Tue. May 21st, 2019

Spring statement: Smaller deficit may be biggest news of fiscal non-event

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Not long ago this used to be the time of year when the Treasury would be poised for its biggest annual set-piece.

The Budget was the event at which the Treasury would change taxes and spending plans. Timed to coincide with the beginning of the new fiscal year, this was the moment the government made its biggest impact on the economy.

But when Philip Hammond became Chancellor, he changed things around. He shifted the date of the Budget to Autumn and converted what was the Budget into the Spring Statement.

His predecessors might have been tempted to use this second fiscal event as an opportunity to grandstand and fiddle with the figures a little bit more to throw in a cheeky tax cut or spending change.

But not Mr Hammond. True to his word, last year’s Spring Statement was a fiscal non-event.

And so, one presumes, will be this year’s event. Unless the Chancellor has been fooling us, there will be no major new fiscal measures, no new spending plans, no tax changes or anything like it this time around.

Instead, the most interesting stuff we’re likely to see is the updated forecasts and numbers from the Office for Budget Responsibility. It is their job to compile and produce the official government economic projections, so there will be much focus over the documents they produce.

More from Philip Hammond

What are the OBR likely to say? They will probably cut the official growth forecasts, which would normally imply a higher deficit. But because it turns out tax revenues are coming in stronger than expected, the chances are they will also forecast a smaller deficit than expected this year.

The bigger question is how the Chancellor reacts. Will he use his speech to signal that he will splurge cash in the event that Parliament votes for a deal – a final carrot to persuade the Commons to support the Prime Minister? Will he keep his head down amid the chaos of votes and amendments? Will he surprise us by pledging new money to end austerity?

The chances, however, are that this spring statement goes down in history as barely a footnote. The big question facing the UK economy is close to being answered, and that is consequently sucking most of the oxygen out of routine economic policy making.

http://news.sky.com/story/spring-statement-smaller-deficit-could-be-biggest-news-of-fiscal-non-event-11663594

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