Hammond Says U.K. Needs ‘Gas in the Tank’ as Cushion for Brexit

  • Spring budget on Wednesday will maintain fiscal discipline
  • Says economy’s resilience gives May strong hand in EU talks

U.K. Chancellor of the Exchequer Philip Hammond said Britain needs “gas in the tank” to cushion any turbulence from Brexit, adding the economy’s resilience since the June referendum gave Prime Minister Theresa May a “very strong hand” as she prepares to begin talks this month.

Hammond, speaking ahead of Wednesday’s budget, restated the goal set in the autumn statement to balance the books in the next Parliament. Writing in the Sunday Times, he said a spending spree financed by borrowing would be "reckless," as the newspaper reported the chancellor will set aside a 60-billion-pound ($74 billion) fund to offset any setbacks during two years of Brexit negotiations with the European Union -- a figure Hammond told a broadcaster interviewer he didn’t recognize.

Philip Hammond

Photographer: Luke MacGregor/Bloomberg

“My job as chancellor is making sure our economy is resilient" so that "as we embark on the journey we’ll be taking over the next couple of years confident that we have enough gas in the tank to see us through,” Hammond said on the BBC’s “Andrew Marr Show” on Sunday. “Any chancellor would be sensible to try to make sure that he has enough flexibility to manage the economy.”

May has set a deadline to trigger Article 50 of the Lisbon Treaty, formally starting Brexit talks, by the end of the month. While the economy has so far been resilient since the vote, higher inflation, slow wage growth and planned benefit cuts have led organizations such as the Institute for Fiscal Studies to warn inequality and poverty in Britain will worsen. In addition, Hammond has come under pressure over funding shortages in the National Health Service and social care.

The potential cost of Brexit also caused speculation after Austrian Chancellor Christian Kern told Bloomberg Britain’s liabilities to the EU could total 60 billion pounds. A House of Lords report on Saturday suggested the government may not be under any obligation to pay -- an assertion Hammond seemed to reject. 

“We are a country that very much abides by the rule of law. We meet our international obligations,” Hammond told ITV’s “Peston on Sunday” show. “If there are any outstanding dues that we are obliged to pay then of course we’ll pay them" though he dismissed the specific numbers as “positioning before negotiations.”

No Deal, Bad Deal

Hammond reiterated May’s stance that leaving the EU with no deal was better than a bad deal. He told the BBC the “the economy is performing extremely well, much better than many people projected” which “gives the prime minister a very strong hand as she goes into negotiations.”

“The alternative is not Britain just slinking away into a corner,” he said on the BBC. “We will fight back and forge new trade deals around the world.”

Nevertheless, Hammond suggested the “mood music” from Europe made him confident an accord would be reached.

Brexit “is increasingly being seen as a shared problem,” Hammond said on ITV. “ feel confident we are moving closer together not further apart.”

Hammond, in his op-ed in the Sunday Times, said his budget would focus on three key points: supporting May in her Brexit negotiations by maintaining the economy’s resilience, getting Britain “match fit” for the exit by targeted investment, and helping ordinary working families.

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