The Autumn Statement is dead – long live the Autumn Budget: reaction as Treasury axes fiscal set-piece

Written by Jim Dunton on 24 November 2016 in News
News
Experts welcome Philip Hammond's Autumn Statement announcement that there will not be any more Autumn Statements

Chancellor Philip Hammond’s announcement that this week’s Autumn Statement will be his first and last has pleased Westminster and Whitehall watchers alike, but the magnitude of the change is less clear.

From 2017, Hammond told MPs on Wednesday, Autumn Statements will be scrapped and replaced with autumn Budgets, while the Spring Budget, a mainstay of recent years, will be replaced by a “Spring Statement”.

As part of the transition “timeline”, next year there will be both a Spring Budget and then an Autumn Budget. 


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The chancellor told MPs that from 2018, Spring Statements would respond to the Office for Budget Responsibility spring forecast, but would be be “no major fiscal event”.

Hammond’s move follows a joint call from the Institute for Government, the Chartered Institute of Taxation, and the Institute for Fiscal Studies in September.

They said blurred lines between the Budgets and Autumn Statements of the past six years had created a high volume of legislation and a lack of “clear strategy” for key parts of the tax system that had contributed to post-Budget forced U-turns “at considerable political cost”.

The 1975 Industry Act requires the government to publish at least two economic forecasts a year, but there is no requirement for two budgets. 

“Philip Hammond might just prove to be the chancellor who is prepared to stick to this model" – Jill Rutter, the Institute for Government

Nevertheless, a trend that started under then-chancellor Gordon Brown almost two decades ago has seen a consistent desire for new fiscal policy to be unveiled twice a year.

Hammond told MPs that barring “unexpected changes in the economy”, Spring Statements from 2018 would not involve significant tax changes.

“No other major economy makes hundreds of tax changes twice a year, and neither should we,” he said.

Hammond said the change would also “allow for greater parliamentary scrutiny of Budget measures ahead of their implementation”.

The Treasury said one scenario for the new arrangements would be for the chancellor to use the Spring Statement to launch consultations on how to address longer-term measures.

IfG programme director Jill Rutter told CSW she was pleased Hammond had seemingly accepted the think-tank’s recommendations in full, and said there was a strong case for autumn as the main focus for new tax policy announcements because of the greater in-year changes between OBR reports. 

"You would expect the Spring Budget to be more of a low-key event, although because of everything that is going on at the moment the nation's finances will continue to be quite interesting."

But she added that the shift would not be without its challenges.

“One of the key tests will be whether, in future, it feels like we’ve got two very similar fiscal events every year, or whether we do have one main event and one update with some minor corrections,” she said.

“Philip Hammond might just prove to be the chancellor who is prepared to stick to this model.”

However, Rutter cautioned that the Treasury would have to find a way to implement the changed approach to tax policy-setting, and said there may be knock-on implications from the fiscal shift for devolved governments.

"Greater transparency"

Vicky Johnson, president of the ARC union representing senior tax officials, said the change had the potential to ease the burden on HMRC staff.

“We hope this move will allow hard-working policy colleagues to focus on the core business of HMRC," she said.

"Policy staff are under immense pressure and any change which removes some of that pressure will help HMRC deliver its main function, which is to collect the right amount of tax at the right time.”

Public Accounts Committee chair Meg Hillier meanwhile said that making the new Spring Statements primarily an opportunity to respond to OBR forecasts could aid scrutiny of the government's fiscal performance.

“We must wait to see what is delivered in practice but this a signal government is taking seriously the need for greater transparency,” she said.

IFS director Paul Johnson meanwhile said a single fiscal event every year was likely to produce better legislation and prove a more valuable use of resources.

“Part of the problem is that the way Budgets and Autumn Statements work is that the chancellor and Treasury have almost free rein,” he wrote in The Times.

“They don’t need to go through the tiresome processes of finding room in the legislative agenda, consulting and other practices that other departments have to go through when making policy.”

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