Chancellor Phillip Hammond delivered his budget yesterday and from the reaction it was the downgraded growth forecast that caught the attention of commentators (HERE). Hammond is a remainer and it was important for the whole package to be reasonably well received otherwise Brexiteers would have called for his removal. I think he avoided that.
Larry Elliot in The Guardian HERE called it a Suez budget in that it marked a point in history where Britain's declining power became clear. He thinks because growth over the next five years is only expected to average 1.4%, it shows we may have to get used to permanently lower growth. According to Elliot, the Chancellor thinks Britain is "alive with innovation and is at the cutting edge of the coming fourth industrial revolution". I know for a fact this isn't true (HERE). Far from being at the cutting edge we are barely part of the handle.
However, I don't believe the forward forecasts really takes account of Brexit, mainly because the independent OBR (Office of Budget Responsibility) don't know what is going to happen. The slowing growth is generally thought to be because of uncertainty over Brexit and poor productivity. So, there is plenty of room for the actual outcome to be far worse.
Roger Bootle, writing in The Telegraph HERE thinks the OBR forecasts are wrong. Like many Brexiteer economists, he always believes the expert forecasts are wrong, which of course they usually are. But his assumption, through all of the last couple of years, is that the forecasts of the Treasury and other official bodies are too pessimistic. It's ironic therefore that part of the current downgrade is that previous assumptions about productivity have been too consistently too optimistic.
The Independent (HERE) wonders if any sacrifice is too great for Brexiteers to get us out of the EU and says Brexit is already wrecking the economy. It points out the poor growth figures are actually against a background of solid 2.2% forecast expansion in the Eurozone (HERE), which is described as continuing to "roar" - just as we are on the road to leaving it! The timing could not be worse for Brexiteers.
What is clear is that the economy in 2020 is forecast to be £49 billion smaller than was expected in March. Given that tax revenues are about 35% of revenue, this means the future chancellor will have about £20 billion less to spend. And this assumes that UK/EU trade is hit only marginally by Brexit. If, as many experts believe, there is a big hit to trade whether or not we get a trade deal, the reduction in GDP and tax receipts will be much greater.
The OBR confirm that the budget will not be in balance until 2031 (HERE) so our debt mountain will be growing in real terms until then, but falling as a percentage of GDP as the economy expands, albeit very slowly and sluggishly.
Either Brexit is already having an effect or, if not, the economy is weakening anyway and Brexit is only going to make matters worse and perhaps very much worse. It is not good news for those trying to sell Brexit.
The Independent (HERE) wonders if any sacrifice is too great for Brexiteers to get us out of the EU and says Brexit is already wrecking the economy. It points out the poor growth figures are actually against a background of solid 2.2% forecast expansion in the Eurozone (HERE), which is described as continuing to "roar" - just as we are on the road to leaving it! The timing could not be worse for Brexiteers.
What is clear is that the economy in 2020 is forecast to be £49 billion smaller than was expected in March. Given that tax revenues are about 35% of revenue, this means the future chancellor will have about £20 billion less to spend. And this assumes that UK/EU trade is hit only marginally by Brexit. If, as many experts believe, there is a big hit to trade whether or not we get a trade deal, the reduction in GDP and tax receipts will be much greater.
The OBR confirm that the budget will not be in balance until 2031 (HERE) so our debt mountain will be growing in real terms until then, but falling as a percentage of GDP as the economy expands, albeit very slowly and sluggishly.
Either Brexit is already having an effect or, if not, the economy is weakening anyway and Brexit is only going to make matters worse and perhaps very much worse. It is not good news for those trying to sell Brexit.
