Brexit – Boon or Bane for Britain
Some £58.7 billion, or almost half of the £122 billion in extra borrowing the government will need over the next five years, is directly related to Brexit, the official budget watchdog said yesterday as Chancellor of the Exchequer Philip Hammond recalibrated fiscal policy.
Lower migration alone — a key goal of Brexit campaigners — will add £16 billion pounds to borrowing through 2020-21, while weaker productivity accounts for £18.1 billion and higher inflation, £10.1 billion. Last year, being an EU member cost the U.K. a net £8.5 billion.
The watchdog also calculated Brexit would subtract 2.4 percentage points from the economy’s growth potential over the next five years.
John Springford of the Centre for European Reform reckoned that Brexit would leave the economy 3.2 percent smaller in 2030 than had voters chosen to stay in the EU.
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Pro-Brexit lawmakers attacked the OBR’s outlook, accusing it again of being overly pessimistic.
“The OBR are probably still quite wrong about 2017,” said Conservative John Redwood. “Their forecast is too low, their borrowing forecast far too high and we will get good access to the single market once we’re out of the EU.”
The OBR’s deficit projections may be irritating the pro-Brexit lobby because they run close to what then-Chancellor George Osborne was projecting before the referendum.
Osborne said on June 15 that the public finances would take a £30 billion hit if Britain voted to leave the EU. The OBR now predicts the U.K. will have to borrow £21.9 billion in 2020, compared with a £10.4 billion surplus predicted in March.
On the Markets U.K. government bonds fell, with 10-year gilt yields rising the most in almost a month, as Hammond planned to borrow more to increase spending.
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