This Spring Statement was initially supposed to be little more than an update on economic and fiscal forecasts. However, it has been overtaken by events; namely the cost-of-living crisis which has been exacerbated by the Russian invasion of Ukraine. As a result, the Chancellor, Rishi Sunak, has had to add a number of policy measures to today’s speech and to revisit some of the tax rises he announced last Autumn.
It was billed as a difficult Budget to navigate. Growing spending pressures that were in play before the pandemic have been compounded by Covid-19-related catch-up demands, including health and education. Interest rates have been inching up, too, making debt repayments a bit pricier. Throw in a brewing cost of living crisis amid building inflationary pressures and looming tax hikes, and it looked like very tricky terrain indeed. So how was the Chancellor going to navigate it?
Rishi Sunak hasn’t yet completed a year as Chancellor but he is a crisis veteran. The word ‘emergency’ featured four times in Sunak’s speech in which he outlined the UK’s three emergencies. These are health, economic and fiscal. “Our health emergency is not yet over. And our economic emergency has only just begun”.
Recent developments on the vaccine front have provided a much needed shot in the arm for optimism for 2021. In turn, that has filtered through to the economic forecasts. Nevertheless, there is no economic vaccine for the deepest recession in 300 years, just painkillers.