS said the United Kingdom economy would have been about 2% bigger without the Brexit vote.

Mr Hammond added that the United Kingdom economy was expected to grow by 1.4 per cent in 2020, unchanged from the government's October forecast.

Still, Hammond said borrowing will be at its lowest level in 22 years.

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".

"I hoped we would do that last night, but I am confident that we, as a House, will do it over the coming weeks".

The thinktank also warned that it could not determine whether austerity was ending and public services moving "decisively upwards after almost a decade of unprecedented cuts" until the conclusion of the chancellor's spending review, which will be unveiled alongside the autumn budget later this year.

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The OBR said a recent run of disappointing economic data in both the United Kingdom and other major economies had also weighed on expectations.

Later in the day, the United Kingdom parliament voted down a no-deal Brexit but May warned the legal default in European Union law remains that "the United Kingdom will leave without a deal unless something else is agreed".

"Brexit is a process, not an event", he said.

"This is up from £15.4 billion in October, as the fiscal costs of the temporary near-term cyclical weakness of the economy have been swamped by the fiscal gains from higher income tax and lower debt interest spending".

However, in a blow to Mr Hammond, changes to the way student loans are accounted for mean the structural budget deficit could increase by around £12 billion in 2020-21.

Wage growth expectations have been revised upwards to at least 3% in each year until 2023, although this year's 3.1% estimate will mark a slowdown on last year's 4.1% growth.

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