Economy

Hammond pledges end to austerity if Brexit deal reached

Chancellor indicates more fiscal headroom available in light of emerging budgetary data

Britain’s chancellor of the exchequer Phillip Hammond: emphasised the necessity of a Brexit deal for the economy. Photograph: Andy Rain/EPA

Wed Mar 13 2019 - 13:10

British chancellor of the exchequer Philip Hammond has promised an end to austerity if parliament passes a Brexit deal, lifting the "cloud of uncertainty" from the potential disruption of an exit from the EU without a withdrawal agreement.

In a spring statement on budget finances, the chancellor revealed official forecasts of economic growth slowing this year but picking up subsequently.

The Office for Budget Responsibility downgraded its forecast for growth in 2019 to 1.2 per cent from 1.6 per cent in October. It maintained its forecast of 1.4 per cent growth in 2020 and revised up its forecast for 2021 to 1.6 per cent from 1.4 per cent in October.

However, these predictions assume there is an orderly exit from the EU. One day after parliament voted down Theresa May’s Brexit plan, Mr Hammond used the statement that was short of tax and spending commitments to remind MPs of the risks of a no-deal Brexit.

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“No deal would mean significant disruption in the short term and medium term and a smaller and less prosperous economy in the long term,” said Mr Hammond ahead of a key vote later on Wednesday evening on whether to rule out an exit from the EU without a withdrawal agreement with Brussels.

“Our economy is fundamentally robust. But the uncertainty that I hoped we would lift last night, still hangs over us. We cannot allow that to continue. It is damaging our economy and it is damaging our standing and reputation in the world.”

Mr Hammond said leaving the EU with an agreement would give the country real choices on how much of a “deal dividend” could be spent on public services or tax cuts. “That is what I mean by an end to austerity,” he said.

Following an orderly Brexit, the chancellor said there would be a spending review with more money for the UK’s stretched public services including social care, local government, schools, police and the armed forces.

Despite lowering its forecast for overall economic growth this year, the Office for Budget Responsibility (OBR) said that higher wages and lower debt interest payments meant the government would borrow less in the 2019/2020 fiscal year.

The government will borrow £29.3bn (€34.25 billion) it predicted, down from a forecast of £31.80 billion in its previous forecast. It will borrow £21.2bn in 2020-21 and £17.6 billion in 2021-22, said the OBR.

Mr Hammond said the OBR forecast upgrades meant he had more “fiscal headroom” since the October budget. But he said he would have to keep this in reserve in order to deal with any disruption from a disorderly Brexit. – Copyright The Financial Times Limited 2019

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