The British government will on Monday unveil its final budget before leaving the European Union and is widely expected to loosen the purse strings but it has also warned that a chaotic “no deal” Brexit could force it to change track.
Finance minister Philip Hammond will deliver his annual tax and spend statement before Parliament, alongside the Conservative government’s latest economic growth forecasts.
Concern is mounting that Britain will exit the EU in March without a deal in place with Brussels, an outcome widely seen as a worst-case scenario that would have a disastrous economic impact — and which would spark a “new” emergency budget, according to Hammond.
“The approach that I’m going to be setting out is based on the assumption… of a deal being done with the EU and us continuing to be able to trade on reasonable terms with our closest neighbours in Europe,” Chancellor of the Exchequer Hammond told Sky News on Sunday.
“If we don’t get a deal, if we were to leave the EU without any deal … then 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,” Hammond added.
London and Brussels remain locked in negotiations and it is still uncertain whether Prime Minister Theresa May can get an eventual deal with the EU backed by lawmakers.
The spending plan will also be studied warily by May’s coalition partners from Northern Ireland’s Democratic Unionist Party.
The small group is a kingmaker that could yet sink both an agreement with Brussels and May’s government in protest over the emerging outlines of a Brexit deal.
Hammond’s hand is boosted by Britain’s resilient economic health.
Growth rates have slowed since the 2016 referendum but the 2018-19 fiscal year deficit could come in under the projected 1.8% of GDP.
Britain is reaping the rewards of a strict diet of austerity measures that curbed spending and raised taxes in the wake of the 2008-09 financial crisis.
Many of these policies already underpin the budget and do not have to be explicitly announced on Monday.
This leaves Hammond free to work in line with May’s announcement at her annual party conference this month that the era of austerity was over and the “hard work has paid off”.
He has already announced £900-million ($1.2-million, 1.0-billion euros) in relief for the annual fees small store owners pay on their retail space.
Billions more are being earmarked by Hammond for roads and mental health funding.
But he has also hinted that some taxes could rise.
At the same time, Hammond has publicly backed calls for a tax on the UK revenues of online retailers and giant technology firms such as Google and Facebook.
Researchers at London’s Institute for Fiscal Studies said that given the Brexit backdrop, the best Hammond could do was postpone the announcement of any unpopular measures until a future date.
“There’s no way Hammond can end austerity and balance the books,” the think-tank said.
“It might prove to be pain delayed rather than pain avoided.”
© Agence France-Presse