Philip Hammond has said the “era of austerity is finally coming to an end”, in his last Budget before Brexit.
He promised measures to help “the strivers, the grafters and the carers”, claiming his proposals would pave the way for a “brighter future”.
He unveiled lower-than-expected borrowing and higher growth forecasts.
He announced an extra £500m for no-deal Brexit preparations – but said a deal with Brussels would allow him to pump more money into public services.
He also announced a new tax on the profits generated in the UK by global online “giants”, such as Facebook, which he said would come into effect in April 2020 and raise £400m a year.
Speaking in the Commons, Mr Hammond promised a “Budget for hard-working families” and told MPs “we have reached a defining moment on this long, hard journey” after repairing the damage to the public finances caused by the financial crash.
The Office for Budget Responsibility revised its growth forecasts up from 1.3% to 1.6% for 2019, then 1.4% in 2020 and 2021; 1.5% in 2022; and 1.6% in 2023.
Borrowing this year will be £11.6bn lower than forecast at Mr Hammond’s spring statement, at 1.2% of GDP, and is then set to fall steadily to £19.8bn in 2023/24.
The OBR forecasts the deficit will be less than 1.4% next year, falling to just 0.8% by 2023/24.
Mr Hammond warned at the weekend that an emergency Budget will be needed if Britain leaves the EU in March without a deal.
But Downing Street has said all spending plans in this Budget will go ahead “irrespective” of Brexit.
The big long-term spending decisions will be made next year, after Britain’s scheduled departure from the EU, but Mr Hammond set the parameters for the spending review, saying spending would go up by 1.2% overall in real terms.
He also announced:
- An extra £1bn for the Ministry of Defence in the period to the end of next year to boost cyber capabilities and anti-submarine warfare capacity
- A further £650m of grant funding for English local authorities struggling to cope with rising care bills, for 2019/20
- An extra £160m in funding for counter-terrorism police over the same period
- An end to the the use of Private Finance Initiative schemes for future infrastructure projects
The chancellor also announced an additional £400m to allow schools to “buy the little extras they need” – prompting an angry reaction from Labour MPs.
Shadow education secretary Angela Rayner tweeted:
Budget measures already announced by the government include:
- An increase in spending on mental health services in England by at least £2bn a year
- A £30bn package for England’s roads, including repairs to motorways and potholes
- £900m in business rates relief for small businesses and £650m to rejuvenate high streets
- £60m on planting trees in England
- Plans to cut the cost of weddings in England and Wales
- Another freeze in fuel duty
Mr Hammond said his Budget is based on the assumption of an “average-type free trade deal” being agreed between the UK and the EU.
He said he was holding back some “fiscal” headroom in case he needed to alter his economic plan if Britain leaves the EU without a deal.
The chancellor has been under growing pressure – including from some Tory MPs – to provide more money to protect people losing out from the switch to universal credit, which merges six working-age benefits.
Labour said the entire Budget should be voted down unless the government agrees to halt the roll-out of universal credit. with shadow chancellor John McDonnell attacking the “callous complacency” of a chancellor “who has refused to make good on the Tories’ promise to end austerity”.
The chancellor announced an extra £2bn for mental health services in England.
The pledge is included in a £20bn boost to the NHS announced by the government in June. The current annual mental health spend is about £12bn.
Labour said: “If this announcement is simply money that’s already been promised, it will do little to relieve the severe pressures on mental health services that have built up because of this Tory government’s relentless underfunding of the NHS.”
Lib Dem MP Norman Lamb, a former mental health minister, said Mr Hammond was “investing the bare minimum” and was recycling commitments made by the coalition government on children’s mental health which the Conservatives had failed to deliver “nearly five years on”.