The move to a single fiscal announcement per year feels sensible, but may not endure.
Tuesday’s Spring Statement was always intended to be a non-event. Chancellor Phillip Hammond conducted the usual media round over the weekend promising that there would be no new fiscal announcements, fulfilling his pledge first made in November 2016.
The rationale behind this decision is clear. No major other economy makes hundreds of tax changes twice a year, whilst preparing for these political set pieces places an enormous burden on the civil service. The switch was advocated by major organisations such as the IMF, CBI, Chartered Institute of Taxation and the Institute for Fiscal Studies.
But it does not come without cost. The Chancellor has relinquished one of the main opportunities to change the political narrative. This may feel appropriate in March 2018, but will that still be the case next year, or the year after that?
As the Institute for Government has observed, Budgets and Spring Statements have become engines for policymaking and tax measures since Gordon Brown introduced the ‘pre-budget statement’ and moved to two fiscal events in 1997. The financial crisis of 2008/09 required an agile government and therefore the format continued under Alistair Darling, who effectively presented six Budgets during his tenure at Number 11.
George Osborne revelled in the political drama of Budget (and Autumn Statement) Day. The number of fiscal measures increased with each passing year – from just 38 in 2010 to more than 80 tax changes in 2015, when the general election meant there was both a Spring and Summer Budget.
Hammond is a different beast. The current Chancellor still bears the scars of the disastrous U-turn on national insurance contributions in March 2017. His manner has been described as Eeyorish, but a kinder analysis would acknowledge Hammond recognises that these major events bring as much risk as reward for an administration under pressure.
By deciding to issue a pared-down Statement this week, the Government has positioned itself as getting on with the job. This communications message has been blended with a signalling of the easing of austerity, given the upgraded economic forecasts.
Labour has been quick to pick at this contradiction. At a pre-Spring Statement event which MHP attended last Friday, John McDonnell said that Britain was “in crisis” and called for fiscal announcements to address this. Healthcare was one of the two areas which McDonnell concentrated on: urging Hammond to boost investment in the NHS and describing a proposed settlement on staff pay as “mean spirited”.
Some interest groups – such as NHS Confederation – were quick to describe the Statement as a “missed opportunity” on health. However, in general the reaction has been more muted – perhaps in recognition that the political fanfare of these days does not always encourage better policymaking. Now attention turns to the November Budget – where some believe the Government will set out its proposed solution for long-term health and social care.
Will the switch to a single fiscal event endure? The Conservatives may find it harder to resist the temptation for ‘Spring populism’ in subsequent years of this parliament – particularly as the 2022 General Election approaches. More immediately, the next Spring Statement (March 2019) will take place on the eve of Brexit. The UK Government will want to build confidence and placate nervousness around the transition deal – we should therefore be careful in sounding the death kneel for the political set piece.
Robert Ede is a Senior Account Manager at MHP Communications