Spring Statement: Spreadsheet Phil and Labour’s financial conundrum

You know you’ve done a pretty good job of managing expectations when the speculation surrounding your big announcement is about how brief and thoroughly uneventful it’s expected to be.

Philip Hammond could have been forgiven today if he’d come to the Despatch Box with a sense of satisfaction and perhaps even feeling the pressure was somewhat off, given speculation over the Spring Statement was that it might be a mere 15 minutes long and wouldn’t contain anything revelatory. The Chancellor didn’t appear to be in a mood to disappoint and stayed faithful to his commitment to one Budget a year, with today’s statement serving as more of a mid-term report card.

But it would be a mistake to understate the importance of the statement. Indeed, Mr Hammond adroitly took the opportunity to consolidate the Conservatives’ case to be the party of economic growth and eschew the public spending model advocated by Messrs Corbyn and McDonnell.

The big news was a more positive budget forecast courtesy of the Office for Budgetary Responsibility, suggesting increasing economic growth from 2019/20, as many as half a million more jobs by 2022 and – perhaps most importantly – falling levels of debt and borrowing every year of the Parliament. Which allowed the Chancellor to make the centrepiece of his report – that the UK was in position to see a small budget surplus over this financial year, with the first sustained fall in debt in 17 years.

Make no mistake about it. It was pretty dry. But important nonetheless in demonstrating recovery from the financial crisis a decade ago – particularly if anticipated reductions in inflation help address a rising cost of living.

From an entirely party-political perspective, it was an important statement. The Chancellor was quick to suggest that Labour’s programme and proposed borrowing would quickly burn through any money saved over the better part of a decade. And while John McDonnell subsequently accused Mr Hammond of complacency and ignoring public services at their time of crisis, Labour is left with a difficult economic argument to make. The Chancellor’s statement that the economy is moving back into the black makes that even more difficult, and if truly to be considered a government in waiting, Labour will need to better articulate how its plans would bolster services and benefit communities without wracking-up unsustainable levels of debt.

There were a few announcements from the Chancellor. More than a billion pounds to develop affordable housing in London. A consultation on plastics. And the bringing forward of a review on business rates. But this was very much a statement to set the scene for big announcements in the autumn. And while there was clamour for the Chancellor to commit additional funding to the NHS, education and defence particularly as part of the statement, he’s left himself flexibility to offer discretionary funding between now and the Budget, and to make more sweeping announcements in the autumn when the likes of the MoD’s Modernising Defence Programme will have made its recommendations.

Some intangibles remain, Brexit being chief amongst them. The Chancellor may have referenced Brexit preparatory funding in his statement, time will tell as to whether these are sufficient or whether the economic cost of leaving the EU undoes much of the more positive news communicated by Mr Hammond.

As parliamentary statements go, this one largely did what it said on the tin. But Mr Hammond was setting himself up for the autumn budget. The Government’s challenge now is to show how more solid economic foundations translate into supporting public services, addressing rising living costs, and helping disadvantaged communities.