Belfast Telegraph

Windfall for Chancellor Philip Hammond ahead of Budget

Chancellor Philip Hammond is set for a windfall in this week's Budget as forecasts are expected to show a sharp growth upgrade and lower-than-expected borrowing.

The Office for Budget Responsibility (OBR) is likely to unveil a hefty hike to this year's growth outlook in its latest independent forecasts after the economy continued to show surprising resilience in the face of Brexit uncertainty.

Experts also predict higher tax receipts will help Mr Hammond undershoot his borrowing target, with experts at PwC pencilling in a £45 billion windfall within the next five years.

But Mr Hammond is unlikely to offer any Budget giveaways, as Britain's public finances remain fragile amid the uncertainty of Brexit negotiations.

In what will be his first and last spring Budget, after Mr Hammond announced in November that the main Budget will instead take place in the autumn from 2018, the Chancellor is expected to keep it a low key affair.

PwC said the Chancellor will "bank" most of the £45 billion borrowing boost given the unclear economic outlook, spending only on "political priorities, like the NHS and social care".

The spotlight is set to fall on what economists believe will be a markedly rosier picture for the economy in 2017 than in November's Autumn Statement.

Economist Allan Monks at JP Morgan said the OBR is set to revise up its 2017 growth forecast close to 1.9%, from the overly-pessimistic 1.4% it predicted in November.

Its Autumn Statement also saw it slash its gross domestic product (GDP) forecasts from 2.1% to 1.7% in 2018, but maintain its outlook of 2.1% growth in 2019 and 2020, before slipping to 2% in 2021.

Growth was revised up to 0.7% for the final three months of 2016 and the Bank of England has upgraded its forecasts twice since last November as the economy confounds expectations for a slowdown.

This robust economic performance is helping drive tax receipts higher and boosting the Government's books, with official figures recently revealing the highest January surplus for 17 years.

Public sector net borrowing excluding state-owned banks was in surplus by £9.4 billion in January, up £300 million year-on-year.

Mr Monks said data suggests borrowing is on course to undershoot the existing 2016/17 projection of £68 billion by at least £10 billion.

This downgrade to around £58 billion is expected to be followed by a cut to 2017/18 borrowing from £59 billion to around £50 billion, he added.

John Hawksworth, chief economist at PwC, said the Chancellor will use this "wriggle room" to bolster the public finances, such as cutting the debt to GDP ratio.

"Given the economic and political uncertainties surrounding the Brexit negotiations, upcoming European elections and the policies of the new US administration, this seems like a prudent path to take," he said.

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