Chancellor Rachel Reeves is unlikely to deliver any targeted support for business next week as she uses her “boring” spring statement to talk up economic recovery.
Ms Reeves has already declared that Tuesday’s event will be short and dull as she focuses on talking up the government’s handling of the economy, referring to recent stability, her increased financial headroom, and the expectation that inflation will continue to fall.
The markets are not expecting any major policy announcements, nor any tax changes, though she may bring forward a cut in the energy profits levy after pressure from the industry to stem the decline in investment and jobs.
After what could be a difficult by-election today, the Chancellor will seek to press home her actions to tackle the cost of living, following the fall in energy prices and the recent rise in retail sales.
By reducing the Commons address to a concise 20-minute update, the Chancellor is expected to provide a “stability dividend” for business which has been convulsed by constant policy changes.
Last November’s budget saw a last-minute reversal of plans to raise income taxes, forcing the Chancellor to make a rare pre-budget address to reassure the markets.
Rain Newton-Smith, chief executive of the CBI, said many employers are hoping for a dull update that allows them to focus on investment and job creation rather than reacting to new Treasury gimmicks.
The statement will address economic forecasts from the Office for Budget Responsibility and Ms Reeves will seek to prove that the pain of Labour’s first 18 months in office is beginning to bear fruit.
She is now looking at a record budget surplus of £30.4 billion in January, buoyed by higher tax receipts, and attention will turn to converting this headroom into economic growth.
There may also be some reference to closer ties with the EU after the Chancellor said she wanted to see closer ties with the bloc. There are plans for a UK-EU summit in early July to discuss liberalising trade in food and energy, alongside a potential youth mobility scheme.
Ms Reeves received some further encouraging news from the Bank of England governor Andrew Bailey who told the Treasury Select Committee on Tuesday that a fall in inflation to its 2% target in April was ‘pretty much baked in’ with energy bills set to fall.
He said: “I do think there is scope for some further easing of policy during most probably the course of this year.
“At the moment – we’re still a little way off the next meeting – it is a genuinely open question.”
The Bank’s next rate-setting decision takes place on 17 March, when markets see a 70% chance of a rate cut to 3.5%.
#Boring #statement #talk #economic #recovery #Daily #Business