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A pledge to end austerity, after Brexit

Hammond’s main message — that he could deliver more funds for public spending only if the British Parliament reaches a deal on Brexit — came a day after lawmakers rejected Prime Minister Theresa May’s plan by a large margin.

By: New York Times | Published: March 14, 2019 8:02:43 am
A pledge to end austerity, after Brexit Prime Minister Theresa May’s mission to secure Britain’s orderly exit from the European Union was defeated Tuesday (Source: AP)

By Ceylan Yeginsu

Britain’s chancellor of the Exchequer, Philip Hammond, delivered a statement on the country’s economy Wednesday that was something of a fiscal nonevent, with the specter of Britain’s withdrawal from the European Union, or Brexit, hanging over every economic projection.

Hammond’s main message — that he could deliver more funds for public spending only if the British Parliament reaches a deal on Brexit — came a day after lawmakers rejected Prime Minister Theresa May’s plan by a large margin.

With May sitting behind him, Hammond conspicuously called for lawmakers “to put aside our differences and seek a compromise” on Brexit, something neither the prime minister nor the Labour leader, Jeremy Corbyn, has yet accepted.

“Higher unemployment, lower wages, higher prices in the shops. That is not what the British people voted for in June 2016,” he said, referring to the 2016 referendum to leave the European Union.

Here are five takeaways from the chancellor’s spring statement.

Slow Growth, Except for Wages

The uncertainty surrounding Brexit and a slowdown in the global economy has cut growth in 2019 to 1.2 percent from the 1.6 percent projected in last year’s autumn budget.

The British economy is set to grow by 1.4 percent in 2020 and by 1.6 percent in the following two years, according to official forecasts from the independent Office for Budget Responsibility.

One bright spot is wage growth, which has been revised upward to at least 3 percent each year, with the workforce expanding by 600,000 by 2023, Hammond said.

A Brexit Dividend?

With public sector borrowing trending down, Hammond pledged to increase the Brexit dividend to 26.6 billion pounds, about $35 billion, but that comes with a catch: British lawmakers would have to vote pronto to leave the European Union with a deal.

In a statement, the Office for Budget Responsibility attributed the improved fiscal climate to higher income tax receipts and lower than expected interest costs.

An End to Austerity, If …

Once again, Hammond hedged the good news with a familiar caveat: Parliament first has to agree on a deal for Brexit.

A smooth Brexit will see a “deal dividend,” an economic boost that will free up resources for schools, police and social care, areas that have suffered significantly from over a decade of budget cuts under the conservative government’s austerity policy.

Analysts were quick to point out that the government has been making such promises for some time now, but the promised spending increases have failed to materialize.

“The repeated promise that austerity is coming to an end will ring hollow for the millions of low wage, disabled and unemployed people who will see their social security and tax credits frozen for another year from April,” Dr. Mary-Ann Stephenson, director of the Women’s Budget Group, said Wednesday.

Acting to End ‘Period Poverty’

The government will fund free sanitary products in secondary schools and colleges in England in response to concerns that some girls are missing school because they cannot afford to buy their own products, Hammond said.

The announcement comes after a two-year campaign started by Amika George, 19, who had read reports that schoolgirls in the northern city of Leeds were using newspaper, socks and toilet paper because they could not afford sanitary products and would sometimes miss school to avoid embarrassment.

“It’s definitely a really huge number,” George said in a phone interview. “This isn’t a small minority of people that it’s affecting at all. It’s definitely prevalent, and it’s something that the government needs to take action on.”

Extra Money to Tackle Knife Crime

Knife crime, which rose for the fourth straight year in 2018, is a hot-button issue these days. To help address it, an additional 100 million pounds, or $130 million, will be made available for police forces across England and Wales to help tackle knife crime, which has risen for a fourth consecutive year.

Police funding in England and Wales fell by 19 percent between 2010-11 and 2018-19, the National Audit Office says.

The extra funding will be spent on additional overtime targeted on knife crime and new violent crime reduction units, Hammond said.

The announcement falls short of the 200 to 300 million pounds, about $260 million to $390 million, requested by the National Police Chief’s Council last week.

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