A November Budget for Brexit Britain?

All eyes with be on Chancellor Philip Hammond, when on 22 November, he delivers his Budget Statement in the House of Commons. It is the first autumn Budget after the Chancellor announced in 2016 that it would move from the spring to the autumn in 2017, meaning that there has been two Budgets this year.
The Chancellor will be updating MPs on the state of the economy and the Government’s taxation and spending plans, based on the latest forecasts from the Office for Budget Responsibility (OBR), which will be published alongside the Budget. Some small, hopefully not precipitous, cheer for the Chancellor though, came with the latest third-quarter GDP figures published on 25 October, which showed that the economy grew by 0.4% with the services sector driving faster-than-expected expansion. Somewhat less gloomy than OBR’s predictions.
However, uncertainty over the Brexit deal is still affecting the long-term outlook with the economy still running around 0.5% more slowly than prior to the EU referendum. Will the Chancellor bring a more generous confidence-boosting “Britain is open for business” Budget to underline this positive economic growth, lift some its austerity measures, and boost the public sector and infrastructure programmes to counter the continuing Brexit uncertainty?
Economic watch list…
In the run up to the Budget, there will be the usual economic indicators to watch, including a string of housing, property and consumer indicators mid-November. The top concerns will be on interest rates and inflation though. On 2 November, the Bank of England’s Monetary Policy Committee (MPC) will announce its latest interest rate decision and publish minutes of the MPC meeting and the quarterly inflation report. At its last meeting in September, the MPC decided by 7-2 to hold the Bank Rate at 0.25%. Most pundits are now predicting an interest rate rise next week on the back of stronger than expected growth.
Last month’s release showed that the Consumer Price Index (CPI) was 3% in September, up from 2.9% in August and above the Government’s 2% target rate. Bank of England Governor, Mark Carney, is required to write an open letter to Chancellor Philip Hammond if the inflation target is missed by more than one percentage point on either side, explaining the reasons why inflation has increased or fallen to such an extent and what the Bank proposes to do to ensure inflation comes back to the target. That made for interesting reading. The UK Monthly Inflation Figures will be published on 14 November. Let’s hope it doesn’t suggest a continuing increasing inflationary trajectory.
“It’s the economy (NOT), stupid”
For those readers old enough to remember this much popularised US political slogan and phrase, there seems to be increasing regulatory appetite of late, for consumer research, public engagement and teach ins.
First, up, and interestingly, the FCA has recently published its first ever Financial Lives Survey. This survey is both mammoth (involving 13,000 face-to-face and online interviews) and comprehensive and the research base and insights into financial resilience is already being used to inform regulatory policy. It makes for very interesting reading.
The survey found that 50% of the adult population show more than one characteristic of potential vulnerability. Over 3 million consumers have a high cost loan. Also evident, are the very varied fortunes and outcomes of different age cohorts, with younger groups having the least financial resilience. Of course, these are trends that MRM picked up in its own research, most notably late last year when it published Generation Austerity, Brexit and Beyond as part of its Young Money series focused on millennials.
Next, on 16 November, Mark Carney will be leading an illustrious delegation of the Bank’s Future Forum – the core theme being “Let’s talk about economics and how the financial world affects your life.”
This will be a whistle stop tour of locations in Liverpool in the morning and an afternoon session at St George’s Hall to discuss what the Bank has been doing to make the economy work better and more accessible to all.
A novel approach for sure. Hopefully, if the tone is right, it won’t smack of paternalism. Clearly, the Bank wants to become more accessible and transparent. It’s got to be a good thing for our regulatory oligarchs to seek open public dialogue, a refreshing departure from the Old Lady’s more stilted, lofty and stuffy commentary of old!
“Exciting” Brexit negotiations ….
Apparently “exciting” is the latest word from David Davis, Secretary of State for Exiting the EU, though it could also be “stressful”, despite him remaining ebullient about the prospects for a trade deal. He indicated that the timing of Parliament’s promised vote will hinge on when a deal is done, and that this may be at the “59th minute of the 11th hour”. So, a vote might not happen before the March 2019 deadline. The Government agreed earlier this year to give Parliament a “meaningful” say on the outcome of the current negotiations, but Downing Street has not said when it will be. That was clearly “stressful” and did not go down well at Prime Minister’s Questions on Wednesday, when Theresa May attempted to reassure the House on the Secretary’s comments. She remains “confident” there will be enough time for MPs to get a Brexit vote before the UK leaves, adding that it would happen “in time for Parliament to have the vote we committed to”. We’ll see.
27th October 2017