If the Brexit process was a dart board, the scheduling of this spring statement would have hit the bullseye. With just two weeks to go before the March 29th deadline (although at this stage that looks likely to be extended), this was never going to be transformational. Nonetheless, the Chancellor reinforced our view that the UK economy remains robust despite being put under significant stress by the impasse in Parliament.
Just a day before the Spring Statement, UK GDP figures for January beat expectations. This was reinforced by Office of Budget Responsibility (OBR) who announced upwards revisions in their forward looking forecasts. Under normal circumstances, this would provide the Chancellor with room to stimulate; reducing taxation and increasing public spending. However, in just another illustration of the effects of the Brexit deadlock, he held off, preferring to keep as many tools in the toolkit as possible in case of an adverse Brexit outcome for the UK economy.
Taking a step back for a second and looking beyond the Brexit decision, UK public finances are now in a pretty healthy state. The opportunity to end austerity is there, providing it is explored in a sensible manner. Of things worth noting, Mr Hammond discussed an important boost to the NHS, the potential for more support for first time homeowners, and some significant changes to student loans – the latter reflecting the fact that many who go to university now will never pay them off.
So aside from these small glimpses into the future, it was as uneventful as expected. Unfortunately, we will have to wait for bigger plans, but with the Chancellor himself offering a “deal dividend” (a three-year spending plan once a Brexit deal is agreed), there is a green light on expansionary policy once certainty is restored. Looking out to the end of 2019 and beyond, this supports our view that the UK economy is in a solid place, and excluding a no-deal shock, has a bright future.