What is the Spring Statement and what will be in it?

The Chancellor, Philip Hammond, will present the UK Government’s first “Spring Statement” at 12.30pm on Tuesday 13 March.

But what is this event? What’s the logic behind it?

And what should we look out for?

What is a Spring Statement?

In November 2016 Mr Hammond, shortly after he was appointed Chancellor, dramatically announced the abolition of the long tradition of the Government holding the annual Budget in March.

He said that the Budget would instead be held in the Autumn, around the time that the Autumn Statement, the second fiscal event of the year, is currently held.

The Autumn Statement would be scrapped and the Autumn Budget would be the one and only major fiscal event of the year.

However, under the law, the Government’s fiscal watchdog, the Office for Budget Responsibility, is mandated to produce two forecasts for borrowing and growth a year, which has meant one in the Spring and one in the Autumn.

So, rather than trying to change the law, the Government has decided to allow the OBR to continue to update its forecasts in March and has said it will respond to those forecasts in this Spring Statement.

What will be in it?

No much, is the steer from the Treasury. No tax changes. No spending announcements. Perhaps the launch of some consultations on addressing long-term fiscal challenges. But it will mainly be a response to the new fiscal and economic forecasts from the Office for Budget Responsibility. The Independent’s political editor has learned that Mr Hammond’s Commons speech might last only 15 minutes.

Compare that with the 60 minutes plus that Chancellors’ Budget speeches generally take.

However, the OBR’s forecasts, still promise to be interesting because they are likely to show a downward revision of borrowing forecasts – possibly up to £11bn according to City of London analysts – as tax revenues this year have held up much better than previously expected.

This is likely to create political pressure for the Chancellor to spend some of this windfall on our creaking public services.

The OBR document will also, for the first time, include an estimate of the annual cost of the post-2019 Brexit divorce payments to the EU agreed, in principle, by the Prime Minister in December.

These have been previously estimated by the Government as summing to between £35-£39bn in total.

Is this Budget reform a good idea?

“No other major economy makes hundreds of tax changes twice a year, and neither should we,” said the Chancellor when he unveiled the plan.

Public finance experts agree.

In fact, they recommended the reform.

Luminaries from the Institute for Fiscal Studies, the Institute for Government and the Chartered Institute of Taxation wrote to the Chancellor in September 2016 arguing that moving to just one fiscal event a year should reduce “the frequency of new significant changes of direction, release resource for better consultation, produce higher quality legislation and more effective implementation, and make life simpler for taxpayers”.

The Chancellor delivered on their proposal just two months later in the 2016 Autumn Statement.

The Autumn Statement was originally supposed to be a relatively minor fiscal event, but ballooned as successive Chancellors couldn’t resist the temptation to tinker, mainly for political reasons rather than good economic or fiscal ones.

The question is whether ministerial discipline will hold and the Spring Statement will remain just a basic fiscal update – or whether it too will bloat, taking us back to square one.

The Treasury says, perhaps ominously, that it “will retain the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.”