Progress | Centre-left Labour politics

Ten things to watch out for in the spring statement

  1. What most people are expecting…

Nothing much really. When he took over as Chancellor of the Exchequer, Philip Hammond made a big play of being more boring. Spreadsheet Phil downgraded the half-year Commons speech from full-fat economics to a mere update to the Commons. Each he time he has said ‘this is not a fiscal event’, the Chancellor has made it clear there will be no changes to taxation and spending. Perhaps this article should just finish here, then.

But, as it happens, this statement is a big deal because of…

  1. Brexit of course

The politics of Brexit this week will undoubtedly overshadow the Chancellor’s words, and all he says will be taken as a verdict on the government’s Brexit process. It’s worse than just a verdict though. Brexit actually undermines the spring statement altogether – the result of the meaningful vote today will happen too late for the Office for Budget Responsibility to factor its implications into their forecasts. Even so …

  1. Gross domestic product growth looks set to be downgraded

As predicted by the Financial Times and the Guardian. They say the OBR is ‘due to mark down its growth forecast for 2019 from its existing prediction of 1.6 per cent to something close to the 0.8 per cent estimate recently made by the OECD’.

This isn’t a good story for the Tories, so, as usual, they will try to make their excuses by pointing to good employment figures, and rising wages. But in isolation, these figures don’t actually tell us that much about how the economy feels to most people at the moment. Work only pays if you can buy more with your wages, and right now we should be worried both about…

  1. Employment rates

The employment rate is historically high, and reached a record of 75.8 per cent in October – December 2018. But coupled with the government’s attitude to immigration, given that the employment rate cannot rise indefinitely and productivity is stagnant, labour shortages could soon have an impact on growth.

And the high demand in the labour market also hides a multitude of sins. Changes to the state pension age for women means older women are having to work longer. And while more women of all ages are working, 41 per cent are working part-time compared to 13 per cent of men. Their hourly pay is much less so the pay gap persists. This means that family incomes – particularly for 1.7 million lone parent families – continue to be constrained. And the impact of this is worsened by …

  1. Inflation

There’s no escaping that people have less money in their pocket as a result of the Brexit vote. The value of the pound saw sterling down ten per cent against the dollar in a 31 year low. This raised the prices of imports so the things we buy became more expensive too. Food prices and inflation has already eaten into the value of wages. And those at the lower end of the income scale feel that squeeze more.

Which is why Hammond may want to mention the…

  1. The deal dividend

This week, all government ministers are tasked with persuading members of parliament to vote in favour of the prime minister’s deal. Another opportunity to make the same arguments could be one reason why the Tories want to go ahead with the spring statement, despite turbulence in the Commons. The Chancellor might repeat what he said last week in the chamber: that investment has been postponed as a result of Brexit uncertainty and could be ‘unleashed’ into the economy if the prime minister’s deal is agreed. But given the fact that all economic forecasts from the OBR to the Bank of England assume a smooth Brexit and an ‘orderly transition’, the Treasury select committee has always disputed that this pent-up investment exists at all.

Nevertheless, the Chancellor will want to make as much of this ethereal possibility as he can.  In contrast, a real question ahead of the spring statement is whether the Chancellor will have any answers for the parts of our country that really need attention?  For example…

  1. Social Care

The social care sector is crying out for some kind of economic policy – both with regards to funding services and the workforce. The government promised it would publish a detailed green paper on the future of adult social care in England in summer 2017. It still has not appeared. Care Minister Caroline Dinenage told Sky News on 12 February that the green paper has been delayed due to ‘a few other little political things that have cropped up in the meantime’. What could she mean?

In fact, Brexit exposes social care providers to even more challenges as ending free movement will not help meet the vacancy rates in the sector, which are eight per cent, up from 6.6 per cent in 2017, equating to 110,000 jobs, according to the charity Skills for Care. The IPPR modelled the impact of the Government’s proposals on European Economic Area nationals currently living in the United Kingdom and working in social care and found that 79 per cent of EEA employees working full-time in social care would have been ineligible to work in the UK under the skills and salary thresholds proposed by the government in their immigration white paper.

Also in need of attention, and one to listen out for is, of course…

  1. Universal Credit

At the budget, the Chancellor made a big show of accepting changes to the work allowances in universal credit that he argued would help address some of the Osborne-era cuts. In essence, this was just making the cut somewhat less punitive. Hammond has some way to go if he is to make sure that no one is worse off under the new system.  The two-child policy remains in place, for example, and we still haven’t had a vote on managed migration. Given that this is allegedly ‘not a fiscal event’, we can assume there is not much hope.  Along with any real resolution on…

  1. Austerity in general

Local government spending power since 2010 has fallen through the floor. The National Audit Office estimates that total local government funding across England is set to fall in real terms by 56.3 per cent between 2010/11 and 2019/20. Councils have experienced significant reductions in funding every single year since the Tories got into power.

Put it this way, even if a miracle occurred, and Hammond increased government funding to Local Authorities by – say – 20 percent this year, they would still be catching up. Add to that the ever increased elderly population and you see that the need for investment is both chronic and urgent.

The Chancellor may announce more details of the spending review – a look at spending priorities across the whole of government – but I wouldn’t get excited. Recent responses to parliamentary questions suggest no departments know when the spending review will be nor how many years it will cover. People will rightly wonder where the PM’s promise to end austerity has gone.

Our police, our armed forces, and myriad other vital officials such as those in our courts or the health and safety executive will point to the threadbare nature of their critical work.  When the next Labour government arrives it will take the wisdom of Solomon to decide priorities, when frankly, not one of the causes is anything but utterly necessary for a well-functioning country.

The Tories have wrecked Britain again.

One issue that Hammond may decide to touch on though is…

  1. Science

Hammond is expected to unveil a package of investment for science and technology innovation. According to the Financial TimesHammond will pledge £200m for genetic research in Cambridge, state-of-the-art lasers in Oxfordshire and a supercomputer in Edinburgh. But Brexit has already meant that the European Medicines Agency decided to move to Amsterdam after being in London for 22 years, and scientists are facing a terrible time given lack of access to EU-based research grants in the future, a lack of appetite to collaboration with UK institutions during the current uncertainty, and the impact of the government’s policy to end free movement.

So there we have it.  Ten things to watch out for, but they all lead back to Brexit in the end. What joy.


Alison McGovern is chair of Progress


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Alison McGovern MP

is chair of Progress

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