Spring Statement Reaction: Roger Philips, Head of Tax at PM+M
The Spring Statement was, to some degree, due to be a relative non-event and that’s exactly what the Chancellor would have been hoping for in the days and weeks leading up to it. However, her statement landed against a far more uncertain global backdrop than many, including the Chancellor herself, will have anticipated when the OBR forecasts were first compiled. A self-congratulatory tone was adopted throughout, particularly with regards falling inflation and borrowing costs – both of which government policy do not have any direct impact on.
Despite some improvement in the near-term fiscal picture, the Chancellor’s room for manoeuvre remains limited and today was not about changes in fiscal policy. Today was about checking all was on track, creating some stability and having a period of calm leading up to the only Budget of the year, in the autumn. Had there been changes, this would have been an indicator of deeper-rooted problems.
The OBR numbers suggest that the UK remains broadly within its fiscal guardrails, helped by January’s record budget surplus and a presently manageable inflation position, albeit a downgrade in growth in the short term at least. This is something on which the Chancellor’s fiscal policy depends so will not make welcome reading for her. In more stable times, and downgrade in growth aside, this would have provided Rachel Reeves with a degree of reassurance that her fiscal policy was working. However, the escalating crisis in the Middle East has quickly shifted the tone and therefore the numbers should be taken with a large pinch of salt.
What does all of this mean for business? In this environment, proactive forward planning remains critical. Whilst the UK’s fiscal position appears stable for now, external factors, such as the impact of the escalating problems in the Middle East, underline how quickly that outlook can shift. Businesses and individuals alike should continue to stress-test assumptions, manage their cash flow carefully, and remain agile to enable them to weather the storm.
