Blink and you might have missed it – the new look Spring Statement was a shorter affair than in previous years and was definitely not a Budget. In fact, lasting less than half an hour (as expected) it didn’t really contain the usual raft of policy announcements and ‘rabbits’ that we are used to at this time of year. However, looking beyond the headlines, it is interesting to note what lies beneath the Chancellor’s rather upbeat message.
Mr Hammond has had a rather rocky few months, some wondering if he would actually be in his job to deliver today’s pronouncements. However, that is all behind us as he stood at the Dispatch Box and proclaimed that the UK economy has grown in every year since 2010, and we have reached a ‘turning point in the nation’s recovery from the financial crisis of a decade ago. Light at the end of the tunnel.’
And if you look at the OBR’s figures, he is not wrong – forecasts have been raised and the outlook appears to be less glum than one might have thought even a year and half ago after the Brexit vote, although the starting point was a rather low one. But looking beyond the medium-term, will the UK see the economic upsurge once our payments to the EU subside – anticipated in the next 5 years or so? At the moment, it would appear not. The longer term forecast is considerably weaker than the Chancellor is leading us to believe. More worryingly, this is based on pure speculation as the make-up of any deal we make with the EU post March 2019 is a completely unknown quantity, and so it could be worse still.
And thus the politics comes into play. Whist Philip Hammond could claim some positive messaging from today’s economic figures, the wariness of the Opposition Parties is justified. And beyond that, Paul Johnson from the widely respected Institute for Fiscal Studies predicted that borrowing numbers ‘will still be much closer to Autumn forecast than March 2016 forecast. Economic and fiscal outlook has deteriorated a lot since March ‘16’. Whilst the Federation of Small Businesses greeted action on late payments positively the response from the British Chambers of Commerce was decidedly more lukewarm.
Economic forecasts are a decidedly scientific affair. However, with so many uncertainties ahead of the UK what happens to growth, debt, GPD and a host of other indicators is as clear as mud – and will remain so for some time. In the meantime, the Government will talk up the economy and once again warn of the dangers of excessive spending, whilst the Labour Party tries to shout them down and make the public see the need to spend on infrastructure projects and public sector wages. Which is the better path for economic certainty – not even a crystal ball will help with that question – time will tell.