Despite the recent bitter winds and snow-drifts, spring is officially upon us, and with it comes a new addition to the economic calendar – a revamped spring statement from the Chancellor of the Exchequer.
The spring statement – presented to Parliament next Tuesday – will be a shorter, snappier version of the old autumn statement, now that the Budget proper has been moved from the spring to the autumn.
Crucially, the fiddly tweaks to fiscal policy have been banished, as Hammond has made clear he wants to restrict major announcements to the November Budget.
Fiddly tweaks to fiscal policy have been banished, Hammond will keep all major policy announcements to his November autumn budget
Hammond’s speech, scheduled for 12.30pm, will see the House of Commons treated to a tight speech of only 15-20 minutes – a far cry from the hour-long mystery tour of pensions, student loans, tax and benefits we have had in years gone by.
With no policy to announce, the statement is expected to offer an update on the economic outlook and public finances as well as look at more longer-term budgetary issues.
No more quick policy fixes or easy-vote winners here. Allegedly.
So what WILL Hammond have to say?
Hammond is expected to finally have some good news to share after a string of damning economic forecasts from the Office of Budget Responsibility dampened his last speech in the run up to Christmas.
Economists believe Britain’s fiscal watchdog will nudge up near-term growth forecasts as the global economy powers ahead, while slashing expected government borrowing for 2017-18 by as much as £7billion.
The UK has recently recorded its strongest two quarters of productivity growth in six years, which in 2017 came in at 0.6 per cent compared to the OBR’s forecast of zero.
Wage growth is improving with pay rising at an annual rate of 2.9 per cent over the last six months.
The government has also recently announced it is finally running a budget surplus on day to day spending.
Investment firm Investec has said it expects growth of 1.7 per cent this year and added: ‘In terms of the spring statement, we would expect the GDP growth projections to be a little more upbeat.’
Phillip Shaw, author of the Investec report into the spring statement, said: ‘The OBR should conclude that the government is on track to meet its three specific fiscal rules on the structural budget position, a falling debt ratio and hitting the welfare cap.’
The UK recently recorded its strongest two quarters of productivity growth in six years – meaning Phillip Hammond has some positive news to spin during Tuesday’s speech
However, Shaw adds that the aim to balance the entire budget by the end of the next parliament was ‘ambitious’.
Chief economist at the Resolution Foundation, Mark Whittaker, added that the challenges Britain faces are likely to be ‘long-lasting’ despite any positive economic news outlined in Hammond’s speech.
Whittaker said: ‘While the temperature has continued to fall, the economic picture has started to brighten and we should expect a slightly sunnier outlook next week.
‘Britain’s revised economic outlook is likely to give the Chancellor more fiscal leeway.
Phillip Hammond, Chancellor of the Exchequer, will read the spring statement in Parliament on Tuesday, March 13
‘However, the broader economic backdrop remains extremely challenging. Britain plunged from the top to the bottom of G7 economic growth league in 2017.’
The Resolution Foundation says while growth in productivity and wages is present, overall progress has been disappointing when compared to the performance of other G7 countries.
UK national debt has more than doubled since the late 2000s, it said, and productivity remains at historically low levels despite the recent uptick.
And although no new policy is due to be announced on Tuesday, a number of changes to welfare are due in the coming weeks which the Resolution Foundation says will have a big impact.
While more than 1.5 million workers are due a 4.4 per cent pay rise when the National Living Wage increases to £7.83 on April 1, around 11 million working-age families will be hit by the benefits freeze from April 9.
The freeze means a couple with two children will lose an average of £315, the foundation said.
The poorest third households will lose £135 on average once the welfare changes come into force, but will save government £2.5billion in 2018/19, while the continued roll out of Universal Credit looks set to leave swathes of families worse off.
So, while Hammond’s speech on Tuesday may end up being a non-event, the economic policy already on its way looks set to have a big enough impact on its own.