The Chancellor’s Spring Statement is out. It is meant to be an assessment of the health of the economy, a half time report, so to say. Thus, it is not surprising that the Chancellor has not committed to spending changes. This has of course not stopped the opposition from castigating the Chancellor for not reversing course on austerity.
Whatever the merits of austerity may be, the Spring Statement is not the appropriate time to make spending changes. Having an annual budget prevents the government from tinkering with the economy too often and offers stability to citizens and businesses. If we accept the logic that prompted the UK to move to a single fiscal event, it is difficult to criticise the Chancellor to do what he said he would. There has of course been some initiatives announced around small business and housing as well as hints (without any specific commitment) towards increased public sector spending. One needs to wait and see how these help boost the economy and help the severely stretched public sector.
One may of course contest the upbeat assessment about the economy, the growth rate is only marginally better than forecast and while views on what is a sustainable deficit differ, the current deficit is unlikely to improve given the still sluggish forecast for long term growth.
The details about the Brexit bill should also come as no surprise with modest reductions of what Britain will be paying the EU after 2022/23 more than offset by other pledged spending, including maintaining farm subsidies. This clarifies what one had already suspected, that smaller payments to the EU will not leave any money to be diverted to public services.
Regardless of whether one agrees with the Chancellor’s assessment, the Spring Statement has done what it said it would, provide a report of the state of the economy and avoided making changes in tax and spending.