‘Steady as she goes’ statement wrong when we need change
Responding to the chancellor’s Spring Statement, Julian Jessop, economics fellow at the Institute of Economic Affairs said: “The chancellor sent a signal of “steady as she goes” today but what was really needed is a change of course.
“There is little sign that the government’s economic plan is working. In particular, the OBR’s forecasts for growth have been revised down and those for unemployment have been revised up.
“Inflation is at least projected to fall a little more quickly, but this forecast has already been overtaken by the surge in energy prices following the escalation of the crisis in the Middle East.
“The jumps in the cost of oil and natural gas could also mean that interest rates do not fall as much as hoped, leading to a renewed increase in the cost of government borrowing.
“More positively, the updated OBR forecasts show a small improvement in “fiscal headroom” since the November Budget. On paper, this means the government is still on course to hit its fiscal targets.
“But the margin for error is still wafer thin, and it may not take much more bad news to force the chancellor to come back with even more tax increases in the Autumn.
“Today’s speech was light in three areas in particular.
“First, there was not enough acknowledgement of the part that the government’s own policies have played made in freezing hiring and driving up unemployment. The chancellor does at least now seem to recognise that the large increases in minimum wages have harmed the job prospects of young people. But employers are still being burdened with additional costs through increased taxes and more regulation.
“Second, there is still no clear plan to bring spending under control, especially in the big ticket areas of welfare, pensions, and healthcare. Difficult decisions keep being put off, which is all the riskier given the need to increase the resources for defence.
“Third, energy policy is a mess. Renewables may or may not be the future, but for now the disruption in the supply from the Middle East has simply underlined the need to make more use of the reserves of oil and gas that we already have.”