Brexit will hit public finances, conference hears

11 Jul 18

Day-to-day spending on public services will fall by 0.6% in real terms between 2020-21 and 2022-23, delegates at CIPFA’s annual conference heard this morning. 

Tim Shipman

Tim Shipman, political editor of the Sunday Times Photo: Rafa Bastos


The Institute for Government’s Gemma Tetlow told her audience economists for and against Brexit were “fairly well aligned” on the view that the Brexit vote had caused a slow down in growth in the UK. 

“The figures that were laid out in March by the Office for Budget Responsibility forecast spending that was consistent with borrowing falling for the next four years and that implied that day-to-day spending on public services would be set to fall by 0.6% in real terms between 2020-21 and 2022-23,” the IFG’s chief economist told the conference. 

“Over the same period, local authorities’ self-financed expenditure is forecast to rise by 1.7% in real terms,” Tetlow added, in a session called What prolonged Brexit negotiations mean for public spending

She said there was “growing evidence” that the economy has grown “less quickly” than it would have had the UK not voted for Brexit.

The economist said this conclusion could be reached by comparing the UK’s position to economic outlook to other advanced economies.

“The UK is the only one of the advanced economies that has performed worse over the last few years than had been predicted pre-referendum,” she said.

“Most other countries, including the Eurozone, have outperformed what was expected in 2016 - for the UK, it is exactly the reverse picture.”

OBR forecasts from early 2016 were expecting UK economic growth to go from 2.3% in 2015 to 2.1% this financial year, although growth for 2018-19 was expected to be 1.5%, Tetlow explained. 

She said: “You can come up with numbers [of] between about a 1 to 2% hit to the UK economy as a result of the Brexit vote.”

This figure translated to £20-£30bn per year, she calculated.  

Tetlow also noted that pro-Brexit economists believed growth would pick up after we left the European Union next March while those in the ‘remain’ camp were of the opinion the slowing down of the economy would continue. 

Tim Shipman, political editor of The Sunday Times, who spoke at the same session pointed out that the government is “totally obsessed with Brexit” leaving little “mental space” to talk about anything else.

“The good news for local government”, he said,  was “that if this government is going to have any kind of domestic agenda to show for themselves beyond Brexit” housing and adult social care, will be top of the agenda.

“The bad news is it is not clear where the money is coming,” he said.

He pointed out that the likelihood of getting tax rises for the NHS’ 70th 'birthday present' of £20bn, announced by the prime minister Theresa May last month, through the House of Commons was “slim”.

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