New Chancellor Phillip Hammond has made clear his intentions for the future of fiscal policy in the UK, deciding to scrap George Osbourne’s failing long term plans dating back to 2010 of achiving a fiscal surplus, for which he consistently pushed back his set deadline. Does this mean the years of austerity are finally over?
Hammond announced his intentions to invest around £2bn into housing to build 40000 homes by 2020. However, Hammond did make clear that since the Brexit vote, the UK faces a future of uncertainty, and these changing times require a change in policy. He did not criticise Osbourne since his policies were right for the times, but now we require more expansionary policy. However, this does not mean there won’t be cut backs in future, since the budget is ‘eye-wateringly large’, Hammond must keep a close eye on this as well.
Hammonds plans to invest into housing will be beneficial in the long term of the UK economy. In the short-term the increase in employment helps to stabilise the economy, encouraging further spending, which is required to offset the likely drop in spending due to uncertainty of Brexit. In the long term, infrastructure will help to improve the productivity in the UK and will hopefully help us compete more on international markets.
With Theresa May announcing the intention to invoke article 50 by March 2017, the need for more expansionary policy became clear, with austerity policy may do more harm than good in current economic conditions. Saying this is contrary to growth statistics since the brexit vote which have been surprisingly postive, but hard times ahead are expected. Nevertheless, Brexit negotiations will likely have a greater impact on the future of the UK economy than fiscal policy in the years to come, with the hope than the UK can negotiate some trade deals which will ensure the preservance of the UK export markets and FDI.