UK’s Hammond, under pressure on budget, promises more homes

By William Schomberg

LONDON (Reuters) – British finance minister Philip Hammond promised to speed up house building in his new budget plan this week and said he had some room to help voters despite his tight squeeze on the public finances, a newspaper reported.

Hammond, who is under pressure to help a weakened Prime Minister Theresa May with his tax and spending plans even as the economy slows after last year’s Brexit vote, told the Sunday Times he would target the construction of 300,000 homes a year.

May has said she wants to help younger voters, many of whom fear they will not achieve the living standards of their parents’ generation.

Hammond said he would do “whatever it takes,” including new powers and planning rules, to get builders building and pledged that “the next generation will have the same opportunities as their parents to own a home.”

Last week, the government said the number of new homes in England rose to 217,350 last year, the highest in nearly a decade but a long way below levels in the 1960s and 1970s

The Sunday Times also said Hammond suggested he would boost spending for Britain’s health service and further ease a squeeze on the pay of public sector workers in his budget plan on Wednesday.

But Hammond said he had to “signal a continued commitment to fiscal responsibility,” suggesting he would stick to his targets for cutting the budget deficit.

“We are heavily constrained fiscally. We don’t have huge amounts of room for maneuver. But we do have some room,” he said.

In an apparent joke at the tough balancing act he faces, Hammond was photographed by the Sunday Times looking puzzled and scratching his head as he pored over papers coming from his famous red budget briefcase.

Many economists say Hammond will struggle to meet his target of eliminating Britain’s budget deficit by the mid-2020s because of the country’s stubborn productivity problem.

Britain’s official budget forecasters have said they expect to cut their productivity growth forecasts, suggesting slower growth ahead and less tax revenue for Hammond.

But many voters are tired of seven years of cuts to many areas of public spending and the budget is seen as vital for Prime Minister May who has made little headway in the Brexit negotiations with the EU, recently lost two cabinet members and remains weakened after losing a parliamentary majority in June.

Accountancy firm PwC says Hammond has a bit of leeway in the short term to spend more on housing and health and ease the public sector pay squeeze because he was on course to borrow less than his target for the current financial year.

But looking further ahead, the shortfall was likely to stand at 24 billion pounds ($32 billion) in the 2021/22 tax year, higher than the official projection of 17 billion pounds, the firm said in a report on the budget.

That would reduce Hammond’s ability to spend more to help Britain’s economy as it leaves the EU.

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