Hope Springs Statement eternal
Rachel Reeves’s second set of fiscal announcements is looming on 26 March.
Since Reeves’s last set of announcements in October, things have gotten materially weirder in quite a number of ways (many of which are geopolitical).
Reeves has the misfortune of making her announcement shortly after the latest inflation figures are published. It will also be less than a week after the labour market update and Bank of England rate decision (both 20 March).
Things are looking fairly grim. There has been much vitriol and negative news emanating from the hike the employer National Insurance announced in October.
Inflation is also back on the up, disconcertingly, and the Monetary Policy Committee (MPC) is likely to pour fuel on the whole bin fire that is the economy as it attempts to reign in rising prices.
Economists have warned that with the energy price cap rising again, twinned with the actual onset of the NI hike, inflation and employment are both going to worsen come April.
What makes all of this bad news framing all the more remarkable is that Reeves isn’t delivering a Budget. Events on 26 March are still (at the time of writing) pencilled in as a Spring ‘Statement’.
The difference here is one of action/update. So the theory goes, the Budget is when the Government announces a raft of spending, taxation and other fiscal measures – which are set to be enacted at the start of the next financial year.
The Statement, meanwhile, is just an update on how things are getting on. And as described, that’s not very well on the whole.
At this point, your venerable columnist can see one of three scenarios playing out:
- In the coming days and weeks before the Statement, Reeves has a rethink because things are not looking good and announces that, actually, there is going to be a full-blown Budget with some big measures to boot.
- Reeves sticks to the script and tries to deliver a regulation update on how the economy, and Government finances, are doing. In my humble opinion, this could cause a lot of political fallout that could well end up costing Reeves her job – at which point we get a full-throated emergency Budget from a replacement Chancellor.
- Reeves says it’s not a full Budget but proceeds to do full Budget things in the announcement.
On balance, I think she might go for option c. This mainly comes from the experience of having watched what former Tory Chancellor Philip Hammond ended up doing.
He too announced we were returning to once-a-year Budgets, only to almost immediately go back on that pledge once the s**t hit the fan (thanks to Brexit etc).
Either way, I don’t think we’re going to be getting boring any time soon. Can’t even remember what boring looks like at this point!
What’s coming up in March?
MRM’s ‘The Pension Landscape in 2040’ Report launches on 11 March. Please do keep an eye out for announcements and get in touch with MRM director and head of institutional Helena MacPherson to find out more.
On 14 March the Office for National Statistics (ONS) publishes the latest GDP estimates.
The latest U.S. interest rate decision is announced on 19 March with the Bank of England following with its rate decision on 20 March.
Meanwhile, the ONS publishes the latest UK monthly unemployment figures also on 20 March, while inflation is published on 26 March – the same day as Reeves’s Spring Statement.
All the best and wishing you a merry Spring Statement from all of us here at MRM, Mouthy Money and Octo.