FILE - In this Wednesday, March 21, 2018 file photo, Britain's Chancellor Philip Hammond leaves 11 Downing Street to attend the weekly session of Prime Ministers Questions in Parliament in London. Britain’s Treasury chief says the country would need a new economic strategy if it leaves the European Union without a deal. Speaking on Sunday, Oct. 29, the day before he delivers his budget in the House of Commons, Philip Hammond told Sky News his plan is based on the idea there will be a deal. If there isn’t one, he says Britain “would need to look at a different strategy and, frankly, we'd need to have a new budget that set out a different strategy for the future." (AP Photo/Kirsty Wigglesworth, File)

UK aims to put more cash into health, Brexit permitting

October 29, 2018 - 8:51 am

LONDON (AP) — Britain's Treasury chief will splash out on health services in a spending plan to be announced Monday, signaling the easing of eight years of austerity — Brexit permitting.

Philip Hammond is set to pledge 2 billion pounds ($2.5 billion) more for mental health services as he delivers his final budget before the country leaves the European Union, his office said. In advance of the presentation, he told the BBC he also intends to increase National Health Service funding by 20 billion pounds a year by 2023.

Hammond is set to declare that the end is in sight for the budget cuts implemented by a series of Conservative-led governments after the global financial crisis, reiterating a commitment made by Prime Minister Theresa May this month. But he is likely to caution that the government's plans to end austerity could be thrown off track if Britain fails to secure a deal that protects trade with the EU.

May's spokesman, James Slack, was quick to note that the promises to be made Monday would be honored — even if Britain laves the EU without a divorce agreement.

"All the commitments the chancellor will set out today are funded irrespective of a deal," he said.

In practice, it's difficult to know how big an economic impact Britain could suffer by leaving the EU without a deal, meaning a high level of uncertainty for the government, as well as businesses and consumers.

The pressure is on for May's administration. Government workers and the public have been agitating to end years of austerity that have slashed funding for everything from law and order to schools as May and her predecessor sought to close the budget deficit.

Police are warning they don't have the resources to fight crime; school principals are marching with demands to help children; and the military is concerned about its eroding ability to defend the nation. Further complicating the picture, the government is pushing ahead with plans to roll out a new comprehensive welfare program that critics say will leave the most vulnerable worse off.

Hammond is likely to get some help in meeting the demands from an unexpected increase in tax revenue. The independent Office of Budget Responsibility is expected to slash its forecast for government borrowing, reducing the deficit by about 13 billion pounds ($16.9 billion) during the current fiscal year, the Financial Times reported last week.

The revision is likely to help Hammond deliver on a government pledge to increase funding for the National Health Service without raising taxes. Ahead of the budget, the government has announced a 1.5-billion-pound package to help small retailers and a 30-billion-pound investment in the transport network.

But Hammond said further details on which programs would get more money would have to wait until next year — after Brexit talks are completed. If the negotiations collapse, a no-deal scenario would represent a "very big transition" in the way the economy operates.

"If our businesses are no longer able to trade with European Union neighbors, if their supply chains are cut off, they will have to find different markets and different ways of doing business," he told the BBC. "The economy will change. It will have to restructure itself over a period of time and that will be a fairly major transition."

The director of the Institute for Fiscal Studies, Paul Johnson, said Hammond has his reasons to be cautious as he unveils his spending blueprint. The man who bears the nickname "Spreadsheet Phil," will be well aware that the future path of the economy will depend on the outcome of negotiations, which at the moment are manifestly uncertain.

"Uncertainty is layered upon uncertainty and he may well be reluctant to make firm and fixed plans even two or three years ahead in the face of such imponderables," Johnson wrote in the Times of London. "Any good news in this year's public finance numbers could easily be offset by the reverse next year."

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Jill Lawless contributed.

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