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UK to spend more on services, but stick with budget rules - Javid

By William Schomberg
FILE PHOTO: Newly appointed Britain's Chancellor of the Exchequer Sajid Javid is seen outside Downing Street in London

By William Schomberg

LONDON (Reuters) - New British finance minister Sajid Javid said on Tuesday he will announce an increase in public spending on health, education and the police next week, but he will stick with the budget rules drawn up by his predecessor.

Javid said he would deliver his first Spending Round announcement on Sept. 4 in order to "clear the decks" and focus the government after that on Britain's scheduled departure from the European Union on Oct. 31.

"Thanks to the hard work of the British people over the last decade, we can afford to spend more on the people's priorities, without breaking the rules around what the government should spend, and we'll do that in a few key areas like schools, hospitals and police," Javid wrote in the Daily Telegraph.

"It's vital that we continue to live within our means as a country," he said. "So I can confirm that next week's spending round will be delivered within the current fiscal rules."

The promises of higher spending by new Prime Minister Boris Johnson have raised speculation that he might call a snap election soon to break the deadlock in parliament over Brexit.

Javid said earlier this month that he would stick to existing budget guidelines, which aim to keep annual borrowing under 2% of gross domestic product, when he sets out his spending plans for the next financial year.

But the Telegraph said some officials in Johnson's office wanted to scrap the rules, especially if Britain leaves the EU without a transition deal which could add to the case for more spending to offset the economic shock.

Britain's budget deficit has fallen to just above 1% of GDP - way down from about 10% when the global financial crisis hammered public finances a decade ago - but it is expected to grow in the current financial year.

Another of the rules drawn up by former finance minister Philip Hammond seeks to keep bringing down Britain's public debt as a share of GDP, and a Treasury source confirmed Javid also wanted to keep that pledge in next week's Spending Round.

Javid has said previously that he was considering how to take advantage of record-low borrowing costs and said a no-deal Brexit would "require a significant economic package as a response."

Javid had been due to deliver a speech on his economic plans on Wednesday but the event was postponed.

(Reporting by William Schomberg; Editing by Sonya Hepinstall)