Chief Economist at KPMG UK, Yael Selfin comments on the ambitious spending plans announced in this budget.
“The Chancellor announces ambitious spending plans in the hope to fight off COVID-19 in the short-term and boost productivity in the long-term,” says Yael Selfin, Chief Economist at KPMG UK.
“Despite temporary measures announced today, worth a total of £12bn, to support the UK economy as the coronavirus outbreak expands, we expect growth in the first half of this year to be negative, with the economy edging on the cusp of a recession.
“The Chancellor announced a big boost in investment, totalling £175bn over the next five years, including a rise in public R&D investment to £22bn per year by 2024-25. This could see productivity growth returning to a golden age in the long-term, eventually rising by 2.5% according to the OBR, but more details are needed to see how that money will be spent before we can declare an end to the productivity crisis.
“A significant rise of 2.8% in public spending envisaged for the Spending Review period, well above GDP growth, will see the relative size of government rise, opening up the possibility for more generous increases in public spending in this parliament.
“In light of the worsening COVID-19 outbreak, OBR forecasts are now way above expectations for this year. The Chancellor has therefore much less room to meet his current fiscal rules, and we expect these to be revised in the Autumn Budget.”
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