On Tuesday 13th March at 12.30pm, we will see a “minor” rather than a “major” fiscal event, with Philip Hammond opting for a more minimalist, camera-shy affair.
There’ll be no (empty anyway) red box, no photo-shoot outside Number 11 Downing Street, no official document, no spending announcements, and no tax changes.
It will only last up to 20 minutes and be on a Tuesday, rather than the hour-long prime-time slot after Prime Minister’s Questions on a Wednesday, when the chamber is already standing-room only.
This should mean life will be simpler for all concerned, with no national deluge of begging letters from all and sundry, and no last minute “inspiration” at the Treasury about how to grab headlines, or the subsequent backtracking when such ideas are shown to be bunkum.
This should halve the time required from all involved, halve the back-room negotiations, and halve the uncertainty caused by such moments – especially given other events, perhaps beginning with B.
It also brings the UK in line with similar economies, which only have one big budget event. Plus it gives Parliament more time to scrutinise the national spending plans.
However, it also diminishes the Chancellor’s power, as it halves the number of times he gets to crack the whip across Whitehall and the Cabinet table.
Hammond first announced the switch from an Autumn to a Spring budget (and from an Autumn to a Spring Statement) in the 2016 budget. It meant we got two budgets last year, while the system reset itself.
Act one – responding to forecasts
Instead, Tuesday’s statement will do two things. First, it will set out a brief response to the latest UK economic forecasts from the independent public finance watchdog, the Office for Budget Responsibility (OBR), which is legally required to make two forecasts a year.
One of these forecasts, the Fiscal Sustainability Report, has a long-term 50-year time horizon, was last published in January 2017, and is next due summer 2018. The other, the Economic and Fiscal Outlook, has a 5-year horizon, was last published November 2018, and is next due the moment the Chancellor stops talking, so probably by 12.50pm.
The updated forecast is unlikely to differ significantly from the, rather bleak, November 2017 economic and fiscal outlook, which can be summarised overall as follows:
- On the plus side, we’re on track to bring the structural deficit below 2% GDP by 2021 and just had the first full 12 months since 2002 of a budget surplus (not counting either investment or a real improvement in revenues).
- But trouble looms, we’re not on target to balance the budget by 2025, with rising inflation, slowing growth (1.6 to 1.4% GDP), stagnant productivity growth, increased borrowing, ongoing Brexit uncertainties, and further cuts to public services due in 2022-23.
For higher education, the November forecast includes a rise in public sector net borrowing for student loans, from £14 billion in 2017-18 to £18.6 billion in 2022-23. Set against an overall fall in borrowing, from £49.9 billion to £25.6 billion over that period, this means the proportion of borrowing for student loans increases from 28% to 73%. The January 2017 FSR forecasts that funding the higher education system will push public sector debt to a peak of 11.1% of GDP before 2040.
The OBR has also predicted a long-term fall in the number of teenage students, with Brexit generating “significant uncertainty” about the number of EU students here.
The frozen fees and raised repayment caps, announced by Theresa May last October, are also forecast to have “significant long-term implications”. The former wipes £0.2 billion off the public purse, the latter £0.6 billion initially, but then a whopping 15% off total repayments.
Although the snap-election delayed the government’s plans to sell off pre-2012 student loans, the plan is now for one a year until 2022. Let’s hope future sales get a better price than the first tranche, which was way below expectations.
Act two – some embryonic policies
Second, and potentially of more interest, the statement will be the Chancellor’s chance to pitch new ideas and launch consultations, which can then be formalised at the main budget statement in Autumn. Housing, the NHS, and social care are all likely to feature, as the government seeks to show action at home, beyond Brexit.
There’s a slim chance of any new insights about the Post-18 Education and Funding Review. The whole point of the much-anticipated review was to demonstrate action, without actually taking any for a while.
The industrial strategy and related R&D funding may also feature, if only as an opportunity to provide yet further details about previous announcements, without actually investing any more money. It’s virtually impossible to find the ‘new’ money in government announcements these days, it’s Russian dolls for miles.
It’s the politics, stupid
However, a year’s a very, very long time in politics, and neither the budget nor the 2019 spending review will come in time to meet growing demands for more spending, especially given the pressure from Labour over issues such as the role of the private sector since Carillion’s collapse, and of course, abolishing tuition fees.
Although the Chancellor promised not to make “significant changes twice a year just for the sake of it”, he gave himself a get-out clause, to take action “if unexpected changes in the economy require it”.
He could also use his brief moment in the limelight to announce “non-budgetary” measures.
So, will Spreadsheet Phil use his next, albeit fleeting, star turn to provide further clarity about the UK’s future strategy, or be dismissed as further inaction and stinginess by a weak government? However you decide, it’ll now only take twenty of your precious minutes.
But before you do, check out Million Plus CEO Greg Walker’s reading of the policy runes here.