Bri­tain braces for first bud­get since Brexit vote

Kuwait Times - - BUSINESS -

Bri­tain to­day de­liv­ers its first bud­get since the Brexit ref­er­en­dum, with economists ex­pect­ing a slight shift away from years of aus­ter­ity as the na­tion read­ies its EU exit strat­egy.

The Con­ser­va­tive govern­ment’s fi­nance min­is­ter Philip Ham­mond will de­liver his so-called Au­tumn State­ment be­fore par­lia­ment around 1230 GMT to­day-ex­actly five months af­ter the Brexit vote. “We need to be match fit for the op­por­tu­ni­ties and chal­lenges” aris­ing from Brexit, Ham­mond de­clared on Sun­day, while warn­ing that Bri­tain still faced an “eye-wa­ter­ing” deficit. Prime Min­is­ter Theresa May has vowed to trig­ger Bri­tain’s exit from the Euro­pean Union by the end of March, af­ter dis­af­fected Bri­tish vot­ers sent shock­waves across the world in the June 23 ref­er­en­dum by choos­ing to leave the bloc.

Some economists ar­gue that Don­ald Trump’s shock elec­tion as US pres­i­dent could sim­i­larly per­suade May’s ad­min­is­tra­tion to do more to help work­ers who have felt shunned by govern­ment poli­cies. “May has made it clear that she wants to pri­ori­tise help­ing those house­holds who are strug­gling to get by and who feel left be­hind by the econ­omy’s re­cov­ery since the 2008/9 slump,” said IHS Markit econ­o­mist Howard Archer. “June’s Brexit vote and Don­ald Trump’s win in the US pres­i­den­tial elec­tion has high­lighted the need for gov­ern­ments to tackle in­come in­equal­ity.”

The Bri­tish econ­omy has proven sur­pris­ingly re­silient since the ref­er­en­dum but ex­perts be­lieve that Bri­tain’s planned de­par­ture from the EU could still spark eco­nomic chaos. That in turn could limit the amount of planned aus­ter­ity re­duc­tion in Ham­mond’s bud­get speech.

“Given the num­ber of un­knowns sur­round­ing Brexit, Ham­mond will have a tough job,” noted City In­dex an­a­lyst Fiona Cin­cotta. “We can ex­pect the Au­tumn State­ment to be a glimpse of what we can ex­pect once the di­vorce pro­ceed­ings with the Euro­pean Union be­gin next year.” She added: “We are ex­pect­ing to see an end to the years of aus­ter­ity with the fo­cus shift­ing back to spend­ing.” So­ci­ete Gen­erale an­a­lyst Kit Juckes cau­tioned how­ever that “public fi­nances are not in good shape and Mr Ham­mond has no ap­petite for a ma­jor in­crease in bor­row­ing”.

Ro­bot­ics and roads

Over the week­end, May an­nounced fresh in­vest­ment in re­search and de­vel­op­ment, re­veal­ing that Ham­mond would hike its spend­ing by £2 bil­lion ($2.5 bil­lion, 2.3 bil­lion eu­ros) an­nu­ally un­til 2020. In­vest­ments will be rolled out through a new fund which will pri­or­i­tize tech­nolo­gies in­clud­ing ro­bot­ics, in­dus­trial biotech­nol­ogy and med­i­cal tech­nol­ogy. The Trea­sury hinted also at a loos­en­ing of Bri­tain’s fis­cal straight­jacket, in­tro­duced by for­mer fi­nance min­is­ter Ge­orge Os­borne who re­signed fol­low­ing the ref­er­en­dum re­sult.

Un­der pre­vi­ous prime min­is­ter David Cameron, Os­borne over­saw an aus­ter­ity pro­gram of spend­ing cuts and tax rises. Ham­mond will prom­ise to place “in­vest­ment in in­fra­struc­ture... at the heart” of the bud­get, ac­cord­ing to a Trea­sury state­ment. “He will set out how the govern­ment will fire up the na­tion’s eco­nomic in­fra­struc­ture-all part of plans which form the back­bone of on­go­ing work to close the UK’s pro­duc­tiv­ity gap,” it added. Os­borne’s aus­ter­ity poli­cies were aimed at elim­i­nat­ing the bud­get deficit fol­low­ing the global fi­nan­cial cri­sis. But Ham­mond has scrapped this ob­jec­tive of pro­duc­ing a bud­get sur­plus by 2020.

“Ham­mond will set out a new fis­cal frame­work, out­lin­ing the need for flex­i­bil­ity to al­low govern­ment to re­spond to chang­ing eco­nomic con­di­tions,” the Trea­sury state­ment said. The plans will also in­clude £1.3 bil­lion of new in­vest­ment in Bri­tain’s roads to tackle con­ges­tion. As well as tax-and-spend plans, the bud­get will in­clude the Con­ser­va­tive govern­ment’s lat­est forecasts for eco­nomic growth. The Au­tumn State­ment is seen as a mini-bud­get be­fore the main tax-and-spend an­nounce­ments given usu­ally in March.

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