Can the Chancellor's Spring Statement optimism trickle down to the self-employed
- 13 Mar 2018
When the Chancellor delivered his Autumn Budget, his announcements that productivity and economic growth would be downgraded sent a stark reminder that the UK’s economic recovery is far from complete. This afternoon, however, in his first Spring Statement, the Chancellor’s OBR forecasts painted a brighter picture.
In November, the Chancellor had to respond to some severe downgrades to the economic and fiscal forecasts; public sector borrowing was the only measure to be upgraded. Fast forward four months, however, and the Spring Statement offered breathing space with forecasts making more pleasing viewing.
On economic growth, the OBR predicted that the UK will grow at 1.5 per cent in 2018 – up from the 1.4 per cent predicted in the Autumn – although this figure will be revised down to 1.3 per cent in 2019 and 2020. Whilst this upward growth revision over the next 12 months is clearly welcome, the rates still leave the UK at the bottom of the G7. The Chancellor will be hoping that, like 2017, the UK can surpass the expectations.
Since the UK voted to leave the EU, the UK’s rate of inflation has been above the Bank of England’s two per cent target and hit a high of 3.1 per cent in December 2017. Over the next 12 months, however, the OBR has predicted that inflation will fall to two per cent which means that workers will get a real wage increase.
The Chancellor delivered more good news on the state of the UK’s public finances over the financial year, with borrowing expected to come in at £45.2 billion – compared to November’s forecast of £49.9 billion. This is partly a result of a strong January, when self-assessments are completed, and taxes paid by the self-employed.
Day-to-day government spending is set to be in surplus, with borrowing used to finance capital investment. Because of the declining public-sector borrowing, the debt to GDP ratio is set to fall from 85.6 per cent in 2017/18 to 77.9 per cent in 2021/22.
Whilst the OBR forecasts have given the Chancellor some breathing space, freelancers do not share the same level of optimism. In IPSE’s most recent Confidence Index, confidence in the UK economy had fallen to the second lowest levels on record while business confidence has remained at a consistently worrying level. Demand for freelance work has been falling since Q1 2017 while self-employment growth has also halted in 2018.
Freelancers have cited Brexit, the Government’s fiscal policy relating to freelancing and regulations relating to hiring freelancers as the top factors hitting their business confidence. And this could be compounded by the Spring Statement’s announcement that there would be a call for evidence relating to the VAT threshold.
Whilst the Spring Statement may have provided the Chancellor with some breathing space, it is worth remembering that the forecasts are still down compared to his Autumn Budget 2016. Hopefully, some of the Chancellor’s overall optimism can trickle down to the UK’s hard-working freelancers as they continue to drive the economy.
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