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Autumn Statement: Government defends post-Brexit vote economy forecasts Autumn Statement: Hammond defends post-Brexit economy forecasts
(about 2 hours later)
The government has defended economic forecasts in the chancellor's Autumn Statement after criticism by some pro-Brexit MPs that they are too gloomy. Chancellor Philip Hammond has called economic forecasts in the Autumn Statement one of a "range of outcomes" after some pro-Brexit MPs criticised them for being too pessimistic.
Philip Hammond quoted Office for Budget Responsibility (OBR) forecasts of more government borrowing and reductions in economic growth after the Brexit vote. The Office for Budget Responsibility (OBR) forecast more government borrowing and reductions in economic growth after the referendum.
Ex-minister Iain Duncan Smith claimed the OBR "hasn't got anything right." Ex-minister Iain Duncan Smith accused the OBR of "utter doom and gloom".
But treasury minister David Gauke said it was right to work on the basis that the OBR forecasts were correct. But Mr Chancellor Hammond said it was good to prepare for a "rainy day".
Mr Hammond told MPs the UK's deficit would no longer be cleared by 2020, while the OBR estimated the government would have to borrow an extra £122bn compared with what was forecast in March, with the referendum result accounting for £58.7bn of this. He added that the government was investing to boost infrastructure and economic productivity and there was a "downward path in borrowing".
The Brexit vote meant potential growth in the current Parliament would be 2.4% lower than forecast in March, according to the OBR. BBC economics editor Kamal Ahmed said the chancellor "hopes that the forecasts do prove very gloomy" and he was "setting a bottom line from which he hopes the government can clamber upwards".
The OBR said producing a forecast was "far from straightforward", as it had not been given any extra information from the government about its negotiation plans. During Wednesday's Autumn Statement, Mr Hammond's first since becoming chancellor, he told MPs the UK's deficit would no longer be cleared by 2020.
And the OBR estimated the government would have to borrow £122bn more than forecast in March's Budget, with the referendum result accounting for £58.7bn of this.
The Brexit vote meant potential growth in the current Parliament would be 2.4% lower than forecast in March, according to the OBR who also admitted producing a forecast was "far from straightforward", as it had not been given any extra information from the government about its negotiation plans.
It said: "We have made a judgement - consistent with most external studies - that over the time horizon of our forecast any likely Brexit outcome would lead to lower trade flows, lower investment and lower net inward migration than we would otherwise have seen, and hence lower potential output."It said: "We have made a judgement - consistent with most external studies - that over the time horizon of our forecast any likely Brexit outcome would lead to lower trade flows, lower investment and lower net inward migration than we would otherwise have seen, and hence lower potential output."
The organisation said the economy will be affected by future choices that the government makes about regulatory and other policies and it "could move in either a growth-enhancing or a growth-impeding direction". The organisation said the economy would be affected by future choices that the government makes about regulatory and other policies and it "could move in either a growth-enhancing or a growth-impeding direction".
Asked about the OBR's predictions, former Work and Pensions Secretary Mr Duncan Smith told the Daily Telegraph it was "another utter doom and gloom scenario" from the organisation. Asked about the OBR's predictions, the former Work and Pensions Secretary and Leave campaigner Mr Duncan Smith told the Daily Telegraph it was "another utter doom and gloom scenario" from the organisation.
The Economists for Brexit group predicted more "humiliating U-turns" from the OBR, saying it had "assumed a pessimistic outlook for the UK economy outside the EU, based on bad economic policy-making".The Economists for Brexit group predicted more "humiliating U-turns" from the OBR, saying it had "assumed a pessimistic outlook for the UK economy outside the EU, based on bad economic policy-making".
Conservative MP John Redwood added: "Their [GDP growth] forecast probably is too low, their borrowing forecast is far too high, and we'll get good access to the single market once we're out of the EU." Conservative MP John Redwood, who also supported Brexit, added: "Their [GDP growth] forecast probably is too low, their borrowing forecast is far too high, and we'll get good access to the single market once we're out of the EU."
But speaking on BBC Newsnight, Chief Secretary to the Treasury Mr Gauke said: "We have an independent body that makes the forecasts and it is sensible for a government to work on the basis that that independent body has got it right." In his statement, Mr Hammond promised to invest £23bn on "innovation and infrastructure" over the next five years, with more money for roads, broadband and regional development.
