When Philip Hammond first announced the creation of the Spring Statement in 2016, he made clear that it would not be a ‘major fiscal event’. With the Government still reeling from defeat in last night’s crunch vote on the Prime Minister’s deal, and with two key Brexit votes due to take place this evening and tomorrow, there was never much chance of today’s Spring Statement being a major political event, let alone a fiscal one!
Ahead of today’s statement, many had rightly pointed out that it would be difficult to take seriously the Government’s predictions for the future of the economy at a time of such intense political uncertainty. Rupert Harrison, George Osborne’s former Chief of Staff turned BlackRock supremo, said that the statement would comprise “fantasy forecasts”. John Crace, The Guardian’s sketch writer, meanwhile mused on Twitter that the Chancellor was about “to give a spring statement when he has no idea what state the economy will be in two months’ time”.
When he got to his feet, Philip Hammond immediately recognised that the House of Commons had other pressing matters on its mind and kept things brief. He then launched into an intensely political litany of positive stats and facts, telling the House that Britain’s economy was continuing its journey of recovery from Labour’s time in Government, that the UK had seen the longest unbroken growth run of any G7 country and that Labour’s legacy of youth unemployment had been ended. Hammond told the House that wages were growing at the fastest rate in a decade, borrowing had fallen to an all-time low, and that both the IMF and OECD were predicting that Britain’s economy would grow faster than Germany’s.
The Chancellor heavily caveated all of this, telling the House that Britain’s bright economic prospects depended on a deal being reached on the country’s orderly exit from the European Union. Such a deal would deliver a £26bn ‘deal dividend’, the spoils of which could be shared across a mixture of investment in public services, infrastructure spending, and keeping taxes low. Hammond promised that if a deal were agreed, he would launch a full three year spending review over the summer to be concluded in time for the Autumn Budget.
Not surprisingly, the Chancellor also took the opportunity to contrast his rosy outlook with what would happen in a no-deal scenario – something he said would lead to significant economic disruption, a smaller and less prosperous economy, lower wages and higher prices. Hammond Made clear such an outcome was not what anybody had voted for in 2016 but said that the Government had put measures in place to mitigate disruption if the worst did come to the worst – but made clear that there was no easy solution to a no deal Brexit.
What followed were a relatively lacklustre series of announcements, many of which had been pre-briefed ahead of today’s statement. Police forces will receive £100m of immediate cash to tackle knife crime, a £3bn affordable homes scheme has been created, fossil fuel heating systems will be banned from new homes from 2025, £260m will be provided to the Borderlands Growth Deal in Northern England. The rabbit from the hat, of sorts, was the commitment that funding will be provided for free sanitary products in secondary schools.
Hammond concluded his statement by reminding the House that continued uncertainty around Brexit was damaging Britain’s economy as well as the country’s standing in the world. He said that tonight would provide an opportunity to remove the spectre of a no deal Brexit and that tomorrow the House of Commons could work together to agree a direction – something that might sound a lot like a departure from the idea of holding a third Meaningful Vote on his bosses Brexit deal, but may be more a case of ‘his hope’ as opposed to ‘her reality’. Before he sat down, Hammond implored the Commons to build “a Britain fit for the future, a Britain the next generation will be proud to call their home”.
The Labour response
Responding, John McDonnell, Labour’s Shadow Chancellor of the Exchequer, derided the statement as “plans, pipelines and strategies – but no real action” and told the Commons that they had just witnessed a display of the Government’s “toxic mix of complacency and grotesque incompetence” when it came to handing Brexit. McDonnell dismissed Hammond’s suggestion of a deal dividend, saying that the Government was actually offering “Brexit bankruptcy”, pointing particularly to the tariff schedules published earlier in the day.
What followed was less a direct response to the Spring Statement than it was a return of fire, in which he embarked on a scathing critique of Government policy since 2010. McDonnell told the House that despite its positive claims on employment the Government had effectively broken the link between somebody getting a job and lifting themselves out of poverty. He said that benefit freezes and the introduction of universal credit had forced people to turn to food banks, and that the number of pensioners living in severe poverty had now topped one million.
McDonnell criticised austerity as an ideological choice and said that the Chancellor’s policies had created nine years of hardship for people across the country. He said that the Government had shown “a chilling ability to disregard the suffering it has caused” telling Philip Hammond that because of his role in designing the austerity programme he was “implicated in every cut, every closure, every preventable death”. Concluding, McDonald said that people had had enough – and that this statement would not deliver them the change that they needed.
Fiona Geskes: Principal Economic Policy Adviser at the CBI;
Tom Newton Dunn: Political Editor, The Sun
Paul Waugh: Executive Editor, Huffpost UK Politics