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U.K.’s Javid Signals Government Austerity May Not Yet Be Over

Jessica Shankleman

(Bloomberg) -- U.K. Chancellor of the Exchequer Sajid Javid warned ministers they shouldn’t expect “blank checks” when he announces the result of his spending round next week.

Writing in the Daily Telegraph, Javid confirmed Sept. 4 as the date he’ll set departmental budgets for the fiscal year 2020/21. That’s the day after Parliament returns from more than five weeks of recess, fueling speculation the government is on an election footing.

But while the review is expected to offer a spending boost for Prime Minister Boris Johnson’s pledges on schools, healthcare and crime -- all key themes among voters -- Javid said it won’t apply across the board.

He billed the one-year spending round as “clearing the decks to allow us to focus on Brexit.”

The government is preparing for a showdown as some lawmakers seek to block it from taking Britain out of the European Union without a divorce deal on Oct. 31 and Johnson announced Wednesday that he has asked for Parliament to be suspended from mid-September to mid-October.

Since coming to power in July, the prime minister has announced more than 6 billion pounds ($7.4 billion) of spending promises, including 2.5 billion pounds on prisons, a 1.8 billion-pounds for the National Health Service and a 2.1 billion-pound allocation for no-deal Brexit preparations.

That’s led economists to raise concerns of a risky approach given uncertainty around the outcome of Brexit and after data showed the economy contracting for the first time in seven years.

In the Telegraph, Javid tried to allay concerns the government is taking a careless approach to spending, saying he will stick to current fiscal rules set by his predecessor, Philip Hammond, for borrowing to be less than 2% of gross domestic product.

Paul Johnson, director of the Institute for Fiscal Studies, said the chancellor would only be able to stay in his fiscal rules if the U.K. gets a deal with the EU.

“That’s one of the oddities of this,” the IFS director told BBC Radio on Wednesday. “He’s saying he wants to stay within his fiscal rules when he’s frankly got no idea what’s going to be happening to the economy because we don’t know what kind of Brexit we’re going to get.”

The spending round is seen as a stop-gap to a full budget from Javid later this year. However, he may have to postpone the budget to 2020 if the government is forced into a general election.

(Updates with context, comment from Javid from third paragraph.)

To contact the reporter on this story: Jessica Shankleman in London at jshankleman@bloomberg.net

To contact the editors responsible for this story: Robert Hutton at rhutton1@bloomberg.net, Stuart Biggs, Thomas Penny

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