U.K. Budget: Hammond Seeks Balance Between Post-Brexit Optimism and Prudent Fiscal Stance
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Version 0 of 1. The British government's first full budget statement since the country voted to leave the European Union last year is likely to be overshadowed by the ongoing Brexit debate even as stronger growth and resilient public finances continue to defy forecasts. U.K. Chancellor Philip Hammond, the country's de-facto Finance Minister, will deliver the annual budget statement to parliament Wednesday just hours after the Upper Chamber, known as the House of Lords, altered a key government policy aim and demanded a full parliamentary vote on the outcome of any Brexit deal it presents to the European Union. The Lords move highlights the multiple ways in which Britain's political and economic fortunes are inexorably tied to its post-European future and adds further pressure of the government to articulate a fiscal stance that is, in equal measures, optimistic and prudent. In that respect, Hammond is likely to play to the country's economic strengths in his budget speech, given that GDP growth has performed well since the June Brexit vote and overall tax receipts -- which are 11.2% higher than last year -- have continued to rise. That will give him some valuable room to manoeuvre if he wishes to offer modest increases in public spending to absorb any post-Brexit shock that may hit Europe's third-largest economy. Record low interest rates (the Bank of England's key lending rate is 0.25%) and historically attractive borrowing costs (benchmark 10-year Gilt yields trade a 1.12%, more than half the rate of the U.S.) may give Hammond further fiscal options. |