A quiet spring statement helps us all — here’s how we make it last

You probably haven’t noticed, but next week the chancellor will give her spring statement – previously a major fiscal event on a par with autumn budgets. Last year’s statement precipitated frantic media speculation and poorly thought through welfare cuts, which were thankfully later scrapped. Changes made in last year’s autumn budget to increase the ​“headroom” against the fiscal rules, and move to assessing the fiscal rules only at the autumn budget, have calmed things down. 

The chancellor is not expected to announce any substantial policy changes. Instead, she will probably highlight the improved economic data we’ve seen so far this year, including stronger public finances and retail sales, and lower inflation. Meanwhile, media coverage will likely focus on changes to Office for Budget Responsibility (OBR) forecasts for the UK economy.

A quiet spring statement is a good thing. A constantly changing policy environment is unhelpful for both people and businesses. Policy changes in 2025 often seemed driven more by market volatility and changing estimates of headroom than by longer-term economic needs.

“While UK fiscal policy remains focused on headroom, policy making may continue to be overly influenced by a relatively arbitrary indicator of ​“fiscal space” – the amount that a government can safety borrow.”

But this respite may only be temporary. At the autumn budget, the OBR estimated that the chancellor had a 59% chance of meeting her fiscal rule that day-to-day spending will be fully funded from revenues by 2029/​30. While headroom may have increased slightly in 2026, meeting this fiscal rule is clearly still far from guaranteed. 

If the winds of economic fortune shift, for example due to geopolitical events, the chancellor could find herself in a bind again. And her troubles would be visible in a spring statement, despite the OBR not formally assessing the fiscal rules, as economists can infer the headroom from published OBR forecast data. So future spring statements aren’t immune from a media maelstrom and knee-jerk policy making.

A more crucial point is that while UK fiscal policy remains focused on headroom, policy making may continue to be overly influenced by a relatively arbitrary indicator of ​“fiscal space” – the amount that a government can safety borrow. We shouldn’t put up taxes because of arbitrary fiscal rules – we should do it because of underlying economic needs, such as crumbling public services and the fiscal pressures of an ageing population.

Since 2021, NEF has argued that fiscal space is multifaceted. It cannot be reduced to one simple indicator, such as the ratio of debt to GDP. This is why NEF suggested fiscal rules are replaced with fiscal referees – an independent committee that could consider the complexity of fiscal space when scrutinising a government’s fiscal strategy.

It was therefore welcome to see the Institute for Fiscal Studies’ (IFS) report last week that advised fiscal rules be replaced by a clearly stated government fiscal strategy and eight to ten indicators to help track progress, which the OBR would annually assess using a red, amber and green traffic light system. Such a framework would be a big improvement, as it would better reflect the complexity of fiscal space.

However, there are problems with how any fiscal framework is assessed that would still urgently need to be addressed. Firstly, the OBR makes controversial assumptions when assessing the impacts of government policies on the economy. Policies are automatically placed into four very broad buckets – taxes, welfare, public spending and public investment. This doesn’t allow analysis of, for example, how some types of spending have larger and longer lasting economic effects than others. The effects of government policies are also assumed to fade to zero after five years. This takes an unnecessarily negative view of many types of investment, and some types of day-to-day spending, such as skills policies.

Some changes to productive capacity are modelled as having increased and longer-lasting effects. However, this excludes preventative policies, like Sure Start and ignores the benefits of running the economy slightly hot

NEF has argued that the OBR should take inspiration from the International Monetary Fund (IMF) and move away from this supply-side and one-size-fits-all approach and instead adopt a more flexible and context-sensitive model.

In addition, while it is vital for fiscal credibility that the government’s plans receive independent scrutiny, there is currently no mechanism for the chancellor to disagree with the OBR. This means when headroom is tight the OBR currently has effective veto power over which policies the government can implement. Economic forecasting is notoriously difficult and there is typically a wide range of estimates in the literature for key variables underpinning models. We must stop treating a single OBR estimate like it is a gospel truth. There must be room for a democratically elected government to (reasonably – i.e. with some underpinning evidence) disagree with a technocratic body. If not, proposals that go beyond simplistic fiscal rules may still encourage austerity, if the OBR assumes this is only way to make the IFS’s indicators go green.

“Governments should be able to make long-term strategic decisions, rather than be dominated by the latest headline”

NEF proposes that fiscal rules (or the fiscal strategy, if the government wisely shifts away from fiscal rules) are assessed using the Treasury’s own forecast, and the OBR instead scrutinises the Treasury forecast. If the OBR disagrees with the forecast, they would have to explain why. Instead of producing a single OBR view, the Budgetary Responsibility Committee could be expanded to, say, the size of the Bank of England’s Monetary Policy Committee, and each committee member could give a separate view. If all committee members disagreed with the Treasury’s forecast, the chancellor would likely find herself under strong pressure to change her plans. However, if some but not all committee members agreed with the chancellor, then maybe the democratically elected chancellor should be free to implement her approach.

Last year’s autumn budget was far from perfect. Growth in living standards will still be slow, many government departments are underfunded, further action is needed on cost of living, and the government has not begun dealing with the fiscal pressures of an ageing population. In short, further policy changes will be required this parliament. But these should be designed carefully and implemented with well thought through communication strategies. We don’t need more policy churn due to half-baked ideas thrown together in a rush falling apart. And people and businesses don’t need a constant onslaught of ever-changing rules. Good riddance to a big spring fiscal event.

But while we enjoy the less frantic approach to policy making for now, let us put in place the system changes required to build a more stable fiscal policy environment. Governments should be able to make long-term strategic decisions, rather than be dominated by the latest headline. By reforming the OBR and replacing the fiscal rules with a fiscal strategy and fiscal referees, we can make the calm more permanent.

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