Britain eyes stronger economy in Brexit year

Published October 30, 2018, 10:33 AM

by AJ Siytangco

By Agence France-Presse

Britain on Monday ramped up the economic growth outlook for next year when the country will exit the European Union, in a pre-Brexit budget that vowed to boost spending after a decade of painful austerity.

The economy will grow by a faster-than-expected 1.6 percent in 2019, up from the Conservative government’s prior forecast of 1.3 percent, finance minister Philip Hammond revealed in his last annual budget before Britain’s EU departure in March.

Chancellor of the Exchequer Philip Hammond presented Monday Britain's last annual budget before Brexit, which took an upbeat view on growth and promised to boost spending after a decade of austerity (AFP / Daniel LEAL-OLIVAS / MANILA BULLETIN)
Chancellor of the Exchequer Philip Hammond presented Monday Britain’s last annual budget before Brexit, which took an upbeat view on growth and promised to boost spending after a decade of austerity (AFP / Daniel LEAL-OLIVAS / MANILA BULLETIN)

However, with London deadlocked in trade talks with Brussels and investors fearful of a chaotic no-deal Brexit, Hammond cut Britain’s 2018 gross domestic product (GDP) growth guidance to 1.3 percent from 1.5 percent.

And Hammond, whose official title is chancellor of the exchequer, confirmed that a disorderly Brexit would spark a new budget sooner than expected.

Sterling showed little reaction to the spending plan that emerged from the chancellor’s traditional budget-day red briefcase, while London’s FTSE 100 stocks index handed back some of the day’s strong gains.

Hammond insisted that the nation’s “resolute” focus was to prosper outside the EU following its departure on March 29.

He added that the austerity era begun at the height of the global financial crisis in 2008 was “finally coming to an end”, but the main opposition Labour party slammed the claim.

Hammond told parliament: “Our economy continues to confound those who talk it down — and we continue to focus resolutely on the challenges and opportunities that lie ahead, as we build a new relationship with our European neighbours; a new future outside the European Union.”

Britain has been on a strict diet of austerity measures that curbed spending and raised taxes in the wake of the financial crisis and subsequent worldwide recession.

Hammond on Monday loosened the purse strings, with the announcement of a multi-billion-pound increase in funding for the state-run National Health Service (NHS) over the next five years, while he outlined his much-trailed digital services tax which targets Amazon, Apple, Google and Facebook.

Higher Brexit fund

With much uncertainty surrounding Britain’s EU exit, Hammond said the government was increasing a Brexit preparation fund to £4.2 billion ($5.4 billion, 4.7 billion euros), a hike of half a billion pounds.

Talks between London and Brussels have stalled and it is still uncertain whether Prime Minister Theresa May can get an eventual deal backed by UK lawmakers.

The Northern Irish party propping up her government said Monday that it would support the latest budget but could still rebel should May strike a Brexit deal it dislikes.

The Democratic Unionist Party (DUP) fears May could agree to new barriers on trade between Northern Ireland and the rest of Britain after Brexit, as the only way of achieving her stated goal of avoiding checks with EU-member Ireland.

Deadlock with Brussels over how to keep the Irish border open is holding up a final deal, just five months before Britain is due to leave the EU.

Tech tax

Additionally, Hammond said he planned to introduce a digital services tax aimed at tech giants from 2020, responding to public outrage over low tax payments by US tech giants.

“It is only right that these global giants with profitable businesses in the UK pay their fair share,” he told lawmakers in a move aimed at helping British businesses struggling against fierce online competition.

The chancellor also promised a package of help for the nation’s struggling high-street retailers, which have been ravaged in recent years also by soaring costs and a string of big-name bankruptcies.

The Treasury is planning £900 million in relief for annual fees, known as business rates, which small store owners pay on retail space.

Hammond argued that his budget would help “the strivers, the grafters and the carers” and would pave the way for a “brighter future”.

However, Labour leader Jeremy Corbyn attacked the finance minister for delivering a “broken-promise budget”.

“Whatever the chancellor claims today, austerity is not over,” Corbyn told rowdy lawmakers, following Hammond’s speech that lasted more than one hour.