Hammond offers more spending, lower taxes if a Brexit deal is done

Mae Love
March 15, 2019

The OBR forecast growth of 1.2% this year, 1.4% next year and 1.6% in the following three years.

Britain's Chancellor of the Exchequer Philip Hammond is seen outside Downing Street ahead of a Brexit vote in London, March 14, 2019.

Notwithstanding sluggish growth around the world, Britain is expanding faster than Germany and our public finances are improving.

Mr Hammond said this cash could go towards public services, capital investment, low taxes and debt reduction, unless it was soaked up responding to a no-deal Brexit.

"I hoped we would do that last night, but I am confident that we, as a House, will do it over the coming weeks", he said.

British Prime Minister Theresa May stressed on Tuesday that parliament's approval of the withdrawal agreement she has reached with Brussels will deliver a fiscal "Brexit dividend".

Lawmakers were expected to vote later on Wednesday against a leaving the European Union without a transition deal, then vote on Thursday on seeking a delay to Britain's departure, now scheduled for March 29.

Mr Hammond used his Spring Statement to warn that a disorderly Brexit would deal a "significant" blow to economic activity in the short term. "That is not what the British people voted for in June 2016".

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"Higher unemployment; lower wages; higher prices in the shops".

New half-yearly fiscal forecasts showed that Britain's public finances, at least in the short term, were in better shape than in October, when Philip Hammond gave an annual budget statement, despite a weaker outlook for the country's economy.

Britain's leading tax and spending thinktank said the chancellor's fiscal headroom - described by Hammond as a "deal dividend" - could be effectively wiped out under a no-deal Brexit.

However, Britain's independent budget forecasters said nearly half of Hammond's fiscal headroom might be lost, depending on how official statisticians treat student loans in the public accounts.

In his full budget statement in October, Hammond also held out the prospect of higher spending or tax cuts if parliament backed the government's Brexit plan.

Its efforts will be helped by extra money if it keeps to a budget deficit below two per cent of gross domestic product in 2020-2021, the Office of Budget Responsibility, which the government tasks with reviewing its budgets, said late yesterday.

He remarked: "By once again declining to set totals for the forthcoming spending review, [the chancellor] deferred making some of the biggest non-Brexit decisions of the parliament".

But there was little of relevance to Northern Ireland in the budget yesterday though Mr Hammond said that negotiations for a City Deal for Londonderry were progressing.

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