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Budget 2017: MPs rally round Hammond after growth gloom

Budget 2017: MPs rally round Hammond after growth gloom
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Conservative MPs have rallied round Philip Hammond despite his Budget being overshadowed by gloomy assessments of the UK s future growth prospects.

The UK economy is forecast to expand by an average of just 1.4% a year by 2022 due to uncertainty over Brexit and sluggish productivity levels.

Labour say the projections, the weakest for decades, risk prolonging austerity and extending the squeeze on families.

But leading Tories said the chancellor had maintained his fiscal credibility.

The BBC s political editor Laura Kuenssberg said while the economic reality was a country that could be "poorer for longer", Mr Hammond may have overcome the short-term political challenge of delivering a controversy-free Budget that could bring "a period of peace" to his party after months of upheaval.

The chancellor, who was under pressure from sections of his party in the run-up to Wednesday s speech, has won praise from Tory backbenchers for his decision to scrap stamp duty for the majority of first-time buyers and to set aside £3bn for preparations for the UK to leave the EU.

MPs privately told the BBC it was "very solid" and had been "well received" while one said it contained "nothing too dangerous" and would pass intact.

While conceding the economic downgrades were "significant", Nicky Morgan - chair of the Treasury select committee - said he had "taken a common-sense approach" and "balanced fiscal credibility with demands for spending on multiple fronts".

Leading Brexit supporter John Redwood said the Budget was full of "good proposals", including the help for first-time buyers.

But opposition parties have said the measures go only a small way to addressing the housing crisis in the country, while an extra in England up to 2022 is insufficient.

Labour has said the Budget laid bare the Conservatives "record of failure" and predicted that it was set to "unravel" in the coming days.

The poor outlook for the economy will put an extra strain on the public finances and will impact negatively on family finances, leading economists are warning.

The Resolution Foundation says disposable incomes are now expected to be £540 lower by 2023 than forecast in March, largely as a result of weaker pay growth.

Average pay is not set to return to its 2008 peak until the middle of the next decade, it has said.

And the Institute for Fiscal Studies, which will give its eagerly-anticipated verdict on the Budget on Thursday, says it is highly unlikely Mr Hammond will meet his target of balancing the books by the mid 2020s.

"To get there we would have to have another round of spending cuts," IFS director Paul Johnson told the BBC. "Given how hard it has been to get where we are, I think that is going to be pretty tough."

The chancellor said the economy continued to "confound those who seek to talk it down" by creating jobs and continuing to grow.

But the independent Office for Budget Responsibility soon signalled that it was less optimistic about the future, slashing its 2017 growth forecast from 2% to 1.5%.

Output, it added, would be weaker than previously thought in each of the subsequent four years.

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Media captionThe BBC s political, economics and business editors on the announcements in Philip Hammond s Budget.

To put the figures into perspective, while there have been three recessions since the early 1980s there has not been a period since then when growth has been forecast to dip below 2% for more than three years in a row.

Asked if the UK should get used to below 2% growth in the long-term, Treasury minister Liz Truss told BBC "we should not expect mediocrity and we have got to get better".

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Media captionThe chancellor abolishes stamp duty on homes under £300,000 to help first-time buyers.

Mr Hammond s "rabbit out of the hat" moment was his pledge to scrap stamp duty for first time buyers purchasing homes worth up to £300,000.

He said the change, which would also see those buying properties worth up to £500,000 paying no tax on the first £300,000, will benefit 95% of first-time buyers.

But in its assessment, the Office for Budget Responsibility said the main gainers would be those who already own a home.

It also said the cut, which will initially only apply in England, Wales and Northern Ireland, would push house prices up by 0.3% and predicted it would only lead to an extra 3,500 first-time buyer purchases.

Treasury minister Liz Truss said 0.3% was a "minor increase" and the main beneficiaries would be those struggling to get on the housing ladder.
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