Hammond Signals ‘Light at End of Tunnel’ for U.K. AusterityBy
Hammond says smallest deficit in decade is key moment
Details of public spending review may come in Autumn Budget
Britain may soon start to see the beginning of the end of austerity, as the Chancellor of the Exchequer prepares to announce the smallest deficit in a decade during his Spring Statement on Tuesday.
Philip Hammond said he’ll announce plans to consult on loosening the public purse strings, with some decisions made by the Autumn Statement, and a public spending review in 2019 for the period after 2020.
“We need to look at what’s happening sustainably in the economy and if there is the flexibility, the space to do something, then we’ll decide in the autumn how we’re going to use that,” he said Sunday on the BBC’s “Andrew Marr Show.”
Hammond has faced pressure from within his own Conservative Party and from opposition Labour members to relax austerity, as the impact of eight years of public spending cuts become apparent for the health system, and among police and fire services. A signal that public finances are improving may add to those calls, especially after the cash-strapped National Health Service has again struggled to cope with a surge in winter illnesses.
“There is light at the end of the tunnel because what we’re about to see is debt starting to fall after it’s been growing for 17 continuous years. That’s a very important moment for us. But we are still in the tunnel,” Hammond said on the BBC. Yet he insisted that the U.K. must continue to take a “balanced approach” to spending while debt remains at 86 percent of gross domestic product.
Most economists think debt needs to be below 60 percent of GDP, Hammond said on ITV’s “Peston on Sunday” show.
For the first time in two decades, the chancellor won’t give a budget statement in the spring. The ministerial statement won’t include any tax changes or spending announcements and he won’t carry the iconic red briefcase.
The pared down Spring Statement to be delivered in the House of Commons is expected to last less than half an hour, consisting mainly of forecasts for growth, inflation, borrowing and debt. In previous years, the spring speech took almost an hour and included high profile and politically minded tax and public spending changes.
“Given how much uncertainty there is around Brexit, it does make sense for him to keep his powder dry until he has a better idea of how the economy is performing and how Brexit negotiations are progressing in November,” said Daniela Russel, head of U.K. rates strategy at HSBC Plc.