No spending spree in Budget – warns Chancellor, amid calls to abandon austerity cuts

CHANCELLOR Philip Hammond has signalled he will take a cautious approach to spending in Wednesday’s Budget.

Mr Hammond, left, accused people calling for him to use increased tax receipts for a major injection of cash into the economy and services as “reckless”.

He told the BBC’s Andrew Marr Show yesterday: “It’s not money in the wallet because we are borrowing a huge amount of money. Remember, we have over £1.7 trillion worth of debt. This isn’t money in a pot. What is being speculated on is whether we might not have borrowed quite as much as we were forecast to borrow.

“If your bank increases your credit card limit, I don’t think you feel obliged to go out and spend every last penny of it immediately.”

Mr Hammond said he saw his role as ensuring “that we have got reserves in the tank, so as we embark on the journey that we will be taking over the next couple of years, we are confident that we have got enough gas in the tank to see us through that journey”.

Amid reports that the Chancellor was set to provide more than £1bn for social care in the Budget, Mr Hammond said: “I recognise in particular that social care, and local authorities delivering social care are under some pressure. This isn’t just about money. We should remember there are many authorities managing extremely well.”

His comments came as Wales’ Finance Minister Mark Drakeford called on the Treasury to abandon planned spending cuts.

In a letter to the Chief Secretary to the Treasury, Mr Drakeford described the cuts as “unnecessary and counter-productive” and urged the UK Government use the Budget

to announce extra cash for health and social care services.

He wrote: “I remain very concerned about the impact of further cuts to public spending and the UK government’s intention to press ahead with £3.5bn of cuts in 2019-20.

“Our budget is already substantially lower in real terms than it was in 2010 as a result of the UK government’s years of austerity – additional cuts on top of those we are already facing could mean a further £175m reduction to our budget.

“These cuts are unnecessary and counter-productive – now is the time for the UK Government to end its damaging policy of austerity and provide a much-needed fiscal stimulus to boost economic confidence and support vital public services.”

Mr Drakesford also used the letter to call for the UK Government to sign the Swansea Bay City Deal, progress the Hendry Report which supported plans for a Swansea Bay tidal lagoon and ensure electrification of the main rail line to Swansea happens immediately after electrification to Cardiff is completed next year.

Meanwhile, the Institute of Economic Affairs (IEA) has called for the tax system to be simplified.

The IEA said a whole range of taxes need to be abolished to boost efficiency and make the revenue collection system more simple.

The body wants the Government to do away with capital gains tax, stamp duty, council tax, business rates and inheritance tax.

The IEA said capital gains tax should be ended because when it is applied to investments in company shares it is generally a double levy that taxes anticipated profits and retained profits that are also taxed elsewhere in the system.

If the Government lacks the will to do away with inheritance tax, then the system should be reformed so people who are left money, or given large gifts, should be taxed on the income they receive in a similar way to wages, the organisation said.

The IEA brands council tax “regressive”, and says stamp duty acts as a block to labour mobility.

It has called on ministers to replace the two levies with an annual property-based tax set at a fixed percentage of a property’s value, with a cap of 1%.

Professor Philip Booth, academic fellow at the IEA said: ““The changes would be largely revenue neutral.”

Chancellor Philip Hammond has warned the EU that Britain will not “slink off like a wounded animal” but will “fight back” if it does not get the Brexit deal it wants.

In some of the toughest talking yet ahead of the UK triggering the Article 50 negotiations on terms of withdrawal, the Chancellor said Britain would “do whatever we need to do” to be competitive in the event of leaving the EU without a trade agreement.

Mr Hammond told the BBC's Andrew Marr Show that Britain's “fighting spirit” would come to the fore in any future clash with the EU.

“If there is anybody in the European Union who thinks that if we don't do a deal with the European Union, if we don't continue to work closely together, Britain will simply slink off as a wounded animal, that is not going to happen.

“British people have a great fighting spirit and we will fight back. We will forge new trade deals around the world. We will build our business globally.

“We will go on from strength to strength and we will do whatever we need to do to make the British economy competitive and to make sure that this country has a great and successful future.”

Asked if this meant the UK would slash business taxes to attract investment away from the EU, the Chancellor said: “People can read what they like into it. I'm not going to speculate now on how the UK would respond to what I don't expect to be the outcome.

“But we are going into a negotiation. We expect to be able to achieve a comprehensive free trade deal with our European Union partners, but they should know that the alternative isn't Britain just slinking away into a corner.”

The Chancellor also indicated the UK would pay any Brexit bills it owed to the EU.

He said: “Obviously, this is a piece of negotiating strategy that we are seeing in Brussels. We are a nation that honours its obligations and if we do have any bills that fall to be paid, we will obviously deal with them in the proper way.

“We are a nation which abides by its international obligations. We always have done, we always will do, and everybody can be confident about that.”

The comments came after a Lords report stated that Britain could legally walk away from the EU without paying a penny if there is no trade deal.

While it has been reported that the European Commission's chief Brexit negotiator, Michel Barnier, is seeking a 60bn (£52bn) “exit bill" from Britain, the Lords EU Financial Affairs Sub-Committee said all estimates of the cost of withdrawal were “hugely speculative”.

Mr Hammond rejected calls from a cross-party committee of MPs for the Government to give an immediate guarantee to the millions of EU nationals living in the UK of their future rights.

The Commons' Exiting the EU Committee said the Government should act unilaterally and not wait for a reciprocal assurance over the position of British citizens in the EU.

The committee – whose members include Michael Gove, who was cochairman of the official Vote Leave campaign – said it was “unconscionable” that they should have to wait up to two years when the negotiations conclude before their position is clarified.

The Chancellor told ITV's Peston on Sunday: “We have to protect the couple of million British nationals who are living in the European Union. We have to get a fair deal for them as well. This isn't about turfing people out, this is about the rights people have.”