13 March 2018

The Treasury did a sterling job reducing expectations. The speech was a bit longer than billed but kept its focus. The big question is whether the Chancellor was right to stick with no Spending Review until 2019, argues Jill Rutter.

The Chancellor, Philip Hammond, had some good news for his first Spring Statement: a bit more revenue, a bit stronger growth, a downward revision in borrowing from November’s gloom and a tick down in the debt-to-GDP ratio.

That was all the Chancellor needed to say today in his first Spring Statement. But he decided to pad out the ten minutes it would have taken to get through the Office for Budget Responsibility’s (OBR) forecast update.

The Chancellor may find it hard to avoid more crisis cash in the autumn

Coming into the Spring Statement, the Chancellor was under pressure to use some of his room for manoeuvre to help public services. He made a virtue of saying these issues would be dealt with in the upcoming Spending Review. But the Spending Review will not take place until 2019 – meaning the first year for new budgets will be 2020/21. 

Given the very real immediate problems in key services – particularly prisons and hospitals – Hammond might have been better advised to move that Spending Review forward a year. That would have enabled those services to see, in the Chancellor’s own current favourite phrase, more "light at the end of the tunnel". By not doing that, he risks being forced into more emergency injections in the next Autumn Budget.

No new money, but departments get their Brexit cash for next year

Philip Hammond managed to steer clear of spending measures that would change the fiscal arithmetic. Money was allocated, most notably for Brexit – but it was money that had been earmarked in the autumn.

As we predicted yesterday, the major beneficiaries are those departments in the frontline of Brexit preparations: the Department for Environment, Food and Rural Affairs; the Home Office; HM Revenue and Customs; and the Department for Business, Energy and Industrial Strategy – but notable additions are the Department for Transport and some of the big non-ministerial departments with potential costs from taking on EU responsibilities. Interestingly for Brexit watchers, the OBR included the first ever profile of the divorce bill – and compared it to what we would pay as continuing EU members.

The move to more early consultations on tax is welcome

The Chancellor also resisted any moves on tax. Time was when a chancellor would have seen a £4 billion improvement in borrowing and felt obliged to give that bonus away instantly. This Chancellor held firm.

Also, and very usefully, the Chancellor adopted another of our proposals and announced some early-stage consultations on tax policy. A past criticism was that the Treasury too often consulted after a decision was already made (and had been scored by the OBR). Earlier is very definitely better.

The Chancellor could have made his statement even shorter

Much of today’s statement was just sheer politicking: some joking about how much money the Chancellor had spent – Spreadsheet Phil had pressed 'autosum' on his Treasury computer. Some crowing about job creation and growth in manufacturing. And a few cracks at the Shadow Chancellor and his colleagues.

It’s not clear that the tone was particularly helpful. The Chancellor’s mission to prevent the Spring Statement growing back into a second Budget would have been helped by making it more like the weekly business statement rather than a facsimile of Prime Minister's Questions.

The Chancellor may have missed his 15-minute forecast. But it is good that he stuck to his commitment to make this a very secondary fiscal event.

Further information

Check out our Policy Tracker to see how the Government is doing on its proposed policies after the Spring Statement.

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