LONDON: Britain’s finance minister pledged on Sunday that “fiscal buffers” would be in place to deal with the potential chaos of the country crashing out of the European Union without a deal in March.
Philip Hammond was speaking ahead of his speech in parliament on Monday in which he is to lay out Britain’s last budget before Europe’s second largest economy breaks up with the other 27 nations in the bloc.
The chancellor of the exchequer voiced optimism that the two sides could still reach an agreement despite the current impasse in negotiations.
But he told the BBC that he “can’t give an absolute guarantee because there have to be two parties — it takes two to tango”.
And he stressed that he was keeping financial firepower in reserve in case Britain crashes out without a deal and a period of financial mayhem ensues.
“What I will continue to do is maintain fiscal buffers, a reserve of borrowing power against my fiscal rules so that if the economy as a result of a no-deal Brexit — or indeed because of something else we haven’t anticipated — needs support for the coming months and years, I have the capacity to provide that support,” he said.
“That depends on what the markets are doing, it depends at the circumstances at the moment.” Officials in Brussels say they are prepared to hold another summit as soon as they see substantial progress on the outstanding issue of the Irish border.
A new UK-EU frontier will emerge between Ireland and Britain’s Northern Ireland on March 29.
But the sides still cannot agree how to maintain frictionless
trade that accounts for the different customs and regulatory rules
that exist between Britain and the EU.
Hammond said that getting a deal “will minimise any negative effects” of the divorce but refused to be drawn on how much damage Brexit as a whole was causing.
And he admitted that Britain would need to come up with a brand new budget in a no-deal scenario.
“If we were to find ourselves in that situation, then we would need to take a different approach to the future of Britain’s economy,” he told Sky News.
“We would need to look at a different strategy and frankly we’d need to have a new budget that set out a different strategy for the future.”
ROAD INVESTMENT
Hammond will also announce a 44-per cent jump in roads and highways investment in his budget, the finance ministry said, offering a glimpse of higher public spending promised by the government.
The £25.5-billion ($37-billion) fund for the 2020-2025 period will be invested in projects in England such as motorway improvements and major new roads, the ministry said.
A further £3.5 billion would be earmarked for local routes. The ministry said the investment would reduce congestion and help to improve Britain’s weak productivity growth.
Revenues raised by Britain’s Vehicle Excise Duty would be entirely earmarked for spending on roads for the first time.
Hammond is under pressure to show he can honour Prime Minister Theresa May’s promise to end nearly a decade of austerity while sticking to his plan to clean up high levels of public debt. On Friday, the government said Hammond was likely to give a £900-million tax cut to small retailers to help them compete against online competition. The finance ministry said that Hammond would also launch a feasibility study into a no-interest loan scheme to help low-income households. — AFP
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