Chancellor Philip Hammond is giving his second Spring Statement this week, so what can we expect?
This year’s Spring Statement is due to take at around 12.30pm on 13 March. Unlike the Autumn Budget, it is mainly used to give an update on the state of the economy.
In his speech the Chancellor will include financial forecasts based on data from the independent Office for Budget Responsibility (OBR), with updates on projected GDP growth and borrowing for future years.
Much shorter than the Autumn Budget, the Spring Statement speech usually comes in at 20 minutes. After the speech there will be a commons debate, which is expected to take around two hours.
The Spring Statement is scheduled to take place the day after the 'meaningful vote,' when MPs will decide to either approve or reject Prime Minister Theresa May’s Brexit deal.
Financial commentators are predicting the OBR will report an improvement in the UK’s financial position since the Autumn Budget delivered on 29 October 2018.
This could mean the Chancellor is in a position to reduce taxation and increase public spending on services.
There are unlikely to be any significant tax or spending announcements in the Spring Statement, with money more likely to be made available in the Autumn Budget later in the year.
Economists predict the OBR will lower its growth forecast for 2019, with the Chancellor expected to focus on the economy’s strengths instead, such as jobs growth and inflation.
Inflation is below the Bank of England’s 2% target, while the Chancellor received a welcome boost after Britain posted its biggest budget surplus on record in January.
Britain ran a surplus – the difference between income from taxes and public spending – of £14.9 billion in January, the largest monthly surplus since records began in 1993.
This could give the Chancellor extra money for the Spring Statement, allowing him to spend more to stimulate the economy.
But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, does not expect the Chancellor to increase his spending plans yet, instead saving his “fiscal firepower” for the Budget in the autumn when the economic outlook is clearer.
He says: “With the government lacking a reliable majority in the Commons, public support for austerity fading and the demographic pressures on health and welfare spending set to intensify over the next decade, it is only a matter of time before the Conservatives drop their medium-term target for an overall budget surplus.”
The Spring Statement falls just two weeks before Brexit is due to happen, so all eyes will be on the Chancellor when he delivers his final economic speech before the UK is set to leave the EU, on 29 March.
However, a lot depends on whether MPs back Theresa May’s Brexit deal in the meaningful vote due to take place on 12 March.
If MPs reject the deal she struck with Brussels last year they will then vote on a no-deal Brexit on 13 March – shortly after the Spring Statement.
If the UK leaves without a deal, it is reported that the government could axe up to 90% of UK trade tariffs.
This would help to make imported goods cheaper and help to protect consumers from price rises.
However, there are fears that if the UK cuts tariffs a flood of cheap imports could hurt farmers and the manufacturing sector.
After years of austerity Hammond is under intense pressure to increase public spending. But in last year’s Spring Statement, the Chancellor just gave an update on how the economy was performing without any major announcements.
He has already promised to increase the NHS budget to the tune of £20 billion a year by 2023 as well as an extra £2.7 billion for Universal Credit.
Rachael Griffin, financial planning expert at Quilter: “With the Chancellor’s spring statement falling just two weeks ahead of the Brexit deadline, Philip Hammond will be hoping the UK’s public finances can help him to continue the theme from last year’s Budget speech which declared the end of austerity.”
It is also expected that Mr Hammond will use the Spring Statement to name the date of the next government spending review, a wide-ranging check on government expenditure that typically only happens once every four years.
The Chancellor will also use the Spring Statement to unveil plans for a £200 million investment in cutting-edge genetic research and laser technology on projects in Cambridge, Edinburgh and Oxfordshire.
Proposals will also be outlined to help tackle climate change and protect the environment, including measures to future proof new-build homes so they meet low carbon heating and high standards of energy efficiency.
Accountancy firm PwC says we may see updates on the taxation of off-payroll workers, environmental taxes and digital tax reforms.