U.K. Finance minister Philip Hammond challenged the two rivals to become Britain’s prime minister over their spending promises on Monday, warning that walking away from the European Union without a deal would use up the extra money in the budget.
With former London mayor Boris Johnson and foreign minister Jeremy Hunt stepping up their campaigns to replace Theresa May, both have turned their attention to how they would run a country which is deeply divided after Britain’s 2016 EU referendum.
They have promised to increase spending, particularly on public services, infrastructure and tax cuts, but they also say they are willing to take Britain out of the EU without a deal, an outcome that Hammond said would use up his war chest of almost 27 billion pounds.
“The ‘fiscal firepower’ we have built up in case of a no-deal Brexit will only be available for extra spending if we leave with an orderly transition,” Hammond said on Twitter.
“If not it will all be needed to plug the hole a no-deal Brexit will make in the public finances.”
More than three years since it voted to leave the EU, Britain is mired in uncertainty over whether it will leave with a deal or not, or even if Brexit will happen at all.
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NO-DEAL IMPACT? “VERY, VERY SMALL”
Hunt, playing catch-up with Johnson as both try to court members of the Conservative Party who will appoint one of them, said he understood that some of the “things I passionately want to do … will take longer” in a no-deal Brexit.
“Our immediate priority is going to be to support businesses that are directly affected by a dramatic change in our circumstances,” he told a news conference in central London.
Keen to play up his “detailed” plans for both a no deal Brexit and for leaving with an agreement, Hunt said he would try to renegotiate a deal with the EU over the summer and in earnest in September, giving himself a “hard deadline” for the end of September to decide whether he could get an agreement or not.
If not, talks would end and “we will put our heads down and focus on no deal,” he said, adding many Conservatives “don’t want a showman, they don’t want to be entertained, they want a prime minister who is going to lead us out of this crisis.”
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Asked how he would pay for his plans, Johnson told reporters that “the money is there … We also think there is room to make some sensible tax cuts as well and we will be doing that too.”
Johnson, meeting voters, said his plans were carefully costed and the impact of leaving the EU without a deal would be “very, very small.”
As finance minister Hammond has helped bring down Britain’s budget deficit, allowing him to raise the prospect of more spending and tax cuts after a decade of austerity that has helped the rise in popularity of the left-wing Labour Party.
Hammond said in March he had nearly 27 billion pounds ($34 billion) in fiscal headroom – or the difference between the target he has set himself for the budget deficit and how big Britain’s budget forecaster think the shortfall will be.
The estimated size of the fiscal war chest could be reduced because of a slowdown in the global economy which is likely to weigh on Britain’s economy.
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Britain’s budget forecasters say almost half the headroom might vanish depending on how official statisticians treat student loans in the public accounts.