Cost of Brexit, austerity update but no fireworks: Here’s what to expect from Philip Hammond’s Spring Statement on 13 March
The chancellor will next week deliver his new, understated Spring Statement – and although it is not expected to have the same weight as previous Budgets, he is still expected to make waves.
As previously announced, Philip Hammond will use the statement to respond to the latest OBR forecasts and set out some long-term thinking, ahead of the autumn Budget, rather than unleash any major new policies.
He said the reason for cutting back the number of “fiscal events” was to make it easier for MPs to scrutinise policies, as well as making life easier for businesses.
However, alongside Hammond’s speech from the despatch box, the Office for Budget Responsibility will finally put detail on the Brexit divorce settlement payments the UK will make to the EU, estimated to total £39bn.
According to the FT, the OBR will reveal what that looks like on an annual basis, honouring the UK’s commitments for the rest of the remaining budgetary period, which runs until 2020.
Beyond that, it looks like there will be few fireworks.
Liz Truss, chief secretary to the Treasury, wrote in today’s Times that there would be “no red box, no rabbits out of the hat and no tax changes”.
She added: “Our message is simple: let’s keep on course, keep our economy strong and focus on the opportunities ahead of us. We want to keep taxes low so that the weekly budget goes further.”
Labour has called on the chancellor to go further that delivering “little more than an update on the nation’s finances”, calling for an end to austerity.
Last week it was revealed that the UK had eliminated the £100bn deficit on day-to-day borrowing it had inherited in 2010. Although it was two years after the target set by former chancellor George Osborne, he hailed it as a success, tweeting: “We got there – in the end”.
Overall, government borrowing (including investment spending) is now around two per cent of GDP.
Yesterday shadow chancellor John McDonnell urged government to act.
“I suspect, if market and other expectations are correct, that Philip Hammond may attempt a small brag of his own when presenting next week’s borrowing figures. Any boasting will be misplaced. The picture in the official statistics remains as bad as ever under this government,” he said.
“These abstract national figures don’t show us the real impact of austerity and economic failure… This is the sixth largest economy on the planet. It is an immensely wealthy society. London has more billionaires living here than any other city in Europe. And yet every night on the streets of this city there is another rough sleeper.”