London (Reuters) – British Finance Minister Philip Hammond will use his annual budget speech on Monday to urge his divided Conservative Party to back the government to push through a Brexit deal or long-awaited easing of austerity measures take risk.
British Chancellor Philip Hammond will appear on October 28, 201
Hammond, routinely calling on many Conservative legislators The close ties with the European Union after Brexit, after nearly a decade of cuts in many public services, will give a sense of higher spending.
But he will also say that easing spending cuts will result in London reaching an agreement with Brussels to smooth Britain's exit from the EU in five months.
"If we do not get a deal, we would have to choose a different approach to the future of the UK economy," Hammond said Sunday on Sky News television.
"We need to think of a different strategy, and frankly, we need to have a new budget that shows a different strategy for the future."
Prime Minister Theresa May has so far failed to mobilize the Conservatives behind her Brexit strategy and fears that Britain could leave the EU in March without a transitional agreement.
Hammond could cushion an immediate shock to the economy by spending part of the reserves he has built up within the limits of his budgetary rules.
But a no-deal Brexit would likely cut Britain's annual growth rate to just 0.3 percent next year and in 2020 and cut borrowing, said the National Institute for Economic and Social Research, a think tank, last week.
The UK economy has slowed since the Brexit referendum in 2016, but not as strong as many economists feared. Hammond was therefore able to announce on Monday a further improvement in the budget deficit.
Nevertheless, Britain's debt remains high and limits how much Hammond can ease its spending cuts.
He said on Sunday that the biggest increase in spending in his budget had already been announced when May said four months ago that more money would go to the health service.
It will announce further measures, including more spending on roads, a tax cut for small retailers hindered by online competition and more spending on broadband.
Hammond indicated on Sunday that he would mitigate the impact of changes to the welfare system and said he wanted a timetable for progress in providing more taxes to giant tech firms.
For the time being, however, he will refrain from talking about a broader push for higher taxes, which, according to fiscal experts, will require Britain to cover the costs of an aging population.
Following a turmoil in the Conservative Party that has since lost its majority in parliament, Hammond has had to turn around its plan to raise more self-employed taxes last year.
Letter from William Schomberg; Editing by Susan Fenton