Chancellor’s seeks stability in turbulent times

A recommendation for planning in response to Spring Statement as government chases stability and growth

Chancellor Rachel Reeves delivered a punchy Spring Statement, flagging the importance of stability at home amidst growing global uncertainty.  Intended as an opportunity to shine a light on improved forecasts, global politics showed how it can intrude on even the most carefully framed domestic narrative, with the sudden escalation of hostilities in the Middle East over the weekend forcing a recalibration of tone.

The Chancellor instead started with the turbulence of an increasingly dangerous world, thanking the armed forces and highlighting the immediate concern of conflict in the region raising the prospect of higher oil and gas prices.  The knock-on effects for inflation, household bills and business input costs, are a material risk sitting largely beyond domestic fiscal control.

But turning to the latest forecast from the Office for Budget Responsibility (OBR) the Chancellor was bullish, as she announced an improvement in the UK’s fiscal position compared with the autumn statement.  Borrowing this year is projected to be nearly £18 billion lower than previously expected, and its lowest level in six years, falling below the G7 average for the first time in more than two decades.

Headroom against the government’s fiscal stability rule has widened to almost £24 billion, while debt interest spending next year is expected to be around £4 billion lower than forecast in the autumn.

On the wider economy, the OBR forecasts that GDP per capita will grow by 5.6% over the course of the Parliament, an upward revision to earlier expectations.

As in last year’s Spring Statement, there were no immediate tax changes, with Reeves flagging the importance of stability through a single, annual review each autumn, to avoid an additional period of speculation and uncertainty.

Said Adele Bebbington-Plant: “There were no big tax announcements, but ongoing fiscal drag, and the gradual restriction of reliefs already scheduled, mean the taxation picture continues to shift.  Everyone recognises the need to use annual allowances, such as for ISA’s, Capital Gains Tax or annual pension contributions, but there are also opportunities around gifting assets, setting up trusts or investigating the value of life insurance to offset future inheritance tax, all of which could materially impact future outcomes.”

The full Spring Statement is available here and the OBR statement here