Kristian Rouz — British Chancellor of the Exchequer Philip Hammond says he is ready to end the highly-unpopular austerity policies and boost government spending as part of the next year's budget. Hammond stressed his fiscal stimulus package could be as large as £1.5 billion, focusing on infrastructure and telecom investment.
Chancellor Hammond is set to deliver his new budget Monday. An expected change in the UK government's approach to fiscal policies comes amid the elevated concerns of a "no-deal" Brexit and its effects on Britain's economic activity.
According to the Exchequer, the Hammond plan will ramp up road and motorway investment by 44 percent, while an additional £900-million fiscal stimulus will come in the form of lower business tax rates for some 500,000 small retailers — or 90 percent of the total number of retailers in the UK. These tax cuts could save retailers up to 30 percent on their annual bills.
"This package will provide short-term relief for struggling retailers and a long-term vision for town centers, helping them to meet the new challenges brought about by our changing shopping habits," the Treasury said in a statement.
Hammond is also expected to announce the establishment of a £25.5-billion government investment vehicle, which will support new construction and infrastructure development in the years 2020-2025. An additional £3.5 billion is expected to go towards the improvement of smaller local roads.
The Exchequer said its plans to boost spending would help ease road congestion, enhance domestic exchange in data and information, and improve labor productivity. All these, in turn, are expected to boost Britain's GDP growth in the medium-to-long-term and make up for potential Brexit-related losses.
"Business rates are a heavy burden that throttle all firms with steep bills regardless of how well they're doing or the economy is faring," Hannah Essex of the British Chamber of Commerce (BCC) said.
Chancellor Hammond, however, said, Prime Minister Theresa May should agree with his vision of the Brexit process in order to maximize the benefits of his upcoming fiscal proposal.
Additionally, the Bank of England (BoE) is expected to coordinate its monetary policies more tightly with the Exchequer in order to offset possible risks and stave off the threat of asset bubbles and overheating of the economy.
Hammond's upcoming announcement comes after the Office for Budget Responsibility reported Britain's budget revenues are expected at £13 billion per year more than previously thought. This might suggest Hammond has more firepower and wiggle room to adjust his stimulus effort over the coming years.
"The focus of this budget should be to help business navigate the choppy waters we're likely to see over the next few years," Suren Thiru of the BCC said.
The Exchequer said Hammond's upcoming plans to cut taxes and boost spending are feasible without additional hikes in other taxes. The fiscal plan is expected to be funded with excess revenues, while part of the costs will be offset by a future expansion in the tax base, employment, business and job creation, and rising British exports.
Hammond's plan will also allocated hundreds of billions of pounds into upgrading and installing broadband Internet connections in the most remote areas of the UK. These measures will allow some businesses to move their operation to the counties with lower property and labor costs without losing their operational efficiency.
Chancellor Hammond has previously stressed the rapidly developing digital economy doesn't necessarily require all businesses to maintain expensive offices in England's South East. He also said his proposed tech investment will improve the quality of British education by upgrading schools and libraries.
This, in turn, will improve the quality of the British workforce in the longer run, and boost labor productivity and overall economic efficiency.
Hammond expressed confidence his plan will not only support Britain's struggling high streets in these uncertain times, but will provide a boost to the broader economy for decades to come.