Neither March hares nor rabbits from hats – why expectations for the spring statement are low
If you were expecting any rabbits out of hats in today’s Spring Statement, both the Treasury and the Chancellor have been doing their level best to disabuse you of such a notion for some time.
After last Autumn’s “Boring Budget” expect the “Stale Spring Statement”.
Day-to-day public spending may finally be in surplus for the first time since the 2002/03 tax year – notably just before the outbreak of war with Iraq – but total national debt still stands at £1.8 trn, or 86.5 per cent of annual economic output.
As a result, the cost of servicing that debt amounts to £40bn this year which, of course, is a lot lower than the £80bn of a few years ago, but is nonetheless a considerable sum of money.
Local elections
While there are those arguing for the end of austerity and for an injection of cash into vital services such as the NHS – which has seen spending increase by just 1.1 per cent in real terms since 2010 – and health and social care, or an end to the welfare cap, Mr Hammond showed on Sunday that he was immovable.
Several local councils have complained that they are near bankruptcy. In fact, Northamptonshire Council already has said it is. And Surrey County Council threatened to hold a referendum last year to increase council tax by as much as 15 per cent before backing down following a promise of additional central government funding.
Given local elections are due in May, some might have expected Mr Hammond to open the spending taps. And there are more than a few members within his own party – with an eye on their substantially reduced majorities following last year’s calamitous general election – that are desperate for him to do so. Tory backbenchers know they need something positive to go door-to-door campaigning with, and effectively eliminating the deficit really isn’t going to be enough if the public don’t feel they are benefiting from the government having done so.
To some extent it’s hard not to feel sorry for the Chancellor. He has to try to work out how to pay down the national debt and increase spending on public services before they collapse under the strain of austerity, all while operating in an uncertain economic environment thanks to Brexit. It wouldn't be an easy job for any Chancellor of any political party.
Brexit, Brexit, Brexit
Borrowing to increase public spending as Labour would do could easily undermine international confidence in Britain as a place to invest, especially at a time when inward investment is being put off by Brexit anyway.
At the same time, if the Tories don’t start to spend money on public services soon they risk facing the same old accusations that led them to being labelled the “Nasty Party” by their current leader 15 years ago.
It is possible that this has all been a bluff and that Philip Hammond will take to the Dispatch Box later today and deliver a Spring Statement that takes everyone by surprise.
But it’s not really his style.
Captain Hammond wants to steer a ‘steady as she goes’ path to Brexit to leave himself some wriggle room in case things go horribly wrong this time next year.
In case you missed it, he said as much on Sunday’s Andrew Marr Show: “This isn’t some ideological issue. It is about making sure we have the capacity to make sure that we can respond to any future shock to the economy.”
One wonders what else, aside from Brexit, he could possibly have been talking about.
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