UK delays public spending review to focus on Brexit

[LONDON] British finance minister Sajid Javid said he would delay a long-planned review of public spending due this year to allow officials to focus on preparing for Brexit on Oct 31.

Mr Javid said he would postpone the full three-year spending review until 2020, and instead set out spending limits next month for just the 2020/21 financial year, which would continue to respect his predecessor Philip Hammond's fiscal rules.

No date was set for the annual budget due later in the autumn, when Mr Javid will face pressure to fund tax cuts promised by Boris Johnson in his campaign last month to succeed Theresa May as prime minister and Conservative Party leader.

Mr Johnson has told public bodies to be ready to leave the European Union (EU) on Oct 31 without any transition deal, which business groups fear will cause widespread economic disruption and many analysts expect to trigger new public spending priorities.

"The Prime Minister and I have asked for a fast-tracked Spending Round for September to set departmental budgets for next year. This will clear the ground ahead of Brexit while delivering on people's priorities," Mr Javid said.

John McDonnell, finance spokesman for the opposition Labour Party, said the move was no way to run a budget, or a country.

"This smacks of pre-election panic measures by the government," he said. "Johnson is splashing a little bit of cash as a publicity stunt, but keeping the door open for even more austerity if a no deal Brexit breaks the economy."

The British government published its last full spending review in November 2015, determining budgets for central government ministries and local authorities through to the end of March 2020.

In a mid-year budget statement this March, Mr Hammond said he would only start the next spending review once parliament approved the Brexit transition deal Mrs May had agreed with the EU. Parliament rejected the deal, prompting May to step down.

During his campaign, Mr Johnson declined to back the government's existing fiscal rules, which require the structural budget deficit to remain below 2 per cent of gross domestic product next year, and for debt to continue to fall as a share of GDP.

In addition to aiming for tax cuts, he has already promised an extra 20,000 police officers, higher school funding and money for poorer towns, and announced 1.8 billion pounds (S$3.02 billion) of extra money to spend on public healthcare.

The spending pledges have fuelled expectations Mr Johnson is preparing for an early election. With a working parliamentary majority of one, a no-confidence vote could easily take the decision out of his hands.

It is unclear how soon Mr Johnson intends to deliver on his spending promises - and when they will need to be paid for - and health experts disagreed over how much of that spending was new.

Deputy finance minister Rishi Sunak said September's spending round would "invest in the priority areas of schools and policing" as well as respecting existing commitments on healthcare, defence and foreign aid.

REUTERS