UK's Hammond readies
budget plan in the shadow of Brexit
Send a link to a friend
[March 08, 2017]
By William Schomberg
LONDON
(Reuters) - Britain's finance minister Philip Hammond will say on
Wednesday he will not relax his grip on the public purse, despite the
economy withstanding the initial Brexit shock, as the challenge of
actually leaving the European Union approaches.
Hammond is due to announce at 1230 GMT the first full budget statement
since the referendum decision to take Britain out of the bloc, which had
been expected to deliver a quick, sharp economic blow to Britain.
Instead, consumers carried on spending heavily and made Britain the
second-fastest growing economy in the Group of Seven rich nations in
2016.
Hammond is unlikely to count on that lasting. There are already signs
that shoppers are turning more cautious as the tumble in the value of
the pound following the referendum pushes up inflation.
Furthermore, his budget statement will be overshadowed by Prime Minister
Theresa May's plan to launch Britain's EU divorce talks before the end
of March, starting a process that is expected to make companies wary
about long-term investments.
The EU buys about half of Britain's exports but May has said her Brexit
priority is to control immigration rather than keep the country in the
bloc's single market.
![](http://archives.lincolndailynews.com/2017/Mar/08/images/ads/current/best_friends_sda_120215.png)
When he stands up in parliament to read out his tax and spending plan,
Hammond will be able to announce some rare good news about the budget
deficit, helped by strong tax revenues as the economy defied the
predictions of a slowdown last year.
But rather than spend any windfall, he has already signaled he will
stick to his plan to eliminate what is still one of the biggest budget
deficits among the world's rich countries during the first half of the
next decade.
Hammond, who has been nicknamed Spreadsheet Phil for his unflashy
approach to running the economy since he took over from George Osborne
last year, plans to build up a reserve fund in case he needs to help
Britain's economy through a Brexit slowdown ahead.
That means any extra spending now on stretched public services, such as
care for the elderly, will have to be funded by higher taxes, for
example on sales of tobacco, or by spending cuts elsewhere.
[to top of second column] |
![](../images/030817pics/busine36.jpg)
Britain's Chancellor of the Exchequer Philip Hammond stands outside
11 Downing Street before delivering his budget to the House of
Commons in London, March 8, 2017. REUTERS/Stefan Wermuth
![](http://archives.lincolndailynews.com/2017/Mar/08/images/ads/current/chestnut_health_lda_EDUCATION_2017.png)
Hammond is under pressure to spend more on other services such as health and
prisons, as well as to ease the hit to smaller retailers from an impending
property tax rise.
But at the weekend, he took aim at the opposition Labour Party for opposing the
squeeze on public finances.
"That approach is not only confused, it's reckless, unsustainable and unfair on
our young people, who would be left to deal with the consequences," he wrote in
the Sunday Times.
Hammond is hoping that voters will continue to stomach the squeeze on public
spending, the effects of which are set to intensify, especially for poorer
households which have seen many of their welfare benefits frozen while inflation
is now rising.
Instead, Hammond is likely to turn attention to his efforts to address the
long-term weaknesses of Britain's economy which, if fixed, could allow economic
output and wages to grow faster in the future.
The government has said it will spend more on skills training for 16- to
19-year-olds and provide more funding to schools. Last year, Hammond said he
would spend more on infrastructure in areas such as transport and broadband.
He is also expected to announce a review of how Britain funds its social care
spending which is set to rise as the population ages. Details of the review may
be announced at a budget update in November which Hammond has said he wants to
become the main fiscal event of the year.
(Editing by Hugh Lawson)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
![](http://archives.lincolndailynews.com/2017/Mar/08/images/ads/current/pestcontrol_bch_termites.png) |