With tough part of Brexit ahead, UK marshals its resources

LONDON — Britain plans to save money while it can to prepare for a potentially drawn-out, economically painful exit from the European Union. That's the message the Treasury chief gave Wednesday in a budget speech whose confident tone and lighthearted moments belied the dramas ahead.

Philip Hammond ditched the dry delivery that earned him the nickname "Spreadsheet Phil," as he outlined a spending plan for the 2017-18 fiscal year that he said lay the foundations for a "stronger, fairer, better Britain" outside the EU.

The chancellor told jokes — some at his own expense — setting an upbeat tone for a government ready to take on the biggest change in a generation.

"Our United Kingdom has a proud history," he told the House of Commons. "We have done remarkable things together. But we look forwards, not backwards, confident that our greatest achievements lie ahead of us."

While he promised additional funding to care for the elderly and mitigated steep rises in property taxes for some businesses, Hammond said that supporting Britain's public finances ahead of Brexit means continuing to control spending. Prime Minister Theresa May and her predecessor have presided over seven years of austerity to close a budget deficit that ballooned during the financial crisis.

"The only responsible course of action ... is to continue with our plan undeterred by any short-term fluctuations," Hammond said. "We will not saddle our children with ever-increasing debts."

The caution over spending came despite improved government finances. While the latest figures from the independent Office for Budget Responsibility show government borrowing during the 2016-17 year will probably be about 16.6 billion pounds ($20.2 billion) less than forecast, Hammond noted Britain is still 1.7 trillion pounds in debt.

The Office for Budget Responsibility also upgraded its forecast for economic growth this year, to 2 percent from the previous estimate of 1.4 percent. But it downgraded the outlook for 2018 to 1.6 percent from 1.7 percent and for 2019 to 1.7 percent from 2.1 percent.

Hammond offered a surprise 2 billion pound increase in social care funding over three years, responding to a crisis in programs for the country's aging population.

In another concession, he offered a 435 million pound package to help ease the burden on firms facing large increases in "business rates," the property taxes paid by companies. London is likely to be particularly hard hit because property values have soared since the financial crisis.

Hammond also said he would look at concerns about business rates in general, and offered some relief to the majority of local pubs — in recognition of their special place in many communities. His package included discretionary relief for difficult cases in local areas.

But the concessions came with pledges that Britain must start "living within its means." As a consequence, the Conservative Party government announced an increase in National Insurance taxes for higher-earning self-employed workers, backing down from a campaign promise not to raise the levy.

Hammond described the measure as a way to level the playing field for those employed by companies and those who work for themselves. Self-employed workers currently pay National Insurance taxes equal to 9 percent of earnings, three percentage points less than traditional employees.

This inequity is hitting the nation's coffers hard, as the number of people working in the so-called gig economy grows.

But analysts such as Ann Casey, a partner at the law firm of Taylor Wessing, suggested that equity was still a long way off.

The proposal "does not address the 'elephant in the room' that an employer has to pay employer (insurance) for an employee and there is no equivalent for self-employed individuals..," she said. "Addressing this difference would require a more radical change to the national insurance system."