In December 2021, the Chancellor of the Exchequer commissioned the Office for Budget Responsibility (OBR) to produce an economic and fiscal forecast. This will be delivered on Wednesday 23 March. With speculation growing that the Chancellor might use the occasion to deliver a mini-budget, we’ve been casting around for clues.
The House of Commons business calendar for the day is, to say the least, incomplete. We therefore asked the Treasury whether they could provide any indication as to the likely timings for the Chancellor’s announcement. They could not.
So what might happen on the day? While tasked with looking after the nation’s finances, the Chancellor is only human. At a time of profound uncertainty, his instinct may therefore be to say as little as possible until a clearer pattern emerges from the events unfolding around him. However, precisely because of the growing uncertainties faced by individuals and businesses alike, the Chancellor is under increasing pressure to demonstrate that he does indeed have a grip on the nation’s finances.
One of the biggest areas of concern is the rapid rise in household costs. As each day passes, the web of contributory causes becomes more tangled. Rocketing energy prices, rising interest rates, the impact of the Health and Social Care Levy and increasing commodity prices as a result of the war between Russia and Ukraine will be felt by every household and business in the UK. Many will, as a result, suffer real hardship.
It would be unrealistic to expect the Spring Statement to produce a feelgood factor. However, all eyes will be on the Chancellor to – at the least – create a feel-not-so-bad factor. How might he do this? Providing more relief from rising household energy bills? Diluting or delaying the Health and Social Care Levy? Increasing universal credit and other benefits to help the poorest in society? While it’s relatively easy to define the problems, offering meaningful solutions which have a real impact requires levels of funding which are simply not available to the Chancellor in post-pandemic UK.
The Chancellor will also be mindful that addressing urgent needs now will not remove the requirement to develop longer-term, sustainable solutions to problems as diverse as improving energy security, meeting the nation’s net zero commitments, generating more and higher-quality jobs as part of the levelling-up agenda and, of course, remedying failings in the current system of health and social care.
Doing nothing on 23 March is not an option for the Chancellor. Merely paying lip service to the problems faced by individuals and businesses will be met with derision. The pressure will be on the Chancellor, therefore, to propose credible solutions to alleviate at least some of these problems. The economic forecast, itself shrouded in uncertainties, will indicate the extent to which more borrowing or tax increases are required. While it may go against the grain for a Conservative Chancellor to contemplate further tax increases, it would not be surprising if he reverted to the mantra that those with the broadest shoulders should bear the greatest load.
The current consultation on a digital sales tax, as a means of offsetting business rates paid by traditional bricks and mortar businesses, shows that the Chancellor is not averse to changing his mind. Unlikely though some of the possibilities are, nothing can be ruled out in the Spring Statement. This includes the possibility of a change in the rates of capital gains tax, a windfall profits tax on North Sea oil and gas businesses, further consideration of a wealth tax and perhaps even a deferral of the Health and Social Care Levy.