Chancellor Philip Hammond announced the biggest government investment programme in over a decade, pledging to spend £23 billion ($28.5 billion) on technology, housing, and transport infrastructure.
Hammond announced the huge “National Productivity Investment Fund” spending programme, to be funded through additional borrowing, in Wednesday’s Autumn Statement. The Chancellor said the fiscal stimulus was needed to tackle the UK’s poor productivity and lower growth forecasts, resulting from Brexit.
Spending plans announced include:
- £2 billion for technology and science research and development;
- £2.3 billion housing infrastructure fund, aiming to build 100,000 new homes in areas of high demand;
- £1.4 billion to fund 40,000 affordable homes;
- £1.1 billion of investment in the English transport network;
- £220 million into roads nationally;
- £450 million into developing digital signalling on railways;
- £390 million investing in low emission vehicles and self-driving cars;
- £1 billion+ for 5G and a full fibre network across Britain.
Hammond told the House of Commons: “We’ve chosen to borrow to kick-start a transformation in infrastructure and innovation investment,” despite the fact that the last Tory government repeatedly attacked Labour for borrowing too much and swelling the national debt.
The OBR forecasts that the government will borrow £68.2 billion in year and £59 million in 2017. As a result, national debt as a percentage of GDP is forecast to rise from its current 84.2% to 90/2% in 2017/18.
Hammond said that the last government’s attempts to drive down the deficit had created “hard won credibility” for the Conservatives on budget matters, giving it room to borrow.
The Chancellor said the borrowing was needed to stimulate the economy, with the Office for Budget Responsibility slashing growth forecasts. The OBR expects GDP growth of 2.1% this year, falling to 1.4% in 2017 before rising to 1.7% in 2018 and 2.1% in 2019/20.
Hammond said the slump in growth next year is down to “lower investment and weaker consumer demand” as a result of uncertainty surrounding Brexit and rising inflation caused by the falling pound.
The Chancellor confirmed that the Government is abandoning plans to balance the government’s books and run a surplus by 2020, instead targeting a surplus in the next parliament. He added that the government “will maintain our commitment to fiscal discipline.”