Hammond to Set Aside $74 Billion for Brexit Risks, Times Says

(Bloomberg) -- U.K. Chancellor of the Exchequer Philip Hammond will use Wednesday's budget to build up a 60 billion-pound ($74 billion) fund to offset any economic turbulence from Brexit, saying borrowing to make spending commitments before Britain formally leaves the EU in 2019 would be “reckless,” the Sunday Times reported.

Hammond, writing in the newspaper, warned Brexit may bring “unexpected” challenges, and stressed the need to maintain fiscal discipline, reaffirming his goal to balance the books in the next Parliament.

“While we are making steady progress in eliminating the deficit, there are still some voices calling for massive borrowing to fund huge spending sprees,” Hammond wrote. “That approach is not only confused, it's reckless, unsustainable and unfair on our young people, who are left to deal with the consequences.”

Prime Minister Theresa May has set herself a deadline to trigger Article 50 of the Lisbon Treaty, formally starting Brexit talks, by the end of the month. While the economy has so far been resilient to the June referendum vote, higher inflation, slow wage growth and planned benefit cuts have led organizations such as the Institute for Fiscal Studies to warn inequality and poverty in Britain are set to worsen.

Hammond said his budget would focus on three key points: supporting May in her Brexit negotiations by maintaining the economy's resilience, getting Britain “match fit” for the exit by targeted investment, and helping ordinary working families.

“As we begin our negotiations with the European Union we are embarking on a new chapter in our history,” Hammond wrote in the newspaper. “We may face unexpected challenges in the months and years ahead as we forge our vision of Britain's future in the world.”

To contact the reporter on this story: Svenja O'Donnell in London at sodonnell@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Kevin Costelloe, Steve Geimann