Javid Sets March 11 Date for U.K. Budget to Deliver on Vows
Chancellor of the Exchequer Sajid Javid promised to unleash “a decade of renewal”
(Bloomberg) -- Chancellor of the Exchequer Sajid Javid promised to unleash “a decade of renewal” when he outlines a budget on March 11 to ready the U.K. for its departure from the European Union.
Javid’s office said Tuesday he will make good on pledges to cut taxes and spread opportunity as he announced the date for the statement, postponed from November. He will build on plans outlined during Prime Minister Boris Johnson’s election campaign to increase borrowing for investment by jettisoning fiscal rules, capitalizing on low interest rates, the Treasury said.
U.K. government bonds fell after the Debt Management Office said gilt sales will increase by 14 billion pounds ($18 billion) in the 2019-2020 financial year, which ends in April. They pared declines after the first sale of 2020 was oversubscribed by almost two-and-a-half times the amount on offer.
Boris Johnson’s Conservative Party won a commanding 80-seat majority in Parliament last month after promising to deliver Brexit and boost spending on hospitals, police and infrastructure. The premier now needs to deliver if he’s to cement the support of voters in blue-collar areas who traditionally voted for the opposition Labour Party but switched to back his program on Dec. 12.
“People across the country have told us that they want change. We’ve listened and will now deliver,” Javid said in an email. “With this budget we will unleash Britain’s potential -- uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.”
The new fiscal rules, outlined by the chancellor in November, commit Johnson’s government to balancing the day-to-day budget and limiting investment to 3% of gross domestic product -- compared with 2% under current restrictions. That would allow an extra 20 billion pounds a year to be spent on capital projects such as railways and roads, though Javid said the plans for extra borrowing would be reassessed if debt-servicing costs rise significantly.
The chancellor will answer questions in Parliament from 2:30 p.m., his office said.
Gilts had started the year strongly, with 10-year bonds recording their longest winning streak since October, partly on the back of deteriorating global risk sentiment. But that trend came to an abrupt end this week when Javid announced he would increase borrowing.
Yields on 10-year gilts rose as much as five basis points to 0.82%. After the debt sale, of bonds maturing in 2029, the yield was up two basis points at 0.79%. Equivalent German bund and U.S. Treasury yields were little changed. With much of the U.K.’s extra issuance coming in shorter maturities, the country’s five-year bonds fared worst, while 30-year debt held its ground.
During the election campaign, the Conservatives promised not to raise rates of income tax, national insurance or value-added tax. They also pledged to increase the threshold for paying national insurance, an employment tax, to 9,500 pounds in their first budget. That would deliver a modest tax cut for most British workers.
Javid is also pledging an additional 8 billion pounds of capital spending by the time of the next election in 2024 and further commitments are expected to be announced in his March budget.
However, his room for further tax cuts and day-to-day spending increases is severely limited, with the current budget -- which excludes investment -- forecast to be in surplus by just 5 billion pounds in 2023-24. Such a small margin could easily be erased and jeopardize Javid’s balanced-budget rule.
Javid will announce measures to help the environment alongside investment in new hospitals, police officers and in-work training in his March 11 statement to Parliament, his office said.
--With assistance from Andrew Atkinson, Jill Ward, James Hirai and Greg Ritchie.
To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net
To contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Paul Sillitoe
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