Spring statement 2019
Economics expert at City, University of London provides analysis of the UK spring statement
He said that UK government’s debt burden had now stabilised, thanks to tax cuts and subsequent cuts to public services that have received widespread media coverage. He stressed, however, that these cuts were probably necessary.
Professor Ben-Gad said: “In the absence of these cuts, the UK would most likely now be finding itself facing a possible disorderly Brexit and a falling pound while still relying on world capital markets to fund its government.”
“The Chancellor remains an unapologetic Remainer, and made clear the cost of a disorderly Brexit in his Spring Statement. But assuming this is the outcome, the government will have the ability to raise spending in the short term to soften some of the immediate negative impact this will imply.”
Professor Ben-Gad emphasised that, while the Chancellor did not disclose what tariffs might look like in the event of a no-deal Brexit, slashing them would not matter much in terms of the budget.
“Overall, out of £705 billion in total government revenue, revenue from customs brought in a paltry £3.4 billion, just half of one per cent of the total.
“Of course some companies would face more competition but consumers might benefit somewhat by the change. The real question is how exporters will fare, as the EU is unlikely to follow the UK’s example and may very well impose tariffs on UK-made goods,” he said.
Depsite all of the austerity that has already been implemented, Professor Ben-Gad noted that the UK’s debt burden will begin to rise again during the next decade as the population continues to age.
He said: “One way to ameliorate the growing dependency ratio, and make sure the economy grows fast enough to allow the government to meet its future commitments, is through higher rates of immigration – provided it is targeted towards young, high-skilled workers.
“Mr Hammond’s announcement that the government will exempt PhD-level roles from visa caps is a good first step,” said the City economist.
Professor Ben-Gad, while recognising that this government may not be in power much longer, said that the Spring Statement had caused him to “renew my membership of the world’s smallest group, the Phillip Hammond Fan Club”.
He said: “Reviled by nearly every faction of his own party, the Chancellor, perhaps because he long ago abandoned hope of becoming Prime Minister himself, seems the only person sitting on either the government or opposition benches to be making responsible decisions for the good of the country rather than manoeuvring to benefit from the growing chaos.”