DAVY VIEW

There were few surprises in the Spring Statement as weaker growth and higher borrowing costs limited the Chancellor’s scope for new policies. Well-flagged adjustments to last October’s Budget plans were necessary for the government to adhere to its new fiscal rules. The ten-year gilt yield declined 3-4bp after yesterday’s statement, unlike the rise of 15bp after the Budget. Structural reforms to the National Planning Policy Framework are set to boost housing and potential output for the remainder of the decade. However, the Government needs faster near-term growth to avoid higher taxes or more spending cuts in the next Budget and to undo unwanted cuts to welfare spending that are now planned later this decade.