We live in extraordinary political times. This is not a new observation, but worth bearing in mind when considering the chancellor’s latest Spring Statement.
This year, the chancellor’s annual Spring Statement to parliament has been delivered between two historic votes – yesterday’s second vote on the government’s post-Brexit deal with the EU, which was once again thoroughly rejected by parliament, and this evening’s vote on the possibility of a no-deal Brexit. Add to this the persistent rumours that the prime minister’s time in office could be over soon, most likely taking the chancellor with her, and a situation arises where the second most important fiscal event of the year is relegated to the bottom of our news feeds amidst the Brexit clamour.
How is the economy doing?
The Office of Budget Responsibility (OBR) stated in their annual outlook on the economy that economic growth in the UK has slowed since the last budget in October, revising down the GDP growth forecast for 2019 from 1.6% to 1.2%, but looks set to recover to 1.6% from 2021-23. The OBR has also revised the amount they believe the government will borrow over the next five years, down to £13.5 billion in 2023-24 as opposed to their prediction of £19.8 billion back in the autumn. This gives the chancellor an extra bit of spending power over the next few years, which could be spent on infrastructure and increased investment in public services.
No deal no money?
The threat of a no-deal Brexit, however, hangs over all the predictions. The OBR has made the predictions described above on the assumption that the UK makes an ‘orderly departure’ from the EU on 29 March and will enter a transition period that lasts until the end of 2020. As recent events have shown, none of these are assumptions that anyone can make with any confidence.
The chancellor urged his colleagues to get together and back a deal to avoid the “disruption” of a no-deal Brexit. Without a deal, the extra windfall of investment highlighted above could all but disappear. His words were stark:
“Last night’s events mean we are not where I hoped we would be today. Our economy is fundamentally robust… But the uncertainty I hoped we would lift last night, still hangs over it… Tonight, we have a choice: we can remove the threat of an imminent no-deal exit hanging over our economy.”
With this in mind, the chancellor offered plenty of carrots to members of the house to encourage them to vote against no deal – should a Brexit deal be agreed, he stated, a “deal dividend” would appear, freeing up more money to spend on public services and decrease government borrowing. A spending review will take place that will include three year budgets for resource spending for government departments, but only if an exit deal is agreed. After almost a decade of austerity, the chancellor is promising a loosening of the purse strings – but only if everyone can get along, agree on a future course of action and secure a deal.
What money will be spent?
Despite all the nervousness surrounding Brexit in the chancellor’s announcements, there were a few promises of investment that could prove to be positive.
Infrastructure investment had a larger-than-usual presence in the chancellor’s speech, even if there were only a few solid financial commitments made.
A total of £260 million will be given to the Borderlands Growth Deal, aimed at strengthening the infrastructure in the towns and communities across the border between England and Scotland and £60 million to add to the Transforming Cities Fund – to be shared between ten cities across the country. Commitments were given to the delivery of the National Infrastructure Strategy for the Autumn Budget and a consultation on how best to support private infrastructure investment has been published. A sum of £717 million from the Housing Infrastructure Fund will be used to unlock up to 37,000 new homes in West London, Cheshire, Didcot and Cambridge and a new £3 billion ‘Affordable Homes Guarantee’ scheme will support the delivery of 30,000 affordable homes. While many may argue that this is not nearly enough to tackle the gaps in the country’s infrastructure and housing needs, they are still significant amounts of money to invest, particularly in these uncertain times.
There was even a mention for Northern Powerhouse Rail in the chancellor’s speech – the plan spearheaded by Transport for the North to develop east-west rail links across the North of England, with Mr Hammond stating that he is ‘looking forward’ to seeing the business case for the proposals in the coming months. While not a ringing endorsement for the scheme, it could certainly be seen as an indication that the chancellor is willing to listen to those calling out for greater connectivity across the country.
The chancellor left the announcement that will likely have the most immediate impact to people across the country to the very end of his speech. In response to campaigners and head teachers alike raising concerns that some girls are missing school attendance owing to the inability to afford sanitary products, the government has decided to fund a provision of free sanitary products in secondary schools and colleges in England from the next school year. A reminder that, behind the political drama and grandstanding over the last few months, politicians can and do make important, immediate changes to people’s lives.
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