UK finance minister Javid says he is ‘turning the page on austerity’

File picture shows newly appointed Britain’s Chancellor of the Exchequer Sajid Javid outside Downing Street in London, July 25, 2019. — Reuters pic
File picture shows newly appointed Britain’s Chancellor of the Exchequer Sajid Javid outside Downing Street in London, July 25, 2019. — Reuters pic

LONDON, Sept 4 — British finance minister Sajid Javid said he was “turning the page on austerity” as he outlined spending increases which are widely seen part of a push for an early election by Prime Minister Boris Johnson to break the country’s Brexit impasse.

“A new economic era needs a new economic plan and today we lay the foundations with the fastest increase in day-to-day spending in 15 years,” Javid said in parliament today.

In his first major speech since taking over the public purse strings in July, Javid promised more money for “the people’s priorities” – education, health and the police – after a decade of tight spending controls that has frustrated voters.

He also promised an “infrastructure revolution” as he said he was adding more than £13 billion to public spending in the next financial year, the first after Britain’s scheduled departure from the European Union on Oct. 31.

But he said he would not be writing any blank cheques.

Javid, a former Deutsche Bank managing director, has said he will stick to Britain’s existing fiscal rules, at least for today’s one-year spending plan.

He has a bit of room to increase borrowing to fund his planned spending increases because Britain has cut its budget deficit from almost 10 per cent of gross domestic product in 2010 to just over 1 per cent now.

But analysts have warned that he could end up weakening Britain’s budget credibility by making big spending pledges at a time when the economy is at risk of recession and the outcome of Brexit remains so unclear.

Johnson is pushing for an early election to resolve the parliamentary impasse over Brexit.

Yesterday, lawmakers moved ahead with a plan to frustrate him by forcing the government to seek a delay to Britain’s exit from the European Union.

In his spending speech, Javid said he would review Britain’s fiscal rules ahead of a longer-term tax-and-spending budget statement later this year.

Those rules, drawn up by Javid’s predecessor Philip Hammond, require the government to keep public borrowing below 2 per cent of gross domestic product and to bring down debt as a share of economic output each year.

The Resolution Foundation think-tank has said Britain’s weak economy, a recent rise in public borrowing and Johnson’s long list of spending promises mean Javid is already set to break the 2 per cent deficit rule next year. — Reuters

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