MPs rubbish chancellor’s ‘Brexit dividend’ claim

12 Feb 19

The chancellor’s claim that the Brexit agreement would bring a ‘deal dividend’ to keep taxes low and support public services is “not credible”, a group of MPs has said. 

The Treasury Select Committee also slammed Philip Hammond and prime minister Theresa May’s assertion that “austerity is coming to an end” and called on them to spell out what this would look like, in a report on the Budget 2018, released today.

Hammond told the Tory conference last year he believed the prime minister would strike a deal with Europe that would mean extra cash for public services, reduce the deficit and keep taxes low - a ‘deal dividend’. 

But the report said the claim was not credible because the Office for Budget Responsibility’s economic forecasts, which Hammond uses when setting the Budget, assumed that the UK would make an “orderly transition” by leaving the EU with a deal.  

It highlighted that rather than a dividend, Hammond was simply describing “avoiding something really bad”.

Committee chair Nicky Morgan said: “The OBR already assumes an orderly Brexit, so there won’t be a ‘deal dividend’ beyond the forecast just by avoiding no-deal.”

The report said: “No ‘deal dividend’ over and above the existing forecast could be attained simply by avoiding a disorderly outcome.

“Beyond this, there could be some improvement to business confidence and investment following an orderly transition or a resolution of Brexit-related uncertainty that is not currently forecast by the OBR. It is not credible that this be described as a dividend.”

The report also highlighted the OBR said it was “odd” to refer to this as a dividend. It said: “What is being talked about is avoiding something really very bad”. 

The MPs report also raised concern over the chancellor’s claim that the 2018 Budget would bring an end to austerity. They called on Hammond to clarify what he meant.

Prime minister May first said that austerity was over at the Conservative Party conference last year, when she said there would be a hike in spending for public services in the next Spending Review. 

Neither May or Hammond have specified what this ‘end of austerity’ looks like, the MPs said.

Morgan added: “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 report was published a day after the IFS warned that public services would need billions of extra pounds at the Spending Review if the chancellor were to fulfil his pledge.

Additionally, the committee report said the next budget should include an analysis of the impact of spending allocations on men and women “in all cases where data are available”.

It said that although there have been “some improvements” on assessing equality impact of spending, the government still falls short of “robust assessments of future budgets, including the tax and welfare measures contained within them”.

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