Philip Hammond hails "light at the end of the tunnel" for economy

Philip Hammond has said there is "light at the end of the tunnel" for the UK economy, with the government's official forecaster upgrading short-term growth projections and predicting falls in inflation, debt and borrowing '” but warning of the growing impact from Brexit in future years.

In his first spring statement to the House of Commons, the Chancellor revealed that the Office for Budget Responsibility now expects GDP growth in 2018 to be 1.5%, rising from the estimate of 1.4% at November's budget. Growth in 2017 was 1.7%, compared with the 1.5% forecast by the OBR last year.

Growth is expected to meet the OBR's existing forecasts in 2019 and 2020 of 1.3%, but estimates have been downgraded in 2021 from 1.5% to 1.4%, and in 2022, from 1.6% to 1.5%.

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Government borrowing will be £45.2 billion this year - some £4.7 billion lower than predicted in November and £108 billion lower than in 2010.

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Debt is forecast to be 1% lower than expected at the time of last autumn's Budget, peaking at 85.6% of GDP in 2017/18, before falling gradually to 77.9% in 2022/23.

Mr Hammond said the forecasts confirmed "the first sustained fall in debt for 17 years, a turning point in the nation's recovery from the financial crisis of a decade ago. Light at the end of the tunnel".

However, GDP estimates confirm that the UK will have the slowest growth of the world's big economies, with the British Chambers of Commerce warning that the country is "locked onto a low growth trajectory for the foreseeable future".

Mr Hammond hinted at the possibility that austerity will be eased in this autumn's Budget.

He told MPs: "If, in the autumn, the public finances continue to reflect the improvements that today's report hints at, then... I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers' money is wasted."

Mr Hammond rejected Labour "doom and gloom" over the state of the economy, saying the recession repeatedly forecast by shadow chancellor John McDonnell since 2010 had failed to materialise.

Instead, he said the economy had grown in every year of the Conservative-led governments, with manufacturing enjoying its longest unbroken run of growth for 50 years, three million additional jobs and higher levels of employment in every part of the UK.

This amounted to "solid progress towards building an economy that works for everyone", he told MPs.

And he claimed that Labour plans would soak up all of the reduction in borrowing achieved over the past eight years, adding £350 billion to debt and taking the figure over 100% of GDP.

The Government had taken "another step on the road to rebuilding the public finances decimated by the party opposite, and one that they would again place at risk," he told MPs.

Playing on his own reputation for gloom, he joked: "If there are any Eey-ores in this Chamber, they are over there. I, meanwhile, am at my most positively Tigger-like."

But shadow chancellor John McDonnell labelled Mr Hammond's "complacency" as "astounding" as he responded to the statement.

Mr McDonnell told the Commons: "We face in every public service a crisis on a scale we've never seen before."

And referring to the Chancellor's Eeyore reference, shadow communities secretary Andrew Gwynne joked that Mr Hammond was "talking Pooh".