Treasury chief says UK faces new strategy in no-deal Brexit

LONDON (AP) — Britain's Treasury chief warned Sunday that plans to end eight years of austerity could be sidetracked by a "no-deal" Brexit as he prepared to release his latest spending plan to the House of Commons.

On the eve of his budget speech Monday, Philip Hammond pledged that the end was in sight for the budget cuts implemented by a series of Conservative-led governments after the global financial crisis, reiterating a commitment made by Prime Minister Theresa May earlier this month. But Hammond cautioned that the government's plans could be thrown off track if Britain fails to secure a deal that protects trade with the European Union.

"If we were to find ourselves in that situation, then we would need to take a different approach to the future of Britain's economy," he told Sky News. "We would need to look at a different strategy and, frankly, we'd need to have a new budget that set out a different strategy for the future."

Government workers and the public are agitating for the government to end years of austerity that have slashed funding for everything from defense and law enforcement to schools and transportation as May and her predecessor sought to close the budget deficit. Teachers recently marched through central London to call for increased funding, as police warn that they don't have the resources to combat rising crime and the military shrinks. Amid the demands for money, the government is pushing ahead with plans to roll out a new comprehensive welfare program that critics say will leave the most vulnerable worse off.

Hammond may get some help in meeting the demands from an unexpected increase in tax revenue. The independent Office of Budget Responsibility on Monday will slash its forecast for government borrowing, reducing the deficit by about 13 billion pounds ($16.9 billion) during the current fiscal year, the Financial Times reported last week.

The revision is likely to help Hammond deliver on a government pledge to increase funding for the National Health Service by 20 billion pounds a year by 2023 without raising taxes. Ahead of the budget, the government has announced a 1.5-billion-pound package to help small retailers and a 30-billion-pound investment in the transport network.

But Hammond said further details on which programs would get more money would have to wait until next year — after Brexit talks are completed. If the negotiations collapse, a no-deal scenario would represent a "very big transition" in the way the economy operates.

"If our businesses are no longer able to trade with European Union neighbors, if their supply chains are cut off, they will have to find different markets and different ways of doing business," he told the BBC. "The economy will change. It will have to restructure itself over a period of time and that will be a fairly major transition."