What to expect from Philip Hammond's stripped-down Spring Statement

Posted On: 
12th March 2018

Philip Hammond shifted his dry wit into fifth gear when he cut the fiscal calendar down to just one big annual event.

'Spreadsheet Phil' has done his best to lower expectations
PA Images / @AnastasiaZaw

"This is my first Autumn Statement as Chancellor," he said at the November 2016 event amid reports that his relationship with Theresa May was already on the rocks. "After careful consideration, and detailed discussion with the Prime Minister, I have decided that it will also be my last."

Far from handing in his resignation on the floor of the Commons during his set-piece moment, the Chancellor was doing a joke. What he meant was that Budgets would be held in Autumn from then on, with basic updates to the fiscal picture taking place in the Spring.

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Philip Hammond’s Spring Statement ‘will last 15 minutes and contain no spending announcements’

Tomorrow is the first of those events. But Hammond has promised few, if any, fireworks. There will be no iconic red box, no official documents and no spending announcements or tax changes. Instead he will speak for about 20 minutes to update the economic forecasts.

Usually the big budget events are on a Wednesday for maximum impact after PMQs, but this one will be on a Tuesday, further emphasising the Chancellor's determination to make this a decidedly low-key event.

According to the Financial Times, the Chancellor would have preferred to have no event at all, but it is a legal requirement of the Office for Budget Responsibility to publish two sets of forecasts a year. The benefit of refusing to announce any actual policy should be that he has no MPs knocking at his office door to make spending requests - a memo that failed to reach the Labour party and even some on the Tory backbenches.

So what will we see tomorrow? Well, at around 12.30 Hammond is expected to announce the smallest budget deficit since 2012 due to better-than-expected public finances. Earlier this month it was revealed that the day-to-day deficit - not including cash for long-term capital investment - had been eliminated. The announcement came two years later than originally forecast by George Osborne in 2010, but no doubt Hammond will spin it to his advantage to show the Tories have the upper hand on the economy - a message that they chose not to deploy at the general election last year.

The UK is now running a surplus of £3.8bn in its day-to-day budget and economists expect Hammond to say borrowing will be around £7bn lower in 2017/18 than previously forecast.

Shadow Chancellor John McDonnell will be on his feet at about 1pm to respond and to beat the Tories with the 'national debt now stands at £1.8 trillion and austerity continues to bite' stick.

Despite briefings to the Sundays that he was preparing to use his new-found wealth to turn on the spending taps, Hammond said on the Andrew Marr show yesterday: "There is light at the end of the tunnel... but we are still in the tunnel at the moment." That means big pay rises for NHS staff and much-needed cash for local councils is likely to be put on hold until at least the autumn. But the Government has said it could still make changes to fiscal policy “if the economic circumstances require it” - so best to rule nothing out.

Elsewhere, we’ll get an estimate of the annual cost of the Brexit bill post-2019, and the Chancellor is expected to launch a consultation on new levies on plastics including chewing gum and crisp packets. There has also been speculation he will launch a consultation on VAT for small businesses with a view to softening the sudden hit when firms reach a turnover of £85,000 to a tapered system. But it has prompted concerns that many more companies could have to start paying some level of the tax despite their smaller turnovers. 

OBR boss Robert Chote will give his take on the fiscal landscape at a press conference at 3pm (always good to see the difference in focus between the Chancellor and his scrutineers) and the all-important Institute for Fiscal Studies takedown will be at 10am on Wednesday. That's when we find out if a stripped-down affair was a good idea or if a set-piece rabbit out the hat could have buried bad news. 

We’ll be running a liveblog from midday tomorrow to cover every twist, turn and tweet of the Spring Statement. Keep an eye on PoliticsHome for that and all the important updates.