Britain needs a new plan to balance the competing demands of fixing its still-weak public finances and boosting the economy with infrastructure spending following the vote to leave the European Union, finance minister Philip Hammond said on Monday.
Although Britain’s economy appears to have largely weathered the initial shock of June’s vote, Hammond plans to ease the strict spending rules laid down by his predecessor George Osborne.
Speaking at the ruling Conservative Party’s annual conference in Birmingham, Hammond is due to say that whilst budgetary discipline remains crucial for the country, there is also a need to invest in building a fairer economy.
“The British people elected us on a promise to restore fiscal discipline, and that is exactly what we are going to do,” he will say according to extracts from the text of his speech provided by his office.
“But we will do it in a pragmatic way that reflects the new circumstances we face.”
Hammond will reiterate his decision to push back the government’s target to turn its 4 percent 2015/16 budget deficit – among the biggest of the world’s rich economies – into a surplus by 2020. He has yet to set a new target date.
Last week, official data showed Britain’s giant services sector grew strongly in July, giving the clearest sign to date that the economy has not suffered a major slowdown after the EU referendum.
Hammond will also promise to deliver a “clear, credible fiscal framework” to reassure investors that he will continue to bring down the deficit by controlling day-to-day public spending while also focusing on investment needed for long-term growth.
He has previously played down expectations of a surge in public spending to offset any economic hit from the Brexit vote, but said he could fund modest infrastructure projects if needed.
In the first sign of how he intends to use his new-found fiscal flexibility, he will set out on Monday a new 2 billion-pound ($2.58 billion) borrowing plan to help address a long-term housing shortage.
Hammond’s full fiscal plan is due to delivered on Nov.23.
“I will set out our plan to deliver long-term fiscal sustainability while responding to the consequences of uncertainty in the short term and recognising the need for investment to build an economy that works for everyone,” Hammond will say.