Britain’s chancellor Philip Hammond announced in his spring statement that forecasts for UK economic growth have been cut significantly to 1.2%, from 1.6% in the last budget.
Hammond unveiled the bad news in his annual address, but said growth in 2021-2023 — the period after the floated transition period if Brexit happens — has been revised up:
- 2019: 1.2% versus previous estimate 1.6% in last October’s budget
- 2020: 1.4% versus previous estimate 1.4%
- 2021: 1.6% versus previous estimate 1.4%
- 2022: 1.6% versus previous estimate 1.5%
- 2023: 1.6% versus previous estimate 1.6%
The Spring Statement is different to the UK budget as it is more of an update on how the UK economy has been performing since the actual budget that was presented in October 2018.
It is also used to announced any revised forecasts for economic growth from the Office for Budget Responsibility (OBR), the independent economic forecasting body that marks the government’s homework.
Hammond emphasised that if parliament passes a Brexit deal, he will launch a full, three-year spending review in time for the next budget.
That would mean more money available for investment in infrastructure, technology, housing, skills, and green energy, in order “to capitalise on the post-Brexit opportunities ahead.”
The Chancellor had originally set aside £15bn ($19.7bn) to spend on combating the negative effects of a no-deal Brexit. If a deal is agreed, he would be free to spend this sum elsewhere. However, due to the lower borrowing forecast by the OBR, the Brexit war chest has grown to £26.6bn.
The Chancellor also reiterated his position that there could be a Brexit dividend in light of Brexit.
Since October last year, he has fallen in line with UK prime minister Theresa May to promote the idea that there will be a Brexit dividend when Britain leaves the European Union.
However, he has also warned that “there will be very significant disruption in the short term and a very significant hit to our economy in the medium to long term,” if there is a no-deal Brexit. He reiterated this in his Spring Statement speech today.
His statement comes just a day after UK prime minister suffered a second defeat over her ‘new’ Brexit deal. Last night, members of Parliament (MPs) voted against her agreement with the EU by 391 votes to 242 — a majority of 149 votes.
The following day, the UK government published the temporary tariff regime for a no-deal Brexit. In response, a raft of business leaders have attacked the “failed politics” around Brexit and said leaving without a deal must be urgently ruled out to protect jobs and the economy.
Tonight, MPs vote on whether Britain will leave the EU without a deal — but there are still 11 possible outcomes from the vote.
What is the Brexit dividend?
The “Brexit dividend” is the idea that the UK economy will suddenly come into a windfall of money once it leaves the EU because the government will not have pay bills to the EU anymore. The UK government says that as part of the Brexit dividend, there will be a £20bn funding increased to Britain’s National Health Service (NHS).
Ever since that pledge was floated during the campaign process from Brexiteers ahead of the June 2016 vote, fact checkers and analysts have continually debunked that promise.
For example, the UK’s largest independent fact-checking agency Full Fact said: “There is no guaranteed extra money to pay for increased NHS funding from stopping our payments to the EU budget. Other costs associated with Brexit are expected to outweigh the savings.”
Iain Begg, professorial research fellow at the European Institute and co-director of the Dahrendorf Forum, London School of Economics and Political Science said in a lengthy post: “Read my lips: no such thing as a Brexit dividend.”
“Few doubt the need for increased funding for the NHS and the government plans to boost its budget by some £20 billion a year by 2023 will be widely welcomed,” said Begg. “Yet to portray it as somehow connected to Brexit is, simply, dishonest, the more so when it is being spun as enabling pro-Brexit ministers to deliver on a referendum promise.
“It has been explained endlessly, but apparently has to be reiterated yet again, that the true UK gross contribution to the EU has to be measured after deducting the rebate received since 1985.”