Brexit bud­get up­date

Malta Independent - - FRONT PAGE -

Bri­tain will have less money, more debt and a slower econ­omy in com­ing years as it grap­ples with un­cer­tainty over leav­ing the Euro­pean Union, the Trea­sury chief said yes­ter­day in his first bud­get up­date since the ‘Brexit’ vote.

Philip Ham­mond de­liv­ered the eco­nomic state­ment to a less­bois­ter­ous-than-usual House of Com­mons as the coun­try faces un­ease over the fu­ture and pre­pares to lock horns with the EU next year on its exit from the bloc.

True to his nick­name of “spread­sheet Phil,” Ham­mond of­fered dis­mal ac­count­ing: growth will be weaker than had been pre­dicted be­fore the vote and households and busi­nesses should not count on the state’s largesse.

Though Ham­mond could take some so­lace in the re­silience of the Bri­tish econ­omy in the months fol­low­ing the seis­mic June 23 ref­er­en­dum, the fu­ture is un­cer­tain. He said his goal was to get the econ­omy “match fit” for the next chap­ter.

“The Bri­tish peo­ple de­cided, ex­actly five months ago today, to leave the Euro­pean Union and chart a new fu­ture for our coun­try,” Ham­mond said. “That de­ci­sion will change the course of Bri­tain’s his­tory... We re­solve today to con­front those chal­lenges head on.”

Ham­mond soberly out­lined the fact that gov­ern­ment fi­nances have tight­ened, leav­ing lit­tle room for spend­ing in­creases that ex­perts say would be needed to help the lower- and mid­dle-in­come fam­i­lies that are strug­gling with pre­vi­ous agreed aus­ter­ity mea­sures.

“We will main­tain our com­mit­ment to fis­cal dis­ci­pline,” Ham­mond said in de­liv­er­ing the up­date, known as the Au­tumn State­ment.

De­spite that pledge, the un­cer­tainty over the com­ing EU exit talks means the gov­ern­ment will have to in­crease bor­row­ing by 122 bil­lion pounds ($150 bil­lion) into the next decade.

Ham­mond of­fered a sweep­ing cri­tique of the coun­try’s eco­nomic land­scape, and placed par­tic­u­lar em­pha­sis on the need to im­prove pro­duc­tiv­ity, point­ing out that the Ger­mans, the French and the Ital­ians had bet­ter pro­duc­tiv­ity rates. He talked about the chal­lenge in pro­vid­ing enough hous­ing and in the im­bal­ance in eco­nomic growth from re­gions such as Lon­don and the south­east and the north­ern part of the coun­try. In­fras­truc­ture in­vest­ment is needed.

“He has cor­rectly iden­ti­fied the long-term prob­lems faced by the UK econ­omy, and this Au­tumn State­ment is a move in the right di­rec­tion,” Aberdeen As­set Man­age­ment Chief Economist Lucy O’Car­roll said. “But there isn’t re­ally enough money be­ing spent here to solve these long-term prob­lems - hardly sur­pris­ing, per­haps, when there is so much un­cer­tainty around Brexit.”

The bud­get up­date set aside money for roads and dig­i­tal in­fras­truc­ture and em­pha­sised in­vest­ment in re­search and de­vel­op­ment.

Though the fore­cast for eco­nomic growth this year was largely un­changed around 2 per­cent, next year’s was slashed from 2.2 per­cent to 1.4 per­cent, ac­cord­ing to Of­fice for Bud­get Re­spon­si­bil­ity, an in­de­pen­dent body that sup­plies the pre­dic­tions.

Over the next five-year pe­riod, the EU exit de­ci­sion will cause growth to be 2.4 per­cent­age points lower than it would other­wise have been, Ham­mond said.

For sub­se­quent years, the out­look re­mains murky due to a range of un­cer­tain­ties, in­clud­ing global fac­tors like the elec­tion of Don­ald Trump to the US pres­i­dency.

Ham­mond was un­der pres­sure to help work­ing fam­i­lies that are threat­ened by wel­fare cuts planned un­der pre­vi­ously an­nounced aus­ter­ity pro­grams.

He an­nounced plans to help build af­ford­able homes, in­creased the na­tional liv­ing wage to 7.5 pounds ($9.30) an hour and banned up­front fees charged to those who rent their homes.

But some ad­vo­cates for these peo­ple were dis­ap­pointed.

“For all the talk, this was a res­cue pack­age for ‘just man­ag­ing’ fam­i­lies that failed to turn up,” said Ali­son Garn­ham, the chief ex­ec­u­tive of the Child Poverty Ac­tion Group. He said that Ham­mond had merely “ap­plied a stick­ing plas­ter to fam­ily bud­gets hem­or­rhag­ing losses im­posed on them by his pre­de­ces­sor’s bud­gets.”

Some 6 mil­lion work­ing households fall into the “just about man­ag­ing” cat­e­gory, with a net in­come of be­tween 12,000 pounds and 34,000 pounds. The typ­i­cal UK wage is 21,000 pounds ($26,000).

These are fam­i­lies who were strug­gling even be­fore the 2008 fi­nan­cial cri­sis, and suf­fered fur­ther from the down­turn.

Typ­i­cal in­comes are no higher than a decade ago, but hous­ing costs are higher, ac­cord­ing to data from the Res­o­lu­tion Foun­da­tion said. The dif­fi­culty is help­ing this group get into a po­si­tion where they can stand on their own — as they of­ten dip in and out of trou­ble, Whit­taker said.

“Even peo­ple do­ing quote un­quote ‘the right thing,’ find that they can’t es­cape,” said Matthew Whit­taker, chief economist of the Res­o­lu­tion Foun­da­tion. “It’s a shame that it has taken the gov­ern­ment so long to no­tice.”

Pho­to­graph: Par­lia­men­tary TV / PA via AP

Bri­tain's Chan­cel­lor of the Ex­che­quer Philip Ham­mond de­liv­ers his Au­tumn State­ment in the House of Com­mons, Lon­don. The Chan­cel­lor's Au­tumn State­ment out­lines his pri­or­i­ties for taxes and spend­ing in the first bud­get up­date since the coun­try voted for its Brexit from the Euro­pean Union.

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