The spring budget statement is arguably one of the most misunderstood and anticlimactic events in the economic calendar. This places it in stark contrast to the autumn statement, which usually includes a number of detailed fiscal policies and offers a clear insight into the future economic climate of the UK.
This years’ spring statement was no exception to this rule, as chancellor Philip Hammond confined himself to a meagre, 26-minute speech that offered little more than a brief and vague perspective on the Tories’ future plans.
Still, there were a couple of interesting headlines that sparked debate, and these explore these in closer detail in the article below.
Low GDP growth and the Brexit bill – The Budget in a nutshell
In truth, the minimal content in Hammond’s statement came as little surprise to key economists, with Richard Perry at Hantec Markets accurately calling the spring budget weeks in advance. He certainly called the “policy neutral” nature of the speech, for example, predicting that “there would be no tax changing or spending pledges” proffered to the public.
True to form, Hammond stopped short of confirming an imminent end to austerity, instead hinting that this policy could be restricted after a major review at some point in 2019. He did announce that the budget deficit had been turned into a surplus in the year ending January, however, raising hopes that the government may well reduce public spending cuts at some point during the next two years.
This was as good or as detailed as it got, however, although it’s fair to say that viewers were probably distracted by the confirmation of the so-called “Brexit divorce bill”. Hammond confirmed that the Office for Budget Responsibility had estimated the financial settlement at around £37.1 billion, which was close to the £40 billion estimated at the beginning of the negotiation process (although this was widely derided at the time by Brexit ministers).
This announcement, coupled with the government’s unwillingness to confirm a finite end to austerity, cast a shadow over the chancellor’s speech and reaffirmed the suggestion that leaving the EU will have a seismic impact on the poorest citizens in the UK.
Another striking headline was provided by the UK’s GDP growth forecasts, which earned mixed reviews from economists and pundits. While the chancellor himself spoke positively about the forecasts and the future prosperity of the UK, the majority of economists derided an estimated growth rate of just 1.5% and confirmed that this was far lower than expected. This will hardly have improved the mood of UK citizens, particularly with inflation remaining perilously and disproportionately high at around 3%.
This negatively was partially counteracted by the prospect of falling debt and the balancing of the budget deficit, of course, but with Brexit likely to trigger a widespread, economic fall-out these potential gains could quickly be diminished.
The last word
While the spring statement may have been policy neutral as expected, it still managed to create a sense of uncertainty and anxiety among UK citizens. Even allowing for falling debt and the emergence of a budget surplus, Hammond was unable to present a convincing case for Britain’s growth and prosperity in the near-term.
Much of this is to do with Brexit, of course, and until the UK has negotiated its exit from the EU we’re unlikely to see any concrete plans being laid down by the government.
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