Economy

Hammond warns Brexit rebels not to risk easing of austerity

Ahead of UK budget chancellor says no-deal Brexit would require new strategy

Chancellor Philip Hammond. Photograph: PA

Sun Oct 28 2018 - 16:32

British finance minister Philip Hammond has warned rebels in his Conservative Party that he would have to quickly reverse plans to ease nearly a decade of austerity if London fails to get a Brexit deal.

Mr Hammond, who is due to announce an annual budget plan on Monday, said he would be able to show voters that "their hard work has paid off" as long as Britain achieves a smooth exit from the European Union in five months' time.

He has angered many members of his party by arguing Britain should remain close to the EU after Brexit and prime minister Theresa May has so far failed to bridge the divide in her party.

Many investors and businesses are worried that the chance of a no-deal Brexit is growing.

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Mr Hammond said he was confident that London and Brussels would settle their differences but “if we don’t get a deal . . . we would need to take a different approach to the future of Britain’s economy”.

“We would need to look at a different strategy and frankly we’d need to have a new budget that set out a different strategy for the future,” he said in an interview with Sky News broadcast on Sunday.

Most economists say Britain would suffer an economic shock if it leaves the EU with no deal. The pound sank to a two-month low against the dollar on Friday and was weaker against the euro.

But hard-line Brexiteer Jacob Rees-Mogg called on Mr Hammond to announce more radical measures in his budget instead of waiting for an outcome from the EU talks.

“We should be making announcements now about how we would deal with leaving on World Trade Organisation arrangements,” he said. He urged the chancellor to cut customs duties on all goods produced outside the UK and reduce the value-added tax for goods that are currently higher because of EU rules, such as solar panels and female sanitary products.

Borrowing

In his budget on Monday, Mr Hammond is expected to announce a further improvement in Britain’s borrowing projections, giving him some room to ease nearly 10 years of steep cuts in many areas of public services.

But despite the budget deficit falling sharply, Britain’s debt levels remain high, limiting how much Mr Hammond can relax his spending squeeze.

He said on Sunday that the biggest increase in spending in his budget had already been announced when Mrs May said four months ago that more money would be earmarked for the health service.

On Monday, he is set to announce other measures including more spending on roads to ease congestion and a tax cut for small retailers to help them compete against online competition.

He hinted on Sunday that he would provide money to soften the impact of changes to Britain’s welfare system.

Mr Hammond said the Bank of England as well as the finance ministry would have to take action if there is a no-deal Brexit.

In the short term, he said he could use some of the breathing space he has kept for himself inside his fiscal targets to help the economy.

Dozens of local councils have called on the chancellor not to delay planned cuts to the maximum stake on controversial fixed-odds betting terminals. In a letter to Mr Hammond, the leaders of 27 councils urged him to take urgent action to address the “human misery” caused by the machines, by moving as quickly as possible to limit the highest possible bet on the betting terminals from £100 (€112) every 20 seconds to £2. – Reuters / Bloomberg / Guardian

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