Britain hikes Brexit pot, slashes growth outlook
LONDON: Britain substantially hiked its funds for Brexit preparations, as it slashed growth forecasts over a five-year period in a key annual budget update.
The government will put aside another £3.0 billion (US$4.0 billion, 3.4 billion euros) ahead of its exit from the European Union, Conservative finance minister Philip Hammond told parliament.
“I stand ready to allocate further sums if and when needed,” the chancellor of the exchequer said, after Britain had already put aside £700 million prior to Wednesday’s additional amount.
“The negotiations on our future relationship with the EU are in a critical phase,” he told lawmakers, ahead of Britain’s scheduled departure in March 2019.
Hammond said the government would make progress on achieving agreement on implementing Brexit “a top priority in the weeks ahead”.
At the same time, he warned that Britain’s economy will grow much slower than expected over the next five years, as it faces Brexit uncertainty and weak productivity.
Gross domestic product will grow 1.5 per cent this year, by 1.4 per cent in 2018, 1.3 per cent in both 2019 and 2020, and 1.5 per cent in 2021, Hammond revealed in a raft of GDP downgrades.
The negotiations on our future relationship with the EU are in a critical phase.
Main opposition Labour leader Jeremy Corbyn, whose anti-austerity policies won greater than expected public support in June’s general election, blasted Hammond over the budget.
“I believe as the days go ahead and this budget unravels, the reality will be a lot of people will be no better off and the misery many are in will be continuing,” Corbyn said in response.
Wednesday’s budget comes after Prime Minister Theresa May’s Conservatives lost their parliamentary majority earlier this year.
The government unveiled its annual budget against a backdrop of difficult Brexit negotiations with Brussels, already sluggish UK economic growth and high UK inflation that is stretching household incomes.
The London stock market rose following the budget and sterling edged higher.
British inflation has jumped this year as a Brexit-hit pound ramped up import costs, which led the Bank of England to raise its key interest rate for the first time in a decade last month.
However, economic output has been hampered by long-standing weak productivity – which refers to the average level of output produced per worker or per hour.
“Regrettably our productivity performance continues to disappoint,” Hammond said after recently declaring it was a ‘major drag’ on the UK economy.
Heading into Wednesday’s announcements, Hammond was under pressure to deliver an eye-catching budget after Brexit spats with cabinet colleagues – and following Prime Minister Theresa May’s botched general election earlier this year.
Hammond meanwhile lowered the UK government’s deficit forecast.
Government borrowing was expected to hit £49 billion in the current fiscal year which runs through to April. That was £8.4 billion lower than given previously.
“We are on track to meet our fiscal rules,” Hammond noted, despite official data showing on the eve of the budget that Britain’s public finances worsened unexpectedly
Philip Hammond, conservative finance minister
last month.
Public sector net borrowing, the government’s preferred measure of the deficit, rose to £8.0 billion in October on soaring debt-interest payments.
The budget takes “a balanced approach.... maintaining fiscal responsibility, as we at last see our debt peaking (while) continuing to invest in the skills and infrastructure that will support the jobs of the future,” said Hammond.
The EU on Wednesday said it would end its special budget supervision for Britain after almost a decade, saying London had reduced its excessive deficit enough to fall within the bloc’s public spending rules.
“On what happens to be the day of Philip Hammond’s budget, we have a good news for him – we are closing the excessive deficit procedure for the UK,” EU economic affairs commissioner Pierre Moscovici said. — AFP