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Philip Hammond said that "Austerity is coming to an end" on Monday as he sought to reassure voters and boost the morale of Fractured Conservative MPs, Theresa May must support her agreement on Brexit in staking his budget speech with promises of spending and a surprise. reduction of income tax.
As negotiations with the EU27 enter their frantic last weeks, the Chancellor has abandoned his reputation for prudence and has chosen to spend almost all of the extraordinary gains that have made him over the next five years a budget of 68 billion pounds sterling. "
"Austerity is coming to an end, but discipline will remain. This is the clear dividing line in British politics today, "he told MEPs, repeatedly stressing that Britain was" at a turning point in the reconstruction of our country. "
In an unexpected and generous offer, which will inject an additional £ 15 billion into the economy next year, Hammond has responded to requests from his colleagues to mitigate the impact of universal credit, with an increase £ 1,000 a year from the work allowance that applicants can earn before retirement. benefits are recovered.
He announced many other short-term gifts, ranging from defense spending to potholes, and refrained from taking fiscal measures, such as pension raids, that could negatively affect the absence of a sure majority of the government.
One of the few measures to increase revenue has been the imposition of a £ 400 million a year tax on large technology companies such as Google, Facebook and eBay. Hammond said that the UK was tired of waiting for an international agreement to target the tech giants and was ready to act alone.
Hammond also confirmed that he would submit to 2019 the promise of the Conservatives' manifesto to increase the personal income tax allowance to £ 12,500 and the threshold rate of over 50,000 £, thus granting a reduction in income tax of up to £ 860 a year to the highest paid people. .
The Chancellor had no choice but to loosen the purse strings, after Theresa May promised to end austerity in her party's speech delivered earlier this month here, in order to show his government that he had a political agenda beyond Brexit.
The OBR said the Chancellor could have used the unexpectedly smaller borrowing bonus than expected to reach his goal of turning around UK finances by the mid-2020s. Instead, the independent watchdog noted that Hammond had spent "unexpected profits instead of saving him" in the biggest easing of fiscal policy since it was created by George Osborne eight years ago.
However, Jeremy Corbyn, reacting to Hammond's optimistic speech, accused him of "broken promises".
"What we have heard today are half measures and quick fixes as austerity continues. And far from the fact that the efforts and sacrifices made by the citizens have borne fruit, as the Chancellor claims, this government has wasted it by offering ideological tax cuts to the richest in our society, "he said. declared.
With a full review of departmental spending planned for next year, Whitehall departments could expect their budgets to grow on average 1.2% per year in real terms over the next five years period of expenditure review.
In a speech that made little reference to the potential economic risks of a Brexit without agreement, Mr. Hammond said the review of spending could potentially be more generous if the EU exit process proceeded without smoothly.
"This is not the limit of my ambition. When our negotiations with the EU come to an agreement, as I am confident, I hope that the "dividend of the agreement" will allow us to provide additional funding for the examination of expenditure. The hard work of the British people is paying off, "he said.
Earlier, the Prime Minister's official spokesperson insisted that all promises of spending made on Monday would be honored regardless of the outcome. "All the spending commitments that the Chancellor will present today are funded, regardless of the agreement," he said.
However, after the Chancellor's intervention, a spokesman for the Ministry of Finance pointed out that the growth of 1.2% per year for Whitehall's departments was a "forecast"; and once the NHS raise was included, it meant that spending elsewhere would be stable in real terms.
The Resolution Foundation think-tank noted that once firm promises have been made in key areas, such as aid, some departments may even experience cuts.
Torsten Bell, Director of Resolution, said: "In today's budget, the Chancellor has significantly eased – but not put an end to – austerity – public services. However, the difficult times are far from over.
"The Chancellor has announced her intention to devote almost all exceptional spending to the NHS budget, thus putting an end to spending cuts for the NHS, thus ending the era of declining spending. in public services. However, unprotected departments are still on the path of spending cuts in the 2020s, averaging 3% between 2019 and 2023. "
George Osborne's age-related retirement benefits freeze was not an end either, as he sought to reduce the social assistance bill as a result of the 2015 general election.
OBR said the economic outlook has not changed much since the release of its latest report in the spring, although it has raised its growth forecast for 2019 and 2020 as a result of the Hammond budget.
He added that the situation as a whole was stable but not spectacular growth of about 1.5% for the next five years, starting from the assumption that Britain would come out of the way. Union smoothly.
Hammond's speech to the "wrestlers and clerks" implied the announcement that the government would consult on future increases in the living wage after inflation, after it reached £ 8.21 per hour. next spring. The OBR said that there was a risk that if the NLW was raised to two-thirds of the national median, it would cost jobs.
TUC General Secretary Frances O'Grady said, "Workers can no longer be dismissed with promises of a better future that will never materialize. The budget does not defeat the austerity that has devastated public services. And the investment needed to accelerate wage growth after the longest wage compression of the last 200 years is lacking. "
While the uncertainty surrounding Brexit was stifling business investment, Adam Marshall, managing director of the British Chambers of Commerce, applauded the decision to raise the annual investment allocation from 200,000 to 1 million pounds for the next two years.
"In an atmosphere of unprecedented uncertainty and increased political noise, the Chancellor has demonstrated that he listens to business concerns by proposing a budget that is favorable to investment and growth."
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