The Chancellor of the Exchequer, Phillip Hammond, said to the BBC that any cash surplus will be used to ensure that the United Kingdom has enough “gas in the tank” for the coming years. The Chancellor will announce the budget on Wednesday for which he said that “there won’t be any shooting sprees”.
Hammond is responsible for steering the British economy in a very difficult period after the Brexit vote and the expected negotiations with the European Union. As he told ITV “if your bank increases your credit card limit, that doesn’t mean that you are obliged to go and spend it all”. Hammond seems to have planned a series of investments on productivity-boosting projects, totally opposite to the austerity strategy that his predecessor George Osborne wanted to use before he was sacked.
Surely it won’t be all about investments in the new budget. Hammond is expected not to increase spending on the health service. Theresa May’s government is facing a lot of pressure in Britain concerning the condition of the National Healthcare System (NHS). On Friday 3rd March tens of thousands of people marched in the British capital to protest against “yet more austerity” in the health service. Union leaders and NHS workers are not sure that the government will invest 4 more billion pounds in health as the Department of Health promised, on the contrary they expect severe budget cuts which will bring the system to its knees. It is certain that Hammond’s plan will predict an allocation of funds to the healthcare system but there is no information on the amount.
The Chancellor said that the Treasury is pleased with the resilience of the British economy after the Brexit vote but there have been some first warning lights about its course. Rising inflation, the slowing consumer spending rate and decrease in investments have started to worsen the living standards of the average citizen. Hammond is expected to smooth the rising business rates.
Alcohol duty may increase making drinks slightly more expensive. Self-employed workers will face tax increases since the government has decided changes to the national insurance rates. Taxes concerning the purchase of diesel cars are going to be re-evaluated making Britain to be brought in line with countries like The Netherlands in which diesel is considered “dirty” because of the pollution it creates. Cigarettes will probably be the next item in which an extra tax will be added.
Hammond says that the good economic performance gives Theresa May an additional weapon in her arsenal for negotiating with her European counterparts. Writing in The Sunday Times, the Chancellor said that “massive borrowing to fund spending sprees was reckless and unfair to the younger generations”. The deficit has risen by 92 billion pounds from January 2016 and it is equivalent with 85,3% of GDP. Hammond has abandoned Osborne’s plan to reduce the deficit by 2020 but, instead, he has pledged to lower it through new profitable investments.