Brexit to raise government borrowing by £226m/week

by Michael Prest | 23.11.2016

Chancellor of the Exchequer Philip Hammond didn’t mention Brexit once in his Autumn Statement. For the first time since the Leave vote, however, official figures released today with his speech show that Brexit is hitting the UK economy hard.

The Office for Budget Responsibility (OBR), the official independent budget watchdog, says that Brexit will increase government borrowing by £58.7bn between now and 2020-21, or £226m a week (see table 1.4). The comparison is not exact, but it’s an instructive contrast with the £350m a week that Brexiters falsely claimed the UK pays to the EU.

What’s more, instead of the budget being in surplus by £11bn in 2020-21 it is forecast to be in deficit by £20.7bn – a £32bn deterioration.  According to the OBR, £15.2bn – or about half of the deterioration – could be due to Brexit.

One reason for the worsening budget position is that the economy will be 1.4% smaller in five years time than forecast in March.

In the short term the economy is expected to expand a bit faster than expected. The growth forecast for 2016 has been raised from 2% in March to 2.1% now.  Hammond looked almost excited when he declared that the UK would have the fastest growing economy this year of any major industrial country.  But the OBR has downgraded growth in 2017 from 2.2% to 1.4%.  The economy is expected to pick up in the three years after that, but the outlook is more than usually uncertain.

We don’t of course know the full economic impact of Brexit yet. That might take a decade and will depend heavily on the deal eventually reached with the EU. But Hammond will not be able to avoid using the B word forever.

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    Edited by Hugo Dixon

    2 Responses to “Brexit to raise government borrowing by £226m/week”

    • This is insane. We actually pay just under £250 million a week to the EU.
      In 2015, we sent £250 million a week to the EU. After accounting for the money Brussels sent back to Britain and EU spending we include in our foreign aid target, the net cost was £120 million a week or £17 million a day. Per person, that’s 26p a day – or half the price of a Mars Bar.

      This is a fraction of the benefits we have got from being part of the EU’s single market. And if we wanted to leave the EU but stay in the single market, like Norway, we’d most likely still have to pay a membership fee. Norway’s net payment per person is about the same as ours.

      BY way of illustration last year the EU sent the British government £4.4 billion to spend in the UK, mainly on farming and regional aid. It also gives money directly to the private sector, in particular for research. In 2013, the last year for which the government has published figures, this amounted to £1.4 billion.

      We are committed to spend 0.7% of our national income on official aid for developing countries. When we calculate our total spending, we include our share of EU aid – £816 million in 2014.

      • Of course there are benefits being a member of the EU but the realities also include the facts that
        a) 3.5million EU migrants to the UK over the last 10-15 years have had a dramatic effect on the UK housing stock – whether to rent or purchase – pushing up prices and making getting ones own home less and less affordable thus helping to fuel the current housing stock;
        b) Static wages for nearly a decade are partially down to that same influx of EU migrants – despite what academia might say;
        c) The nett sums of money that the UK donates to the EU – let’s accept it’s your £120million – goes to fund infrastructure and industrial/ commercial regeneration in EU countries so that those workers are in direct competition wit our ow workers – so it’s not surprising that UK industry has been in decline for decades!!

        And all this at a time when we import more from the EU than we export to it so it”s no wonder that the 26 countries want us to remain part of their club – they would be daft to want us to leabe!