The Brexit impact extends beyond stock and bond market to hit fiscal policy as well.
CNN Money reported that the British government is walking back commitments to produce a budget surplus within the next few years. Those plans had been in place for a while, said the financial news site.
The Chancellor of the Exchequer George Osborne said late last week, “We will continue to be tough on the deficit but we must be realistic about achieving a surplus by the end of this decade.” The government official said that the Brexit vote would lead to at least some measures of austerity that would carry the twin engines of tax hikes and government spending cuts. The “hole” in the budget of the United Kingdom would be worth as much as 30 billion British pounds annually, at least according to forecasts issued ahead of the vote late last month.
The Office of Budget Responsibility has also, after the Brexit vote, cancelled plans to issue forecasts for economic growth, according to CNN. In fact, the office will not issue new forecasts until this fall as tied to fiscal impact of Brexit. There have been walk-backs of several growth forecasts from other parties, and others have put out estimates that have called for recession. Theresa May, who has been called the leading candidate to succeed David Cameron and to take the prime minister’s seat, has advocated for government borrowing in an effort to skirt tax increases. If there is fiscal stimulus, according to CNN, monetary stimulus from the Bank of England is likely to follow suit.