U.K. Treasury chief Philip Hammond on Wednesday presented gloomier forecasts for the economy and government finances, in a budget address to parliament aimed at boosting the country's feeble productivity as well as his own political fortunes.
Presenting his latest tax-and-spending plans to lawmakers, Mr. Hammond said he remains on track to meet a self-imposed goal of bringing the country's budget deficit under 2% by 2021, though with less room for extra spending or tax cuts than was forecast in March.
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The downbeat prognosis reflects steep cuts to forecasts for the economy and the public finances by the Office for Budget Responsibility, the U.K.'s fiscal watchdog. The agency said it expects the economy to grow 1.5% this year, 1.4% in 2018 and 1.3% in 2019.
Those forecasts compare with March projections of growth of 2%, 1.6% and 1.7%, respectively.
The downgrades follow a reassessment of by the OBR of the U.K.'s prospects for productivity growth in the years ahead following repeated disappointments. The U.K.'s productivity, the economy's ability to make better use of labor and capital to produce ever more goods, has lagged behind other major economies since the financial crisis.
Mr. Hammond announced new investments in infrastructure, education, and research and development in an effort to boost productivity, though he acknowledged that improvements won't happen overnight.
His budget speech, a centerpiece of the British political calendar, represents the latest effort by the ruling Conservatives to reassert their authority and woo back voters after a snap election in June cost the party its parliamentary majority.
Mr. Hammond has been under pressure from ardently pro-Brexit Conservatives who disagree with his vocal support for a Brexit deal that keeps the U.K. and the European Union close after Britain formally withdraws from the bloc in 2019. Some, such as Nigel Lawson, who served as Treasury chief under Margaret Thatcher, have called for Mr. Hammond to be sacked.
In an effort to allay lawmakers concerns over the government's lack of preparation for a clean break, Mr. Hammond said he has earmarked GBP3 billion ($3.97 billion) over the next two years to ready the economy for any Brexit outcome.
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(END) Dow Jones Newswires
November 22, 2017 08:54 ET (13:54 GMT)