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Will the chancellor’s gamble pay off?

First published: Prospect 01/11/2018

While the chancellor was delivering the Budget statement earlier this week, a friend sent me a text message reading “Where did he get all this money from?”

It was a great question. Without the extra money, the government would be up its Brexit creek without so much as a pooh stick, let alone a paddle. It is a windfall the government did not expect. Instead of using it to balance the budget and start to pay down debt, Philip Hammond returned it to the country, mostly in the form of higher NHS spending. While he still plans to bring the deficit down to a low level and reduce debt as a share of GDP in the next five years, the hallowed balanced budget has dropped out of the forecast horizon even though, cyclically adjusted, the budget is in small surplus throughout…. Read on..