The UK Government was keen to downplay the significance of the Chancellor’s Spring Statement, with little announced in policy terms that had not already been briefed to the press or outlined in parliament. It’s easy to understand why.
As a mark of her commitment to bring stability to the public finances, the Chancellor, when she delivered her first Budget in the Autumn promised only one major fiscal event a year. At the same time, she also set out her self-imposed fiscal rules which she claimed would create a foundation for future growth and prosperity. So far, Rachel Reeves has stuck to the script, but, unfortunately for the government, the economic growth she anticipated remains stubbornly elusive and Labour has struggled to recover political momentum having been derailed by a series of early policy mishaps.
However, today’s Statement was, the Chancellor told us, necessitated by the demands of a “changing world” and the most substantial portion of her speech was given over to announcing a substantial increase in defence spending, an extra £2.2 billion next year alone. National security and economic security, she suggested, go hand-in-hand.
Reeves was keen to play up the economic benefits of increased defence spending, particularly the emerging opportunities for innovative and high-tech industries in the defence sector. The language that we heard in July about Britain’s future as a ‘clean energy superpower’ has now become a refrain about Britain as a ‘defence industrial superpower’. It remains to be seen what implications that shift in focus may have for energy policy; there was no mention of that today.
However, the pièce de rèsistance of Reeves’ statement was the OBR’s growth forecasts which downgrade growth from 2% to 1% this year, but predict modest growth, albeit of less than 2%, in each of the next four years. While any upward revision of the UK’s deeply uninspiring growth forecasts is to be welcomed, it is only really cause for celebration in the context of the dismal economic performance of recent years, and it is hardly a ringing endorsement of a UK government that pledged to put growth at the forefront of its priorities.
At one point Reeves told the House of Commons, ‘This isn’t about lines on a graph; its about improving people’s lives’. The problem for the government is that any positive impact from the policy changes they have initiated are small and unlikely to be felt quickly; meanwhile, they are on the back foot, forced into a series of policy announcements that play badly with their core supporters, like the major cuts to disability benefits, international aid, and civil service jobs announced in recent weeks. Some of those reforms, I suspect, will be easier to legislate than to implement. The same could be said of the new Planning and Infrastructure Bill which has far reaching provisions, the fruits of which are some years away. Similarly, the extra £2.2 billion announced for housing should help boost the economy, but won’t really become visible to the public until the bricks and mortar start taking shape.
Even so, alongside the economic opportunities highlighted by the Chancellor, there are short term domestic political opportunities for the government in this changing world of shifting geopolitical alliances and increased global instability. In a volatile international arena, Keir Starmer looks like a fairly steady pair of hands, a more statesman-like proposition than his main opponents. He has a chance now to look and sound like a leader; it might just buy him a bit more time to deliver.