-Ditching Hammond is unlikely to solve Brexit problem
Last week the U.K. posted its smallest September budget deficit in the last 10 years with only £5.9 billion, according to the Office for National Statistics (ONS). The expectation from economists was around £6.5 billion. Compared with the same month of last year, the U.K. budget deficit was down by 11 percent. This is a positive sign to be considered in the U.K. Chancellor Philip Hammond’s new budget preparations next week.
However, the U.K.’s overall debt is still considered high, according to ONS figures. Public sector net debt, excluding state-owned banks, increased by £145.2 billion since September last year to £1,785.3 billion, equivalent to 87.2 percent of gross domestic product.
Speaking on the ONS figures, a Treasury spokesman said: "Whilst we've made great progress getting the deficit down by over two thirds, government borrowing is still far too high at over £150 million a day. We will continue to take a balanced approach that deals with our debts and allows us to invest in our public services."
Nonetheless, Hammond is still the target of many Conservatives. According to the Times story, cabinet colleagues have warned Philip Hammond that he faces an ambush on the budget from Tories who want him out. Senior government figures fear that the chancellor has become so toxic that he does not have sufficient authority to get difficult measures through the Commons. He has been told that some of the budget ideas that he has suggested, such as squeezing cash from pensioners, would cause a Tory backbench revolt.
On the bigger picture, the Conservative party’s problems seem to be bigger than Hammond’s cautious stance on expenditure and the preparations for a possible no deal in Brexit negotiations is of considerable concern.
Last week, news was leaked about the U.K. Prime Minister Theresa May’s meeting with EU Commission President Jean-Claude Juncker at a dinner in Brussels. According to The Independent, Juncker reportedly told aides after dining with the Prime Minister that May appeared “tormented” and “begged” for help in Brexit talks. Almost after every cabinet meeting with EU officials, similar leaked news, which might not serve the government’s interests in the long run, is released. May has repeatedly asked her cabinet members to keep tales of the Brexit negotiations confidential within the meetings and not to share them with the media – a problem that crops up time and again.
Recent data reveals that a wage squeeze, slowing domestic demand, rising inflation and the drop in purchasing power due to the weakened pound continues to exert overall pressure on the U.K. economy. And the gloomy overall economic outlook will remain as long as uncertainty over the Brexit negotiations continues.
