Chancellor Philip Hammond warns that Brexit logjam threatens to slam the brakes on the economy
The Chancellor said his three-year spending review may have to be binned if MPs have not passed an EU deal after July
Philip Hammond has warned the Brexit logjam threatens to slam the brakes on the economy – and slash business investment.
The Chancellor said that his planned three-year Spending Review, which allocates cash to Government departments, may have to be binned entirely if MPs still haven’t passed an EU deal by the start of the summer.
And he reiterated that an estimated £27 billion Brexit “dividend” – fuelled by the lowest borrowing for 17 years - could only be pumped into the economy if No Deal is taken off the table.
It came as he told MPs business investment is thought to be 20 per cent lower than forecast at the time of the EU Referendum in 2016.
Speaking to the cross-party Treasury Select Committee, the Chancellor said: “It’s very clear to me that the sooner we can bring this process to a conclusion the better, both for the state of our politics and for the state of investment in our economy.
'WE HAVE CHOICES'
“Business shares the view that the sooner we can bring this to a conclusion the better so that investment can resume and people can get on with the day jobs as it were.”
He added: “For the first time in a decade we are in the position where we have choices.”
Mr Hammond said he still believed a Brexit deal – to ensure a “smooth” departure from EU – could be agreed. AND he said this would “release some of the headroom that we have in the fiscal arithmetic”
Delivering the Spring Statement in March, the Chancellor said a dramatic improvement in the state of the Treasury’s coffers meant his war chest had swelled to £26.6 billion.
The Sun last month revealed that Work and Pensions Secretary Amber Rudd had already called for an extra £2 billion to tackle poverty.
And yesterday the Chancellor indicated it may be impossible to do a full Spending Review if the Brexit impasse continues beyond July.
He told the SNP’s Stewart Hosie: “If we’re going to do a full three year spending review we need to formally start the process before the summer recess.
“My own view at the moment is that if we have not clearly found the solution to the Brexit conundrum and we’re on our to delivering an outcome it probably would not be appropriate to go ahead with a three-year spending review.”
Plunge in UK's loans
GOVERNMENT borrowing has plunged to the lowest levels for 17 years despite a surge in welfare spending in March.
GOVERNMENT borrowing has plunged to the lowest levels for 17 years despite a surge in welfare spending in March.
In a huge boost for Philip Hammond’s bid to ‘end austerity’, official figures revealed borrowing fell by £17.2 billion to £24.7 billion in 2018-2019.
It’s equivalent to just 1.2 per cent of Britain’s GDP – down from 10 per cent at the height of the credit crisis.
And it’s the lowest annual borrowing figure since 2001-2002.
Experts pointed out Government spending in March – the final month of the financial year - leapt by £3.5 billion because of a rise in welfare payments to £17.9 billion.
But they said Philip Hammond should be able to loosen the purse strings in the Budget later this year.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: “The Chancellor still should be able to scrap the further austerity measures planned for 2020-2021 later this year.”
Britain’s total debt still remains a staggering £1.8 trillion- equivalent to 83.1 per cent of national output.
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