Choices still face the Chancellor after the Spring Statement

So how did the Chancellor’s ‘Spring Statement’ affect the world of credit and collections? While there were a few measures of note, the main impact was to underline the precariousness of the UK’s current economic outlook, the fragile state of the public finances and an impending sense of possible tax rises in the main autumn Budget.

The Office for Budget Responsibility rather generously predicts growth to be one percent for 2025, a higher estimate than most other economic forecasters but still half the predicted growth level than they set out at the Budget. 

As a consequence, the fiscal outlook has deteriorated and – coupled with rising debt interest payments and weaker receipts – the Chancellor was only able to fulfil her ‘fiscal rule’ by cutting a further £5bn from the welfare budget. 

This will reduce PIP awards for 800,000 claimants and weigh slightly on real disposable household income projections for the coming years, which are due to be fairly anaemic over the course of this Parliament. 

With consumption growth also due to bump along at between 1.2% and 1.8% for each of the next four years, there is little sign of a “consumer boom” to support economic growth. However, the pressures on household budgets are such that a greater reliance on credit to span from one payday to another could become evident. 

It is not all bad news. Structural unemployment is stabilising at just over four percent by 2028 and many other developed economies are enduring more difficult times. 

Inflation is going to rise slightly from 2024 levels to 3.2% predicted for 2025, but not to the levels seen straight after the pandemic. The global backdrop of an ageing population, climate change, gas price rises and tariff wars all suggest that the prospects for UK economic improvement are not strong. 

In a nutshell, the lack of growth we experienced in the UK in the first half of this decade don’t look terribly different from the lack of recovery prospects for the second half. 

There is a dilemma for the Chancellor: should she try to directly prioritise shoring up UK fiscal policies with more tax rises in the autumn, as she comes under pressure from her own political allies to look at ‘wealth taxes’ and the like? Or should she learn the lessons from the announcement of National Insurance rises on employers that the dampening effect this can have on sentiment and investment more than offset any revenues to be generated? 

There are some alternatives to pursue. There is around £50bn of uncollected debts owed to government at the moment, and it was positive to see the Chancellor announce new steps to boost HMRC and other collections actions across departments. 

Moreover, the ‘Regulation Action Plan’ published by the Treasury to fulfil the Prime Minister’s promise to cut compliance costs for business by 25% by 2029 does suggest a realisation of some of the obstacles fettering business investment in financial services generally. 

In particular, the announcement that the Economic Secretary to the Treasury will be concluding a review of the Financial Ombudsman Service in the summer is a positive sign that Ministers are intending to tackle some of the uncertainties which have caused some to question the ‘investability’ of the sector in recent years. 

With the Supreme Court actively looking at motor finance commission redress and other cases looking at definitions of ‘unfair relationships’, there is certainly a fair amount of uncertainty still around – which ministers may have to act upon in the months ahead. 

When the wider economic environment is still so challenging, Government should embrace all the help it can get from those industries whose specialist strengths make up key components of our future economic success. 

Creditors and collections agencies ensure that a healthy credit cycle can be maintained. Credit availability and affordability need to be a higher priority for ministers if they want to boost economic growth. 

It is to be hoped that the Chancellor will reflect on the impact of tax announcements and uncertainty, choose to boost the supply side and reduce compliance and regulatory burdens on business, and recognise that supporting the creditor and collection agency community is integral to both consumer spending and business investment for the future.