Tags: EU | Britain | Budget

Amid Uncertainty, UK Treasury Chief to Offer Bleak Outlook

Amid Uncertainty, UK Treasury Chief to Offer Bleak Outlook

Wednesday, 23 November 2016 06:07 AM

LONDON (AP) — Britain's Treasury chief is likely to offer a stark outlook for the country as he outlines his priorities in taxes and spending in the first budget update since the country voted to leave the European Union.

As Philip Hammond delivers the biannual economic statement to lawmakers Wednesday, the level of uncertainty is particularly high, with talks on Britain's EU exit yet to even start.

He can take some solace in the resilience of the British economy in the months following the seismic June 23 referendum. It has not fallen into recession, as some feared.

But government finances have tightened significantly, leaving little room for spending increases that experts say are needed to help the lower- and middle-income families that are struggling with previous agreed austerity measures.

"What I would hope to see is a relaxation of austerity but with a new fiscal framework that will allow some investment into the economy," said Michael Kitson, an economist at the University of Cambridge's Judge Business School.

The budget update is likely to set aside money for roads and digital infrastructure. Prime Minister Theresa May this week also trailed more investment into research and development in hopes of putting the U.K. ahead of the curve in science and technology.

A key part of the budget update will be the economic forecasts, provided by the Office for Budget Responsibility, an independent body. In the March budget, the OBR had predicted the economy would grow 2 percent this year, 2.2 percent in 2017, and 2.1 percent in 2018.

Economists do not expect a big change to the estimate for this year, though the outlook is murky for subsequent years due to a range of uncertainties, including the EU exit talks and global factors like the election of Donald Trump to the U.S. presidency.

The Resolution Foundation, a think tank, estimates that compared with March, the government's borrowing needs over the next five years have grown by 84 billion pounds ($104 billion), leaving it with less money to support households and companies. The poorest half of households are experiencing flat or falling incomes.

Hammond will be under pressure to help working families described by government officials as "jams," or people who are "just about managing." Many households face further welfare cuts planned under previously announced austerity programs.

"Even people doing quote unquote 'the right thing,' find that they can't escape," said Matthew Whittaker, chief economist of the Resolution Foundation. "It's a shame that it has taken the government so long to notice."

Some 6 million working households fall into this category, with a net income of between 12,000 pounds and 34,000 pounds. The typical U.K. wage is 21,000 pounds ($26,000).

These are families who were struggling even before the 2008 financial crisis, and saw their living standards eroded further during the downturn.

Typical incomes are no higher than a decade ago, but housing costs are higher, according to data from the Resolution Foundation said. The difficulty is helping this group get into a position where they can stand on their own two feet — as they often dip in and out of trouble, Whittaker said.

"It's not a simple case of giving more money to them," Whittaker said. "They need some extra financial support but you need to be careful and targeted."

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Britain's Treasury chief is likely to offer a stark outlook for the country as he outlines his priorities in taxes and spending in the first budget update since the country voted to leave the European Union.As Philip Hammond delivers the biannual economic statement to...
EU,Britain,Budget
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2016-07-23
Wednesday, 23 November 2016 06:07 AM
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