There is one key message from the British budget: economic growth there is poor and the economy is set to under-perform. The GDP growth forecast this year was cut from two per cent to 1.5 per cent and is predicted to slow further in the years ahead. With the possibility of an even greater hit to the economy if there is a hard Brexit, the outlook for the UK is uncertain as well as poor. No amount of rhetoric from chancellor of the exchequer Philip Hammond could conceal this.
Politically, he may have done enough to keep the show on the road, for the moment at least. Divisions in the cabinet meant he could never hope to keep everyone happy but, by avoiding undue references to Brexit or the government’s plans for it, he ensured much of the immediate debate will relate to issues such as housing. That said, focus in London will soon turn back to the negotiations with the EU and the December deadline for a decision on whether the Brexit talks can progress to the next stage. In that sense, the budget was something of a diversion.
Slower growth takes a toll. An earlier promise to eliminate borrowing has been quietly dropped and the deficit will now be higher than expected. There was limited cash to spare for social services, leaving the Conservatives open to attack from Labour.
A key focus was housing, with significant resources planned for building and land provision to tackle a crisis of affordability and supply which has some similarities with our own. It remains to be seen how effective this will be, while the surprise measure of a stamp duty break for first-time buyers was immediately criticised as being likely to push up prices. Like their counterparts in Ireland, Britain’s politicians are learning that tackling housing is a lengthy and complex challenge.
Attention will now turn to the key talks on Brexit. Whether prime minister Theresa May can do enough to make sure these progress to the next stage remains very much open to question. If she does not, then the uncertainties created will only damage the economic outlook further.