Forecasts look bang on to us!
Mr Hammond was straight to the point here (i.e. no scenic route taking in growth projections for other G7 economies), growth was slightly better than expected last year (thanks to some post-autumn Budget revisions from ONS), and the OBR has upgraded its outlook from November for GDP growth in 2018 from 1.4% to 1.5%, but left projections for subsequent years unchanged.
Given that the forecasts we published last week were bang in line with this, I’d be inclined to say that all looks like a reasonable assessment of future performance – steady, not spectacular, with household spending still subdued this year, investment plans hampered by Brexit uncertainty, and a stronger global economy spurring a bigger contribution to growth from net trade.
Indeed the role of global growth is pretty key here, with the OBR report noting that
“Relative to November, we have revised up our forecast for GDP growth in 2018 from 1.4 to 1.5 per cent. This is due to stronger growth in the first half of 2018 and is entirely explained by the unexpected strength of the global economy”
A point reiterated in the OECD’s interim economic outlook, also published today (what a time to be alive for economists). The OECD has upgraded its global growth forecasts by 0.2 and 0.3 percentage points this year and next (to 3.9% in both years).
If, as the Chancellor purports, forecasts are there to be beaten (this is not my understanding of them at all) then the economic fortunes of the rest of the world will continue be quite important. As indeed, it has been in the recent unbroken run of growth experienced by UK manufacturing.
Holding off for a rainy day
There was also some upside news on the public finances for the Chancellor to announce. Though the improved outlook for net borrowing is somewhat modest, if this had been a regular spring budget we would have been talking about these revisions in terms of wiggle room for new tax or spending measures.
That said, we have supported the end of Treasury fine-tuning at multiple fiscal statements – preferring the promised approach of a more considered and consultative approach to future policy changes. The fact that the statement didn’t blow this at the first opportunity is mostly a good thing. Not least because if a rainy day is coming, its timing and severity is difficult to predict so having something in reserve feels like a plan.
What’s government been up to since the last Budget
With no new policies to list, the Chancellor moved on to update on progress on some previous announcements. While this makes for neither a particularly interesting speech and an even less interesting blog on the subject, it still matters. Some of the headlines included:
- An update on a review of housing and regional commitments on new builds
- Detail on changes to the frequency of business rates revaluations, with the next one to be brought forward to 2021 and carried out every three years after that.
- Allocations of funding for improving full-fibre broadband
- Departmental allocations of additional spending for Brexit preparations
- Invitations to bid into the transforming cities fund to improve infrastructure
- A down payment on ensuring businesses are prepared to engage with the new T-levels that are under-development.
The cash for all of these was previously announced last autumn. But importantly many of these pick up the baton from the industrial strategy white paper, signalling progress on the people and infrastructure pillars, in particular.
What can we look forward to in the autumn Budget?
The statement also set out some thinking around the direction of travel; areas where consultation is needed ahead of further action in the actual Budget later this year. There are some interesting ideas up for discussion and some more action on the industrial strategy front too.
- There will shortly be a call for evidence on SME productivity and how best practice across high performing firms can be better diffused to low productivity firms
- A look at the tax treatment of self-funded learning
- How can government policy be deployed to reduce consumption of single-use plastics
- Some follow on from the patient capital review, looking at the detail of EIS, for example
There are some interesting, and pretty open, questions being asked here. EEF Economists have been chewing over the productivity performance of different manufacturing sectors in the past few months and will be feeding in thinking to the SME productivity review on behalf of manufacturing.
You can share your thoughts with us by dropping us a line: [email protected]
In the context of rapidly changing technology, longer working lives and careers that will inevitably have a different shape in future, it is important to looking at what the role of individuals is in funding continuing education and upgrading their skills. And to spend more time, as a country, doing so than we spent on coming up with the apprenticeship levy.
Similarly, not reaching for a quick solution on the issue of single use plastics is a sensible move – levies or funds to encourage innovation or both is the right way to go to manage environmental impact and balancing carrots and sticks for producers.
And what’s next for us?
As we see more detail on the issues being consulted on (and have time to process it) we’ll be back blogging on our initial thoughts and asking for the views of industry … so stay tuned to be kept up to date and to have your say.