British finance minister George Osborne said on Friday he was no longer sticking to his centrepiece policy of turning the country’s budget deficit into a surplus by 2020 after voters decided to leave the European Union last week.
“The government must provide fiscal credibility, so we will continue to be tough on the deficit but we must be realistic about achieving a surplus by the end of this decade,” Osborne said in a speech.
“This is precisely the flexibility that our rules provide for,” he said.
Bank of England Governor Mark Carney said on Thursday that Britain’s economy would take a hit after the vote to leave the EU plunged the country into a period of deep uncertainty.
Even before the referendum, many economists had questioned the ability of Osborne to deliver the surplus by the end of the decade because of the scale of the spending cuts or tax increases that would be required to hit it.
Osborne inherited a deficit of more than 10 percent of gross domestic product when he became finance minister in 2010. Since then, the shortfall has fallen and was just under 4 per cent of GDP in the 2015/16 financial year which ended in March.
When Osborne announced a new fiscal plan last year, he included a clause relieving the government of the requirement to put the public finances in the black in the event of a hit to the economy.