Growth surprise: Could it save the day?

The core of this Spring Fiscal Report lies in the government's cuts to welfare spending to offset the rising costs of national debt repayment. Furthermore, the budgets of various government departments are also facing a certain degree of reduction.

From a policy perspective, the actual changes in this report are relatively small. There are neither tax increases nor adjustments to Shadow Chancellor Rachel Reeves' borrowing rules. As expected, this is not a comprehensive budget.

The key question now is whether the Chancellor can escape the endless cycle of "micro-bargaining" with the Office for Budget Responsibility (OBR), an independent forecasting body, and repeat this process twice a year for the remainder of this Parliament.

When asked if she would introduce new tax policies as she did last autumn, she stated clearly: "We will absolutely never need to do a budget like that again." However, economic data remains volatile and highly sensitive to global economic and political changes.

OBR Chairman Richard Hughes pointed out that if the United States imposes a 20% tariff on the UK next week, it could lead to a downward revision of the UK's economic growth forecast and "wipe out" the £9.9 billion buffer that the Chancellor has set aside to meet her borrowing rules. He also added that other uncertainties, including higher interest rates and lower UK productivity, make the "risks very high."

For this reason, economic growth, confidence, and a comprehensive economic strategy are particularly important. The government is expected to unveil new trade, industrial, and infrastructure plans by June. In the coming weeks, an economic agreement may be reached with the United States, and a reset of "Brexit" relations with the European Union may be initiated.

Despite the many uncertainties, the OBR's assessment of the UK economy is better than expected. Although this year's economic growth forecast has been revised downwards, it is expected to return to near-normal growth levels in the coming years. The OBR acknowledges that the government's planning reforms could significantly boost house building, which Downing Street sees as a major victory. This policy does not require the use of taxes or spending, but is expected to greatly promote economic growth.

Currently, this does not refer to laying an extra brick, or even planning approval, but a "spreadsheet victory" that alleviates the Chancellor's fiscal pressure. This is thanks to local government housing targets and the release of municipal land. The Planning and Infrastructure Bill, expected to pass later this year, will reduce judicial reviews, further increasing economic growth expectations. But the real test lies in actual groundbreaking and architects' drawings being approved. This government is now fully betting on "Builder Bob."

The government has also adopted some accounting maneuvers. The list of defense-related public spending across the UK comes from an unconstrained buildings capital budget, which is largely exempt from the Chancellor's non-negotiable fiscal rule of "borrowing only for day-to-day spending." However, welfare cuts are real. Cutting health-related benefits has led to an increase of 250,000 people in poverty, not including the impact of recipients finding new jobs.

The impact assessment seems to confirm that the purpose of this policy is more to save money than to carry out fundamental reforms. In this regard and others, people are beginning to question whether "the OBR's tail is wagging the policy dog" – that is, is this really the right way to formulate long-term policy?

From a broader perspective, if economic growth recovers and interest rate costs fall, all of these problems will become much easier. In the vision of 11 Downing Street, while we assume that the autumn debate will revolve around which taxes need to be further increased, it is also possible that by the October budget, these taxes will no longer be needed.