There were two main conclusions drawn from the Chancellors Spring Statement on March 13th.
Firstly, we received confirmation that the economy is expected to weaken in 2019.
The Office for Budget Responsibility (OBR) revised its forecast for growth down to 1.2%, from the 1.6% prediction in the October Budget.
The signs are already evident. International market-leading motor companies are pulling their production out of the UK and major UK construction companies are falling into administration seemingly at a rate of one per week. The latter being a worrying point as the construction industry is widely seen as an indicator of when a recession will bite.
Secondly, was a more positive viewpoint that public finances continue to strengthen. The budget deficit this year is now expected to be 1.1% of Gross Domestic Product (GDP). That’s the narrowest it’s been since 2002 when there was surplus of 1.9%, and a significant turnaround from 2010 when the budget deficit was a whopping 6.9%.
This should give the Chancellor some flexibility to increase spending on public services in the Government Spending Review later in 2019. Indeed, £100million has already been made immediately available to the police to tackle the rise in knife crime.
The only caveat to this (and to everything in the near future) is BREXIT. With recent votes going against the government’s plans for BREXIT, the UK looks like it could crash out of Europe without any kind of deal at all.
A no-deal BREXIT could cause growth to slow down even further, or even stop growth altogether, and prompt the chancellor to announce new fiscal spending to ensure the UK economy is sufficiently supported.
This would go against his preference to deliver an autumn budget rather than an emergency package to mitigate the pain of a no-deal BREXIT.
What else did we learn from the Spring Statement?
It’s taken a while and has meant the country suffering hardship for a number of years, but the government’s plans to build a stronger and fairer economy are beginning to show positive results.
The overall economy remains resilient and forecasts are for continued growth.
Thanks to the government’s hard work, and the stretched’ patience of the British public, the public finances are starting to look a lot better.
At the Autumn Budget 2017, the government set out new policies to raise housing supply by the end of this Parliament to its highest level since 1970.
It is on track to reach 300,000 a year on average.
The Budget set out steps to equip people with the skills to succeed in the modern economy, with the Chancellor announcing the following;
The government will hold a Spending Review later in 2019, which will conclude alongside the autumn Budget.
The Spending Review will set departmental budgets, including 3-year budgets for resource spending, provided the UK leaves the EU with a BREXIT deal.
The government’s review of capital spending will involve looking at each project from the bottom up, to ensure maximum return for the country.
The Spending Review will focus on the outcomes achieved for the country and the return on investment. The focus will be on supporting a high-growth economy with public services that work for everyone.
For more in-depth analysis of the Spring Statement, see the Gov.uk website.