Predictions for Rishi Sunak’s spring statement

Chancellor Rishi Sunak’s spring statement may prove to be a difficult balancing act as he faces calls to increase defence spending and introduce measures to reduce the cost of living. 

Sunak is set to deliver the spring statement on 23 March, alongside the latest Office for Budget Responsibility (OBR) forecasts, which are published twice a year.

The OBR is “widely expected to upgrade its forecasts”, giving the chancellor the option to “increase public spending while staying within his limits” after the Treasury received almost £9bn more in tax receipts in January 2022 than the previous year, said Sky News.

As The Telegraph explained, the spring statement is “an opportunity for the Chancellor to provide an update on the overall health of the economy”, but is unlikely to include any “major tax or spending changes”, which are saved for the Budget, given once a year. 

The spring statement can be likened to a “mini-Budget” and “tends to include the launch of a number of consultations on potential new policies”. 

Rise in defence spending

Any spending increase is most likely to go towards defence, sources told the broadcaster, with “additional money for lethal aid for Ukraine” as well as increases in other areas of the defence budget “in the face of the increased threat to NATO from Russia”.

There is yet to be any formal submission from the Ministry of Defence, but Labour’s shadow defence secretary John Healey said he expects there to be a “big boost to defence” in the spring statement. 

“The government must respond to increased threats and increased threats to our security in Europe,” he told Trevor Phillips on Sunday.

Calls for tax and cost of living cuts

The chancellor is likely to find himself under pressure to alleviate the looming cost of living crisis through “Covid-level intervention” to save energy markets from disaster, said Politico’s London Playbook.

He could face pressure from Boris Johnson to “offer new help to households” amid fears that inflation could rise to 7% in May, reported the Financial Times (FT). 

One minister predicted that Johnson will “demand short-term help for families facing higher fuel and food prices” as Russian sanctions hit UK energy supplies, said the paper. Sunak has already announced a £9bn package to help households with the surging costs of energy bills, in the form of a repayable discount and a one-off rebate for council tax bands A to D. 

Article source: https://www.theweek.co.uk/news/uk-news/956023/predictions-for-rishi-sunaks-spring-statement