Hammond has pledged to achieve a budget deficit of less than 2 percent of gross domestic product (GDP), from 2.6 percent for 2016/17, by 2020 with the goal of eliminating the deficit by the mid 2020s. However, the government could look to adopt a less hawkish tone in light of Brexit developments and austerity fatigue from voters.
A public spending splurge may also spark the attention of rating agencies. Moody’s downgraded the U.K. rating to “Aa2” on September 22, citing concerns about growth and the state of public finances.
Hammond has the delicate task of addressing the concerns of those inflicted by cuts to public services and to welfare in the last few years, but at the same time he has to maintain credibility in fiscal targets over the horizon period.