The forthcoming UK Spring Statement presents a clear opening for the government. They can show what industries or sectors the country’s well-poised to jump ahead in economic prosperity. As the Chancellor gears up to announce the financial outlook, there is speculation on whether they can continue to avoid tax hikes in light of global economic shifts. The government may be facing tax hikes this fall, economists are forecasting, especially to fund the ballooning defence budget. Philip Hammond’s Spring Statement to be delivered on Wednesday is likely to make defence spending the main subject of debate.
The Office for Budget Responsibility (OBR) will also unveil its spring forecast during the statement, providing official projections on the economy. This forecast follows an external review. The OBR was probably pushed by that review to take a tougher forecasting approach. The government is under enormous pressure, too, as borrowing costs have soared, just as a new bond sales calendar is expected to be unveiled. This has pretty much tied the Chancellor Rachel Reeves’ hands on any flexibility to stick to her currently set of iron borrowing rules.
Wednesday it will be known how many people have been stripped of their Personal Independence Payments (PIP). They’ll be releasing new data on the groups most impacted by Universal Credit. Information about the average monetary damage suffered by present and future beneficiaries will be disclosed as well. This new information will surely shape public opinion toward welfare reforms during tough economic times.
In return, the Treasury should push for recognition from the OBR for any growth-enhancing reforms, such as the positive impacts from reforming planning policies. Despite these prudential efforts, the OBR’s office is staring at a very limited forecast maneuverability for any future borrowing by government, further adding pressure on fiscal strategies.
The government has committed to an ambitious civil service administrative cost savings, targeting a £2.2 billion reduction in civil service administrative costs by 2029-30. We’ve broken down their problematic proposal below, which would implement a drastic 15% cut in spending on public wages & consultants. The cut represents the majority of central government spending. Under the Chancellor’s plans this would result in the elimination of around 10,000 civil service jobs. This number is just a drop in the bucket of the overall workforce, now over a half a million strong.