Chancellor Philip Hammond delivered the first Spring Statement on Tuesday 13 March 2018, responding to the OBR's latest economic and fiscal forecasts. Below is some initial commentary from IFS researchers.
A full analysis was presented at a briefing on Wednesday 14 March 2018.
- Paul Johnson, Opening Remarks
- Thomas Pope, The lost decade
- Carl Emmerson, More difficult choices ahead
Initial IFS response to Spring Statement 2018
1. Growth outlook much weaker than 2 years ago
“The growth forecast for 2018 has been revised up a little since November. But slightly weaker growth thereafter leaves the outlook for the economy in five years time broadly unchanged. Overall the forecasts are for subdued medium-term growth, with an economy that is more than 3% smaller in 2020–21 than was being forecast just two years ago.”
Thomas Pope, Research Economist
To be clear - against a long term trend of at least 2% a year growth, after poor growth since 2008, and compared with growth across rest of OECD, these are not encouraging forecasts https://t.co/UjoizmQWBI— Paul Johnson (@PJTheEconomist) March 13, 2018
"Against a long term trend of at least 2% a year growth, after poor growth since 2008, and compared with growth across rest of OECD, these are not encouraging forecasts"
Paul Johnson, IFS Director
2. Forecast deficit much higher than 2 years ago
“The Chancellor revised down the forecast deficit for this fiscal year by almost £5 billion. This is good news and the deficit has been returned to pre-crisis levels. However the forecast for 2019–20 is for a £34 billion deficit, rather than the £10 billion surplus forecast just two years ago. The government now intends to eliminate the deficit by the mid-2020s, but even delivering that would entail difficult choices and missing it would certainly not be a surprise.”
Carl Emmerson, Deputy Director
3. Wage growth
"Despite a very marginal upgrade to the forecast for earnings growth today, real average earnings are now expected to grow by just 3.5% over the next 5 years, meaning their level in 2022-23 would be similar to 2007-08. Meanwhile inflation will continue to erode the value of most working-age benefits as they are frozen in cash terms, alongside other benefit cuts. Together this means we expect a further period of weak growth in the living standards of working age households."
Robert Joyce, Associate Director