Article last updated 22 July 2025.
“Chancellor Phillip Hammond was very clear when he reformed the system, the Spring Statement will not be ‘a major fiscal event’ – no other western economy announces tax and spending changes twice a year and the UK needed to stop too. He lived up to that promise today: the first ever Spring Statement was a short update on policy already in train and a response to the Office for Budget Responsibility's new forecasts (which were pretty much unchanged over the forecast horizon). Remember, the OBR's forecasts are grim. They suggest that despite the low levels of growth that the UK is currently achieving - lower than most of our peers overseas - we are actually delivering more than what we can sustainably produce. That's the Bank of England’s view too, which means rates could rise despite weak growth. And the OBR not baking in the most adverse of Brexit scenarios into their forecasts...
“The one point of interest was a hint that Mr Hammond may lighten up on austerity in the Autumn. There isn't much austerity in the pipe this year, but a change of policy could provide some significant relief in fiscal years 2019 and 2020, in which are currently pencilled a fiscal drag equating to 0.6% of GDP per year. But let’s be frank - the Chancellor has banged on at length before about the need to maintain some fiscal headroom to guard against an adverse Brexit scenario, so I wouldn't expect too much let up. He says he's not someone who thinks 'every available penny should be spent on debt reduction', but contradicts his attitude for the last few years, choosing to ignore the rare universal agreement among economists that this amount of austerity is not advisable, and that government bond yields do not respond to changes in the fiscal position of all but the most broken economies.”
Edward Smith, Asset Allocation Strategist
Rathbones
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