| LONDON, March 8
LONDON, March 8 Britain's finance minister
Philip Hammond will say on Wednesday he will not relax his grip
on the public purse, despite the economy withstanding the
initial Brexit shock, as the challenge of actually leaving the
European Union approaches.
Hammond is due to announce at 1230 GMT the first full budget
statement since the referendum decision to take Britain out of
the bloc, which had been expected to deliver a quick, sharp
economic blow to Britain.
Instead, consumers carried on spending heavily and made
Britain the second-fastest growing economy in the Group of Seven
rich nations in 2016.
Hammond is unlikely to count on that lasting. There are
already signs that shoppers are turning more cautious as the
tumble in the value of the pound following the referendum pushes
Furthermore, his budget statement will be overshadowed by
Prime Minister Theresa May's plan to launch Britain's EU divorce
talks before the end of March, starting a process that is
expected to make companies wary about long-term investments.
The EU buys about half of Britain's exports but May has said
her Brexit priority is to control immigration rather than keep
the country in the bloc's single market.
When he stands up in parliament to read out his tax and
spending plan, Hammond will be able to announce some rare good
news about the budget deficit, helped by strong tax revenues as
the economy defied the predictions of a slowdown last year.
But rather than spend any windfall, he has already signalled
he will stick to his plan to eliminate what is still one of the
biggest budget deficits among the world's rich countries during
the first half of the next decade.
Hammond, who has been nicknamed Spreadsheet Phil for his
unflashy approach to running the economy since he took over from
George Osborne last year, plans to build up a reserve fund in
case he needs to help Britain's economy through a Brexit
That means any extra spending now on stretched public
services, such as care for the elderly, will have to be funded
by higher taxes, for example on sales of tobacco, or by spending
Hammond is under pressure to spend more on other services
such as health and prisons, as well as to ease the hit to
smaller retailers from an impending property tax rise.
But at the weekend, he took aim at the opposition Labour
Party for opposing the squeeze on public finances.
"That approach is not only confused, it's reckless,
unsustainable and unfair on our young people, who would be left
to deal with the consequences," he wrote in the Sunday Times.
Hammond is hoping that voters will continue to stomach the
squeeze on public spending, the effects of which are set to
intensify, especially for poorer households which have seen many
of their welfare benefits frozen while inflation is now rising.
Instead, Hammond is likely to turn attention to his efforts
to address the long-term weaknesses of Britain's economy which,
if fixed, could allow economic output and wages to grow faster
in the future.
The government has said it will spend more on skills
training for 16- to 19-year-olds and provide more funding to
schools. Last year, Hammond said he would spend more on
infrastructure in areas such as transport and broadband.
He is also expected to announce a review of how Britain
funds its social care spending which is set to rise as the
population ages. Details of the review may be announced at a
budget update in November which Hammond has said he wants to
become the main fiscal event of the year.
(Editing by Hugh Lawson)