What the Chancellor could say in the Spring Statement

When the Chancellor gets up on Tuesday to make a statement to the Commons, it will not – if he has judged it right – resemble the traditional Budget day performance. No red box (in fact, empty) lifted up to the cameras, no long statement full of twists and turns across the whole range of the UK’s tax and spending, and none of those elaborate surprises devised (with an eye to the headlines) in late-night Treasury stints. Maybe, too, none of those painstakingly crafted jokes, a staple of parliamentary theatre on Budget day for years.

This new kind of statement would mark a big step forward. The Institute for Government has been a strong advocate of the case for just one “fiscal event” a year, to avoid the fiddling and improvisation that are all too tempting if there are two big pronouncements a year. Philip Hammond, in agreeing last year to have an Autumn Budget followed by a pared-down Spring Statement, made an important commitment to reduce the uncertainty for people and businesses.

The risk is that in doing so he will fail to meet other expectations. A government conscious of its fragility and grappling with the mechanics and high-wire politics of Brexit will have many voices – inside and out – calling for more spending. A recent and unexpected improvement in public finances – the first full 12 months since 2002 of a current budget surplus (not counting investment) – will add to those calls.

He could resist these. But if he succumbs, he could argue that new promises are minor or part of an existing plan – or would have been made whether or not there was a Spring Statement. As we have argued, throwing dollops of emergency cash at public services may sometimes be inescapable but does nothing to solve underlying problems. Moreover, as such funding has not been anticipated and may only be temporary, the money may not be well spent.

Meanwhile, the budget surplus does reflect a real improvement in revenues – particularly from self-employment and capital-gains tax in January.

However, many pressures – not least from an ageing population – threaten to reverse the trend, and the Chancellor needs to listen carefully to the calls for more spending on public services. As the Institute has argued, many public services, having responded to the first years of austerity by finding more efficiency, are now showing signs of a sharp deterioration. Prison violence is rising; many hospital trusts are in deficit. Some of these problems will demand an early answer; the spending review scheduled for 2019 seems a long way off. In the end, though, the problems cry out for strategic answers.

The pressure on prisons could be addressed with more money – but it would be far better to ask whether sentencing policy is partly to blame. Parts of the NHS are in an immediate funding crisis, but there is no good answer to its problems without considering the funding of social care at the same time. That answer needs to acknowledge the changes in demography and medicine that seem to demand either that the UK spend a higher proportion of GDP on health – or accept a lower standard of healthcare.

It would be good to hear from the Government how it plans to produce answers to these questions. It would be good, too, to know how the Autumn Budget this year and the 2019 Spending Review will fit into its plans. It would be far better if the next Spending Review allowed departments to consider whether their spending as a whole fits with their strategy, rather than (as happens often) having to scrap with the Treasury over the incremental amount the Chancellor can afford to dole out.

Public services aside, other big questions are looming. Labour – helped by the collapse of Carillion – has successfully brought into debate the question of what works (and doesn’t) in using the private sector to do government work. The question of how to tax people and companies in a changing economy is on the list, too. So is the continuing digital revolution.

It’s fine – indeed, more than fine – for the Spring Statement to be small. But the Chancellor and his colleagues in government need to show that they understand the big challenges confronting the UK – and have a plan that recognises their urgency and scale.