Philip Hammond To Deliver the UK’s First Post-Brexit Autumn Statement Wednesday

Chancellor of the Exchequer Philip Hammond will deliver the United Kingdom’s first post-Brexit Autumn Statement on Wednesday. Unlike predecessor George Osborne, the new Chancellor will face intense scrutiny from a nation that is divided over the question of European integration.

The Autumn Statement will be the first major fiscal event since the June 23 referendum, when Brits shocked the world by voting to leave the European Union (EU). The Statement will provide a glimpse into British finances and serve a similar capacity to the previous Budget statement, albeit in less weighty terms. It will also offer tangible clues about how ministers intend to navigate the British economy during the Brexit period.

The Chancellor offered a taste of what the Autumn Statement might entail on Sunday when he gave a round of interviews outlining the country’s economic outlook. He spoke of sluggish business investment, higher inflation and “eye-watering” levels of national debt.[1] A recent study by the Institute for Fiscal Studies showed that the rapidly declining value of the British pound is likely to push up consumer inflation by about 2.5%.[2]

Brexit was heralded by many Tories as a win for British nationalism, but regardless of which side of the political divide you sit, the next two-plus years could prove difficult for a nation struggling with uneven growth. Hammond said this period will bring “an unprecedented level of uncertainty.”

According to some experts, the Chancellor is considering restricting tax-free benefits to offset possible spending plans. This included reining in salary sacrifice schemes, which are a growing cost for the Exchequer. In Britain, a “salary sacrifice” is when an employee agrees to receive reduced cash payments in exchange for certain benefits, such as health screening, mobile phones and even cars. Pensions, contributions and childcare will not be affected by these changes, according to a recent government consultation.[3]

One of Hammond’s biggest tasks on Wednesday is deciding how to mitigate Brexit-related uncertainty without overplaying the impact of the great unknown in the year ahead. The Bank of England (BOE) has already eased monetary policy and lowered its outlook on economic growth. Most prognosticators expect a sharp slowdown in the British economy in the next several years. Based on the latest High Court ruling, the Brexit ordeal may extend much longer than two years beginning in April, the timeline initially proposed by Prime Minister Theresa May. Based on the latest ruling, Brexit must first attain parliamentary approval.[4] While Hammond isn’t likely to address this point, this is the kind of “uncertainty” his statement must address.

[1] Tom Baterman (November 21, 2016). “Autumn Statement: Philip Hammond’s political challenge.” BBC News.

[2] Tom Baterman (November 21, 2016). “Autumn Statement: Philip Hammond’s political challenge.” BBC News.

[3] Miles Brignall (November 21, 2016). “Philip Hammond ‘to mount tax raid on employee benefits’.” The Guardian.

[4] Danica Kirka and Kill Lawless (November 3, 2016). “U.K. court rules Brexit must go to Parliament first.” The Toronto Star.

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