Posted by Geoff Bishop.
Written by Michael Settle.
BRITAIN might still be paying off its £37 billion divorce bill to Brussels 45 years after Brexit in 2064, the Office for Budget Responsibility has suggested.
The protracted timescale from the UK Government’s economic forecaster, due to continuing pension contribution payments to EU staff, came as Philip Hammond, in his first Spring Statement, gave an upbeat assessment of the UK’s economic prospects and pointed to a public spending splurge in the November Budget – should the economic figures continue to recover.
The Chancellor told MPs: “If, in the autumn, the public finances continue to reflect the improvements that today’s report hints at, then…I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers’ money is wasted.”
The Treasury pointed out how Mr Hammond had some £15.4bn of headroom, much of which may be spent on boosting NHS spending with a potential knock-on Barnett Formula windfall for the Scottish Government.
But John McDonnell for Labour criticised the Chancellor for not ending austerity now and accused him of “astounding complacency,” adding: “The Chancellor has proclaimed…there is light at the end of the tunnel; this shows just how cut off from the real world he is.”
The SNP’s Ian Blackford criticised Mr Hammond’s failure to prepare for the cost of Brexit and for remaining wedded to austerity, suggesting Scotland was “shackled to a sinking ship”.
While borrowing is down, inflation is set to fall and employment is rising, the growth figures are muted with the OBR placing them at just 1.5 per cent in the years ahead; a prediction from the OECD watchdog was even gloomier, suggesting the rise in GDP would be 1.3 per cent this year and 1.1 per cent in 2019, placing the UK at the bottom of the G20 growth table.
In its number-crunching analysis that accompanied the Chancellor’s set-piece Commons statement, the OBR calculated the costs of Britain’s exit from the EU.
The UK Government had estimated in the December Agreement that the divorce bill would be in the region of £35bn to £39bn and the independent forecaster took a central estimate of £37bn with the bulk, some 75 per cent or £28bn, falling in the years after Brexit in 2019 up to the financial year of the next General Election in 2022/23.
The OBR also calculated, in terms of some £68bn in future EU pension payments, that Britain’s share would be £8.4bn up to 2064. But this would be offset by assets such as reimbursed contributions to the European Investment Bank, meaning the final liability to the UK taxpayer would be nearer £2.4bn over the 45-year timescale.
The independent forecaster noted: “These liabilities will fall due over a very long period, so there is clearly uncertainty over how and when this or future governments would decide to meet the estimated cost.”
A Treasury source pointed out, as part of the negotiating process, the UK Government might wish to shorten the timescale over which it met its liabilities.
Uncertainties over the calculation include the pound-euro exchange rate given the financial settlement will be paid in euros, growth rate forecasts, which will affect the UK’s financial share, and the precise timing of payments.
The independent forecaster ended its report with a major qualification, saying: “The impact of Brexit on the public finances is complex and uncertain and ultimately will depend on both the outcome of the current negotiations and how it affects our future relationship with the rest of the world.
“Moreover, even with hindsight, it is likely to be difficult to quantify the impact of Brexit on both the economy and the public finances with any degree of confidence since that requires a presumption as to what would have happened in the absence of a vote to leave the EU.”
In other developments:
*spending on Brexit preparations for 2018/19 showed the Scottish Government had been allocated £37.3m with the Home Office being the largest spender at £395m;
*the OBR upgraded revenue from North Sea oil and gas over the fiscal period to 2022/23 by a total of £2.2bn;
*it also calculated the Scottish Government’s minimum unit alcohol pricing would reduce revenue receipts by £40m this year, dropping slightly in later years;
*a consultation was announced on single-use plastics waste, covering a possible “latte levy,” and
*a call for evidence was made to look at the role of cash and digital payments, prompting speculation the days of the 1p and 2p might be numbered.