With the constant political maneuvering surrounding the Brexit deal as our penned in exit date looms ever-closer, it is perhaps not surprising that something as important as the Spring Statement has slipped under the radar.
“GDP might still only rise by around 1% for 2019 as a whole but could pick back up to around 1.5% or more next year.”
“Fiscal Phil” will be revealing the contents of the Spring Statement 2019 on Wednesday 13 March—during a week of some important votes in parliament.
“With the Spring Statement potentially taking place in the midst of three crucial votes on Brexit, it’s difficult to imagine any major new measures will be brought to the table,” Kevin Burrowes, managing partner for clients and markets at PwC, has argued.
The Big Four firm has shared their thoughts on what could be included in the latest Spring Statement; understandably, their main concern lies with business stability.
Burrowes pointed out: “Businesses want certainty, which is crucial to stimulate investment. Anything the chancellor can do to pave a clear path forward will be well received.”
In many ways, the performance of UK businesses goes hand in hand with the strength of the UK economy. Therefore, it is within the best interests of the government to stabilise this uncertain period as much as possible.
“More probable is a summer ‘Brexit Budget’ when a clearer picture of the UK’s future relationship with the EU should allow the chancellor to set out something of a future economic road map.”
John Hawksworth, chief economist at PwC, said: “There has been increasing evidence since the last OBR forecast in late October that Brexit-related uncertainty has dampened business investment and caused a marked slowdown in the economy.”
In the fourth quarter of 2018, GDP was listed as just 0.2%, and Hawksworth has warned that the percentage could be even lower in the first quarter of 2019.
Nonetheless, there is still time left for the May and her government to achieve an “orderly Brexit”. Hawksworth claimed that, in this eventuality, “growth could pick up later in the year as business investment comes back on stream.”
He continued: “GDP might still only rise by around 1% for 2019 as a whole but could pick back up to around 1.5% or more next year.”
This would only be the case if a clean-cut Brexit is agreed. Now, it seems to be less likely as the public watches on and hopes for a miracle.
“We expect a nod to the recently published consultation on the taxation of off-payroll workers.”
“The latest public finance data suggests the budget deficit could come in close to £20bn in 2018-19, down from £25,5bn, as forecast by the OBR last October,” Hawksworth added. “This reflects bumper self-assessment tax receipts in January and, more generally, the fact that economic growth has been focused recently on more ‘tax rich’ areas, such as income from employment and consumer spending, rather than business investment.
“It remains to be seen if the OBR will push forward this short-term borrowing undershoot into future years, or if they will make more cautious assumptions on future revenue growth, given the uncertainties around Brexit.”
The question remains whether the Statement will be seen more as an opportunity by Hammond and May to gain support from opposing members to their views on the Brexit deal, as opposed to an initiative that will be entirely focused on the stabilisation of the economy and business confidence.
“The chancellor is not likely to be in a hurry to spend any windfall until the fog of uncertainty over Brexit has cleared.”
However, it is likely that the Spring Statement will consist of soft changes, much like the Autumn Budget back in October 2018.
“More probable is a summer ‘Brexit Budget’ when a clearer picture of the UK’s future relationship with the EU should allow the chancellor to set out something of a future economic road map,” said Stella Amiss, head of tax policy at PwC.
She continued: “As the chancellor promised, last year’s Spring Statement didn’t contain any new immediate tax changes, but it did prove to be the launching pad for a series of updates and consultations. We can expect similar again Wednesday.
“That is likely to mean some form of update on the areas of tax that continue to be of significant interest. We expect a nod to the recently published consultation on the taxation of off-payroll workers. Environmental taxes are also still high on the agenda. The chancellor may take the opportunity to reaffirm his commitment to a new UK Digital Services Tax (DST), especially as the wider OECD discussions on taxing the digital economy continue.
“Finally, with the deadline for Making Tax Digital for VAT looming, we should also expect a status update on the readiness of both business and HMRC to deal with the new filing requirements.”
Hawksworth concluded: “The chancellor is not likely to be in a hurry to spend any windfall until the fog of uncertainty over Brexit has cleared.”
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