Javid pledges to ‘turn the page on austerity’ amid Brexit chaos

UK Finance Minister Sajid Javid has announced the crisis-wracked country was ending a decade of austerity and focusing on investing in growth despite the economic uncertainties of Brexit. 

“We can now afford to turn the page on austerity and move forward from a decade of recovery to a decade of renewal,” Javid told Parliament on Wednesday as he revealed his spending plan for the next year. 

“We can now afford to spend more on vital public services,” he said.

Spending reviews – which confirm ministry budgets – usually cover a three-year period, but Wednesday’s spanned just a single year due to uncertainty surrounding Brexit. 

However, it is not clear if the review’s relevance will be even that long-lived, with Prime Minister Boris Johnson now leading a minority government and calling for a snap election on October 15 over resistance to his Brexit plans.

Johnson previously promised that his Conservative Party would deliver “the most ambitious spending round for more than a decade” and focus on pumping money into public services.

In his first major speech since taking over the public purse strings in July, Javid – a former Deutsche Bank managing director – said he intends to raise government spending by 13.8 billion pounds ($16.8bn) on health and education, as well as putting more police on the streets.

“Even with the extra spending, we are still meeting the current fiscal rules,” he said.

“While our biggest challenge a decade ago was getting the deficit down, our biggest challenge today is getting our long-term economic growth back to where it was.”

A decade of austerity

The UK and most other major economies plunged into an extended economic crisis 12 years ago.

The country was headed at the time by the “New Labour” government of Gordon Brown.

The Conservative-led governments that have headed the UK since 2010 responded to the crisis by keeping to strict budget rules that slashed public spending.

The country has since enjoyed a period of slow but steady growth, cutting its budget deficit from almost 10 percent of gross domestic product in 2010 to slightly more than one percent now.

However, this growth is increasingly threatened by Brexit. The economy unexpectedly shrank again in the second quarter on investor worries over the prospects of the UK crashing out of the European Union without an agreement with Brussels on October 31.

It was the first contraction in seven years. 

In Wednesday’s speech, Javid said he would review the UK’s fiscal rules before a longer-term tax-and-spending budget statement to be given later this year.

Those rules, drawn up by Javid’s predecessor Philip Hammond – who was kicked out of the Conservative Party on Tuesday night for siding with a rebellion over the Brexit timetable – require the government to keep public borrowing below two percent of GDP and to bring down debt as a share of economic output each year.

The Resolution Foundation think-tank has said that the UK’s weak economy, a recent rise in public borrowing and Johnson’s long list of spending promises mean Javid is already set to break the two percent deficit rule this year.