By William Schomberg
LONDON (Reuters) – New British finance minister Sajid Javid said he will announce higher public spending on health, education and the police next week in order to “clear the decks for Brexit,” a move seen by many as preparation for an early election.
Javid said he would deliver his first spending round statement on Sept. 4, earlier than planned, after he postponed a speech on his economic plans on Wednesday.
“We need to focus relentlessly on making sure we’re ready to leave the EU on Oct. 31, whatever happens,” Javid wrote in the Daily Telegraph. “So next week’s spending round will be about clearing the decks to allow us to focus on Brexit.”
He said he would stick to the budget rules set out by previous finance minister Philip Hammond.
“It’s vital that we continue to live within our means as a country,” he said. “So I can confirm that next week’s spending round will be delivered within the current fiscal rules.”
The promises of higher spending by new Prime Minister Boris Johnson have raised speculation that he might call a snap election soon to break the deadlock in parliament over Brexit.
Britain is not due to hold an election until 2022 but Johnson could gamble on an earlier poll in a bid to increase his working majority of just one in parliament.
The opposition Labour Party dismissed the spending plan as “a one-off, pre-election, panic-driven stunt budget.”
Britain is due to leave the European Union on Oct. 31 and Johnson is seeking to overcome broad opposition among lawmakers, including some in his own Conservative Party, to taking Britain out of the bloc without a transition deal if necessary.
The Telegraph said some officials in Johnson’s office wanted to scrap the budget rules, especially if Britain leaves the EU without a transition deal which could add to the case for more spending to offset the economic shock.
Britain’s budget deficit has fallen to just above 1% of GDP – way down from about 10% when the global financial crisis hammered public finances a decade ago – but it is expected to grow in the current financial year.
Another of the rules seeks to keep lowering public debt as a share of GDP.
Javid has said previously that he was considering how to take advantage of record-low borrowing costs and a no-deal Brexit would “require a significant economic package as a response.”
Next week’s spending round will cover only the 2020/21 financial year which starts in April.
A longer-term picture for public spending might emerge from a budget statement which Javid is due to deliver later this year, possibly after Brexit.
Paul Johnson, head of the Institute for Fiscal Studies, a think-tank, said Javid was unlikely to use all the 15 billion pounds available to him without breaking the borrowing rule next year because Johnson has also promised tax cuts and because of the uncertainty about Brexit and its impact on the economy.
“He’s frankly got no idea of what’s going to be happening to the economy because we don’t know what kind of Brexit we are going to get,” Johnson told BBC Radio.
(Reporting by William Schomberg; Editing by Sonya Hepinstall and Janet Lawrence)