Published: Sat, March 16, 2019
Finance | By Loren Pratt

Hammond could have ended austerity earlier without Brexit

Hammond could have ended austerity earlier without Brexit

Changes in how student loans are accounted could make it harder for Britain to balance the budget by the mid-2020s, Britain's Office for Budget Responsibility said on Wednesday.

The OBR also said on Wednesday that the pay of the top 0.1% has been rising considerably faster than the average over the past year or more, which the IFS said was not true for most of the period after 2010.

In his Spring Statement, Philip Hammond said the Spending Review will set departmental budgets beyond the NHS and maximise taxpayer's money.

Last night's vote leaves a cloud of uncertainty hanging over our economy.

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.

In Hammond's speech yesterday, the Treasury's official view on a "disorderly Brexit" were also made clear, during which Hammond said it had the potential to become "a significant blow" to the United Kingdom economy.

"Leaving with no deal would mean significant disruption in the short and medium term and a smaller, less prosperous economy in the long term, than if we leave with a deal", Mr Hammond said in his speech to parliament.

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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".

But the OBR also warned that a disorderly no-deal would pose a risk to the predicted growth rates, as the numbers are based on an assumed scenario in which the United Kingdom leaves the European Union with a deal on March 29, and enters a transition period.

"In recent weeks survey indicators of current activity have weakened materially, in part reflecting heightened uncertainty related to Brexit", the OBR said.

"Higher unemployment; lower wages; higher prices in the shops". "And when we do, the British people will fully expect us to fire-up our economic plan, to seize the opportunities as confidence in our economy returns".

New half-yearly fiscal forecasts showed that Britain's public finances were in better shape than in October, when Hammond gave his full, annual budget statement, even against the backdrop of a weaker outlook for the country's economy.

Mr Hammond said he now had £26.6 billion of fiscal "headroom" that he has earmarked as a potential war chest for helping Britain's economy - for example, via extra spending or tax cuts - up from a previous estimate of £15.4 billion.

But lawmakers still rejected her deal, sending it to a second defeat since January.


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