LONDON – Britain’s Treasury chief is likely to offer a stark outlook as he outlines his priorities in taxes and spending in the first budget update since the country voted to leave the European Union.
In the biannual economic statement to lawmakers due Wednesday, Philip Hammond can take some solace in the resilience of the British economy in the months following the seismic June 23 referendum.
The level of uncertainty is particularly high, however, as the outcome of talks on Britain’s EU exit have yet to start or take a clear direction.
In the March budget, the Office for Budget Responsibility — an independent body that supplies forecasts to the Treasury — had predicted the economy would grow 2 per cent this year, 2.2 per cent in 2017, and 2.1 per cent in 2018.
“Clearly much has changed since these initial projections were strung together, with the U.K. having voted to leave the EU, with a new Chancellor Philip Hammond at the helm of the Treasury and, most recently, with Donald Trump winning the U.S. Presidential race,” said Philip Shaw, chief economist at Investec. “Despite these earth-moving events, the March Budget projection of 2 per cent for 2016 GDP growth may be revised relatively little.”
The budget update is likely to set aside money for roads and digital infrastructure. And Prime Minister Theresa May earlier this week trailed more investment into research and development in hopes of putting the U.K. ahead of the curve in science and technology.
“What I would hope to see is a relaxation of austerity but with a new fiscal framework that will allow some investment into the economy,” said Michael Kitson, an economist at the University of Cambridge’s Judge Business School.
But Hammond will also be under pressure to help working families described by government officials as “jams” or people who are “just about managing.” The Treasury chief is under pressure to help working families threatened with further upheaval by welfare cuts planned under previously announced austerity programs.
“Even people doing quote unquote ‘the right thing,’ find that they can’t escape,” said Matthew Whittaker, chief economist of the Resolution Foundation. “It’s a shame that it has taken the government so long to notice.”