Amid political turmoil, a reassuringly predictable Spring Statement

  1. HM Treasury.
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    Ray Newman

    Ray Newman UKBF Newcomer Staff Member

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    Chancellor Philip Hammond made his Spring Statement speech in the House of Commons yesterday, 13 March, and it was, for the second year in a row, remarkable in its blandness.

    Traditionally, there was one ‘fiscal event’ each year – the Budget, usually in spring – with the occasional additional ‘mini-budget’ when there was a need to tidy up some pressing tax issue. The Industry Act 1975 formalised this model, making two annual statements a legal requirement, and so a regular ‘Autumn Statement’ came into being.

    From the 1990s onward, however, a string of politically ambitious chancellors began to see these two fiscal events as opportunities to seize newspaper front pages. As a result, the supposedly low-key, functional statement began to evolve into a true second budget, almost as stuffed with policy announcements and tax changes as the main event.

    Pundits, business-people and their accountants got used to predicting, analysing and reacting to these two yearly events – relying on them for news stories, and opportunities to prove their worth.

    On the downside, people grew resigned to tax changes landing startlingly close to the start of the new financial year. And too often, politically motivated announcements were trumpeted, then promptly withdrawn when it became apparent they hadn’t been thought through. The ‘pasty tax’ announced in the so-called ‘omnishambles’ budget of 2012 is perhaps the most famous example – announced in March, ditched in May, leaving gravy on faces all round.

    In 2015, things got really silly: there were two full budgets, and an Autumn Statement, containing more than 80 tax measures between them.

    In 2016 a joint group of industry bodies and think tanks published a report, Better Budgets, which argued that this model put Britain out of step with the rest of the world, and made our tax system unpredictable and unwieldy. It recommended a return to the model of a single major fiscal event, with fewer and better-thought-through announcements, on a set schedule.

    This happened to chime with the temperament and attitudes of Philip Hammond, the man who became Chancellor in spring that year  – a quietly confident pragmatist, often mocked for his supposed love of spreadsheets, and with no obvious desire to be Prime Minister.

    He seized on the Better Budgets recommendations, announcing that from 2018 there would be a full Budget each autumn, and a slimmed down Spring Statement responding to the latest forecasts from the Office for Budget Responsibility, but otherwise a non-event.

    Journalists went into the Spring Statement in March 2018 having been briefed by official to expect a 30-minute, announcement-free speech. Many, though, spoiled by the twice-yearly glut of content, and cynical about the capacity of politicians to keep their promises, were privately braced for a surprise mini-budget.

    It did not come.

    A few consultations were announced, but that was it, and Hammond was back in his seat after about 25 minutes.

    As a result, this year, we Treasury-watchers were somewhat less sceptical when officials promised a short, functional speech. There was some wishful thinking from big financial firms and trade organisations – “Could there be a mention for contractors on 13 March?” – but most expected exactly what was delivered.

    That is, a handful of low-key announcements around investment and consultations, followed by some hard messaging about the potential impact of a no-deal Brexit ahead of a parliamentary vote on that subject due to land only a few hours after Hammond’s speech. (There were actually two votes on the subject; in both, MPs voted to reject no-deal.)

    It takes a certain kind of bloody-mindedness to deliver a non-event amid the hysteria of the final stage of Brexit – to talk about biodiversity and supercomputer investment when all anyone is really interested in is the Irish border backstop and Westminster village gossip.

    For businesses, though, this stubborn predictability might be regarded as rather a tonic.

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  2. FD Capital

    FD Capital UKBF Contributor Full Member

    34 7
    Better this format I agree, nothing worse that two budgets to contend with. I would have welcomed a surprise income tax cut in response to Brexit but didn't expect it and the economy seems to be holding up pretty well considering.
     
    Posted: Mar 19, 2019 at 1:15 PM By: FD Capital Member since: Mar 4, 2019
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