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More UK spending? Higher taxes look inevitable: think-tank

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Britain’s new Finance Minister Rishi Sunak (pictured) will have to raise taxes rather than rely on tweaks to budget rules if he wants to really ramp up spending in a first post-Brexit budget next month, the Resolution Foundation, a think-tank, said.

Sunak is due to announce the tax and spending plans of Prime Minister Boris Johnson’s new government on 11 March.

His predecessor Sajid Javid unexpectedly quit less than two weeks ago, leading to speculation that Johnson wants to raise spending by more than Javid’s budget rules allow.

Johnson plans to help voters in struggling regions who backed him in December’s election by spending more on infrastructure, a big shift for the Conservative Party which has focused on fixing the public finances for the past 10 years.

“But new roads and rail lines are only part of the story,” Jack Leslie, a Resolution Foundation economist, said.

Johnson has also announced the biggest increase in spending on day-to-day public services in 15 years.

“Higher spending will require higher taxes,” Leslie said.

Britain’s fiscal forecasters assess each budget against fiscal rules that the finance ministry sets itself. Javid’s rules aim to balance day-to-day spending against tax revenue within three years.

The Sunday Times reported that Sunak was considering pushing back that target to five years.

The Resolution Foundation said that would create only 15 billion pounds of extra fiscal firepower by the 2024/25 financial year, less margin for error than previous finance ministers have had at a time when spending demands are growing.

The Sunday Times also said Javid had been asked to change the rules to allow 1% leeway on balancing the budget.

“The big question for (Sunak) is the extent to which he undoes big spending cuts to day-to-day public services, and how that is paid for,” the Resolution Foundation said.

Sunak could increase tax revenues by cutting back incentives for private pension contributions, fixing loopholes in inheritance tax and reforming property taxes, it said.

There was likely to be some good news for Sunak as he prepared the budget - reduced debt servicing costs from lower interest rates and inflation mean he will pocket a “a modest fiscal windfall” of 8 billion pounds ($10.4bn) a year by the 2022/23 financial year, the Resolution Foundation said.

Brexit

UK tells EU on Northern Ireland: Be responsible, be reasonable

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Britain's Trade Minister Liz Truss walks after the ceremony of State Opening of Parliament at the Palace of Westminster, amid the coronavirus disease (COVID-19) restrictions, in London, Britain, May 11, 2021. REUTERS/John Sibley

Britain's trade minister on Wednesday (16 June) called on the European Union to be responsible and reasonable in a row over the implementation of Northern Ireland Protocol of the Brexit divorce deal, write Guy Faulconbridge and Michael Holden, Reuters.

"We need the EU to be pragmatic about the checks that are undertaken and that was always the way the protocol was drafted," International Trade Secretary Liz Truss (pictured) told Sky News.

"It requires compromise between the parties, and the EU need to be reasonable," Truss said.

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Brexit deal risks undermining Northern Ireland peace, says UK's Frost

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The historic US-brokered 1998 Irish peace agreement has been put at risk by the implementation of the Brexit divorce deal in the British province of Northern Ireland, Prime Minister Boris Johnson's top Brexit negotiator said on Wednesday (16 June), writes Guy Faulconbridge.

The United States has expressed grave concern that a dispute between London and Brussels over the implementation of the 2020 Brexit treaty could undermine the Good Friday accord, which effectively ended three decades of violence.

After the United Kingdom exited the bloc's orbit on 1 January, Johnson has unilaterally delayed the implementation of some provisions of the deal's Northern Ireland Protocol and his top negotiator has said the protocol is unsustainable.

"It's super important that we keep the purpose of the nature of the protocol in mind, which is to support the Belfast Good Friday Agreement and not to undermine it, as it risks doing," Brexit Minister David Frost (pictured) told lawmakers.

The 1998 peace deal largely brought an end to the "Troubles" - three decades of conflict between Irish Catholic nationalist militants and pro-British Protestant "loyalist" paramilitaries in which 3,600 people were killed.

Johnson has said he could trigger emergency measures in the Northern Ireland protocol after its implementation disrupted trade between Britain and its province.

The protocol aims to keep the province, which borders EU member Ireland, in both the United Kingdom's customs territory and the EU's single market.

The EU wants to protect its single market, but an effective border in the Irish Sea created by the protocol cuts off Northern Ireland from the rest of the United Kingdom - to the fury of Protestant unionists.

Frost said London wanted agreed solutions to enable the Protocol to operate without undermining the consent of either broad community in Northern Ireland.

"If we can't do that, and at the moment, we aren't making a lot of progress on that - if we can't do that then all options are on the table for what we do next," Frost said. "We would rather find agreed solutions."

Asked if the Britain would invoke Article 16 of the Northern Irish Protocol to force a rethink, Frost said: "We are extremely concerned about the situation.

"Support for the protocol has corroded rapidly," Frost said.

"Our frustration ... is that we're not getting a lot of traction, and we feel we have put in a lot of ideas and we haven't had very much back to help move these discussions forward, and meanwhile ... time is running out."

Ireland's foreign minister said in response that the province's trading arrangement's were not a threat to the territorial integrity of the United Kingdom, but simply a means of managing disruption from its exit from the EU.

"Don't know how many times this needs to be said before it's fully accepted as true. NI Protocol is a technical trading arrangement to manage the disruption of Brexit for the island of Ireland to the greatest extent possible," Simon Coveney said on Twitter.

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Getting nothing back, UK minister says frustration is growing with EU

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Frustration in the British government is rising because London has offered a number of proposals to solve a standoff with the European Union over Northern Ireland but has not had a lot back, Brexit minister David Frost said on Wednesday (16 June), writes Guy Faulconbridge, Reuters.

"Our position is that we would like to find negotiated agreements that ... bring it back to the sort of light-touch agreement that we thought we were agreeing," Frost told a parliamentary committee.

"Our frustration ... is that we're not getting a lot of traction, and we feel we have put in a lot of ideas and we haven't had very much back to help move these discussions forward, and meanwhile ... time is running out."

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