He said nobody should be surprised that uncertainty created by the Brexit vote would hit growth. He told BBC Radio 4's Today programme: "There's a downward path in borrowing. We need to keep the downward path on borrowing... But we also need to invest in our economy, to generate the revenue that will drive down the debt."
"People of course are entitled to their opinion and I guess in a year or two's time we can look back and see who was right and who was wrong," he said, adding that the forecasts were "not government numbers". 'Strong foundation'
In his first major speech as chancellor, Mr Hammond vowed to make the UK economy "resilient" for Brexit. Describing economic forecasting as "not a precise science", Mr Hammond said of the OBR's forecast: "We should think of it as one of the possible range of outcomes we need to plan for."
The chancellor told MPs the Brexit vote would "change the course of Britain's history", making it "more urgent than ever" to tackle long-term economic weaknesses. He added: "We have a very strong foundation on which to build."
Labour said the statement offered no hope for the future after six "wasted" years. Mr Hammond also said: "We should have a plan which both invests in our economy and puts a little aside for the possibility of a slightly more rainy day next year or the year after."
Among announcements in the Autumn Statement were: Uncertainty was "not just about" Brexit but the change of US government when Donald Trump takes office and the growth rate of the Chinese economy, he added.
Labour said the Autumn Statement offered no hope for the future after six "wasted" years.
Among Mr Hammond's announcements were:
The speech also triggered questions about the future of the so-called "triple lock" protection for state pensions, while campaigners criticised the lack of extra funding for social care.The speech also triggered questions about the future of the so-called "triple lock" protection for state pensions, while campaigners criticised the lack of extra funding for social care.
The triple-lock guarantees that state pensions rise by the same as average earnings, the consumer price index, or 2.5%, whichever is the highest.The triple-lock guarantees that state pensions rise by the same as average earnings, the consumer price index, or 2.5%, whichever is the highest.
Mr Hammond said the government would meet this pledge, adding: "But as we look ahead to the next Parliament, we will need to ensure we tackle the challenges of rising longevity and fiscal sustainability."Mr Hammond said the government would meet this pledge, adding: "But as we look ahead to the next Parliament, we will need to ensure we tackle the challenges of rising longevity and fiscal sustainability."
Former Pensions Minister Baroness Altmann, who has said the pledge is too expensive and should be scrapped, said: "The chancellor's speech signalled pretty clearly that the state pension triple lock is only safe until 2020. Former Pensions Minister Baroness Altmann, who has said the pledge is too expensive and should be scrapped, said: "The chancellor's speech signalled pretty clearly that the state pension triple lock is only safe until 2020."
"I would like to see a double lock announced, whereby state pensions would rise in line with either earnings or prices."
Meanwhile health and social care leaders have condemned the statement for a "missed opportunity" to announce new investment.Meanwhile health and social care leaders have condemned the statement for a "missed opportunity" to announce new investment.
Responding to Mr Hammond in the Commons, shadow chancellor John McDonnell condemned the government's approach to austerity and said the people the prime minister promised to protect - those who are "just about managing" - had been "betrayed". For Labour, shadow chancellor John McDonnell told BBC One's Breakfast that although he welcomed the government "moving on investment policy" there had been "mismanagement of the economy over the last six years".
He told BBC One's Breakfast on Thursday that although he welcomed the government "moving on investment policy" there had been "mismanagement of the economy over the last six years".
"I find it extremely worrying that they've used the last six years with austerity measures and instead of investing they've been cutting, and as a result of that they're unprepared and ill-equipped for Brexit.""I find it extremely worrying that they've used the last six years with austerity measures and instead of investing they've been cutting, and as a result of that they're unprepared and ill-equipped for Brexit."
The SNP said Mr Hammond had offered little on the "elephant in the room" - Brexit - while the Lib Dems said the government would "hit people in the pocket through their hapless handling of Brexit".The SNP said Mr Hammond had offered little on the "elephant in the room" - Brexit - while the Lib Dems said the government would "hit people in the pocket through their hapless handling of Brexit".
But UKIP said billions were being wasted by the government "delaying" the UK's exit from the EU.But UKIP said billions were being wasted by the government "delaying" the UK's exit from the EU.
Plaid Cymru said there was little in the statement to help rebuild the Welsh economy and close the wage gap with England.Plaid Cymru said there was little in the statement to help rebuild the Welsh economy and close the wage gap with England.
What questions do you have about the Autumn Statement?What questions do you have about the Autumn Statement?