Austerity "is finally coming to an end," British Chancellor Philip Hammond said on Monday, outlining new public spending. However, he warned that financial plans could change if Britain did not reach an agreement on leaving the European Union.
During his recent budget speech before Britain's planned exit from the bloc in March, Hammond announced a tax on multinational digital giants. They have been widely criticized for paying very little tax in many European countries.
But his big political message was a promise to stop public spending with an extra cash injection for health, education, defense and even money to stop potholes on highways. The amount that employees can earn before they pay income tax will also rise and help increase home pay. Nonetheless, British policy is overshadowed by the retreat, known as Brexit. Negotiations will stall in Brussels, and without a deal, Britain would experience a dangerous "descent" in March that could clog up ports and disrupt supply chains. Investments have recently declined as companies delay or cancel decisions due to uncertainty.
But Hammond's financial plans are generally based on the assumption that Britain is negotiating the kind of exit he wants from the European Union: not just a smooth downhill but one that has close economic ties to the bloc. On Monday, he said that as a precautionary measure, he "retains firepower to intervene when the economy needs more support," and that if the prospects change, he may have a full budget again in the spring.
Hard-line Brexit supporters within Mr Hammond's Conservative Party want a cleaner break with the bloc, and some are threatening to vote against any Brexit deal that binds Britain too close to the European Union. So his comments will be seen as a reminder of the economic and political consequences of anything that is an orderly exit from the block of the type he wants.
You know that the British are tired over years of cuts in key public services that were introduced when the country fought to stabilize its finances after the financial crisis. In fact, many analysts believe that the Brexit vote was in part a response to austerity policies, particularly in areas of the country that did not benefit from globalization.
Critics argue that Hammond still does not intend to be aggressive in reversing this policy and that some cuts will continue, particularly in terms of investment.
"The austerity measures are not over yet," said Jeremy Corbyn, chairman of the opposition Labor Party, adding that this has caused "true hardship for millions of our citizens."
Although the UK economy has slowed down, it is still growing and Mr. Hammond still has room for maneuver because tax revenues are higher than predicted. He was able to keep the promises of Prime Minister Theresa May, which had already promised a significant increase in spending to reduce the pressure on the overburdened British health service . Hammond said the budget deficit next year would be less than 1.4 percent of the total budget, with borrowing this year being £ 11.6 billion or $ 14.7 billion lower than forecast in the spring. The growth forecast for the coming year has been raised from 1.3 percent to 1.6 percent.
But overall, the picture is not so rosy. Debt remains high at about 84 percent of gross domestic product, compared with around 34 percent in 2001, and productivity growth remains stubbornly low.
According to the Center for European Reform, a London-based research organization, the UK economy is 2.5 percent less than it would if the country had voted to stay in the European Union
more money provided for cushioning the impact of a new system of social benefits called universal credit, by which critics claim that it is urging some people into acute poverty
Mr. Hammond also promised a tax on some plastic packaging and investments at Heathrow Airport in London so that electronic passport gates could be used by visitors from the United States, Canada, New Zealand, Australia and Japan.
One of the biggest announcements was plans for a new tax on digital services aimed at large technology companies that pay relatively little in the UK
"A new global agreement is the best long-term solution," Hammond said.
Details of the proposed levy were scarce, but Mr Hammond said he plans to introduce it in 2020 and that the annual revenue would be around £ 400 million.
"I emphasize that this is not an online sales tax for goods ordered over the internet," he said. In a further step, Britain wants to join The Organization for Economic Co-operation and Development and the Group of 20 Economies work together to seek a globally agreed solution for the taxation of such companies.
"If one shows up, we'll be doping it instead of the UK Digital Services Tax," he added.