MPs have dismissed Chancellor Philip Hammond’s forecast of a Brexit “deal dividend” that would see lower taxes and higher spending.
In its report on the 2018 Budget, the Treasury Committee said it was “not credible” to label any resultant economic boost from a Brexit deal as a “dividend”, while the Office for Budget Responsibility (OBR) said it was “odd” to refer to it as one.
MPs said it would be more appropriate to describe the outcome as “what is being talked about is avoiding something really very bad”.
The committee continued to say that the government’s aim of eliminating the budget deficit had “no credibility” and should therefore be abandoned.
According to Treasury Committee chair Nicky Morgan, Chancellor Philip Hammond had said that, in the event of a deal being struck, there would be a “boost from the end of uncertainty, and a boost from releasing some of the fiscal headroom that I am holding in reserve at the moment”.
Morgan added: “The OBR already assumes an orderly Brexit, so there won't be a 'deal dividend' beyond the forecast just by avoiding no-deal. Business confidence may improve with increased certainty, but it's not credible to describe this as a dividend.”
Following the publication of the latest GDP figures on Monday from the Office for National Statistics (ONS), Hammond said to the BBC that the Bank of England (BoE) had confirmed there was an “upside to come for the UK economy, if we get a good deal which allows us to leave the European Union (EU) in good order, in a smooth fashion, business investment will kick back in and we will see a benefit for the UK economy later this year”.
Hammond continued to dismiss the idea that it was unrealistic to discuss a “deal dividend”, adding that he is of the belief that businesses will feel “more confident”, if we get the right deal, as a result of consumer confidence recovering.
Morgan stated that the objective has “no credibility”, meaning that parliament cannot use it to hold government to account, and it should be replaced.
“It’s clear that the Government should update its Charter for Budget Responsibility. The Chancellor appears to have disregarded the fiscal objective of achieving a surplus and says that he prefers securing economic growth as a better way of shrinking the debt as a proportion of GDP,” the committee chairman said.
“Claims by the Chancellor that austerity is coming to an end are expansive and imprecise. He should set out what he means in more measurable terms, especially as he will face more difficult choices at future budgets for how to fund such a pledge.
“The upcoming Spring Statement may be the OBR’s first opportunity to assess the UK’s short-term prospects post-Brexit, and for Parliament to scrutinise the finances behind any withdrawal deal. The Government must, therefore, ensure that the OBR has the resources and information it needs to produce an accurate forecast.”
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