Five months to the day after Britain voted for Brexit, its finance minister will outline how the government plans to cope with the economic fallout and voters’ frustrations which had echoes in Donald Trump’s US election triumph.
Philip Hammond, the chancellor of the exchequer, is due on November 23 to announce spending and tax plans until the end of the decade in his first budget update since taking office after the June vote to leave the European Union.
His speech to parliament is likely to build on Conservative Prime Minister Theresa May’s pledge to serve families that are “just managing” – a response to discontent with the political establishment and income disparity that was exposed by the referendum.
Her promise leaves Hammond with a difficult challenge: how to ease the squeeze on living standards and reduce inequality when the public finances are deep in the red and the economy is likely to slow sharply next year, reducing tax revenues.
Hammond has hinted at more spending on infrastructure, building more homes and giving companies incentives to overcome their Brexit nerves and invest. But after a decade of stagnant incomes the issues of living standards and inequality are at the top of the agenda – as in the US and other European countries. “You ignore the distribution of income at your peril,” said John Llewellyn, a former global chief economist at Lehman Brothers who now runs a consultancy, Llewellyn Consulting and is on the advisory panel of Britain’s independent budget office. “It doesn’t affect political outcomes one year to the next. But, as we have seen, it can produce very big outcomes. It creates a sense of injustice and we know that always ultimately bites hard,” he said.
Trump’s victory in the US presidential election on November 8 was an illustration of what can happen when voters lose faith in their politicians and feel left out.