Hailed as an ‘important victory’
both candidates pledging a no-deal exit if necessary.
Wage stagnation would stretch for 13 years since the last financial crisis, house prices would slump by nearly 10 per cent between the start of 2019 and 18 months later, and the exchange rate would immediately depreciate by 10 per cent, the report assumes.
In the no-deal scenario, borrowing would be £30bn a year higher from March 2020-21 as the government would receive less money from income tax, National Insurance contributions and capital taxes.
Those alone would cost £26.5bn a year from 2020-21, the report says, while weak consumer spending would also shave £3bn off finances.
Compared with an OBR estimate of a smooth transition to a deal, welfare spending would rise by £2.7bn in 2021-22 and business investment would slump 15 per cent by the end of 2021. Public sector net debt would rise to around 12 per cent of GDP higher than the orderly exit forecast by 202324, the OBR adds.
Chancellor Philip Hammond said the report showed that, even in the “most benign version” of a no-deal exit, there would be a “very significant hit” to the British economy.
“But that most benign version is not the version that is being talked about by prominent Brexiteers,” he said. “I greatly fear the impact on our economy and our public finances of the kind of no-deal Brexit that is realistically being discussed now.”
The OBR countered leadership frontrunner Mr Johnson’s claim that a wellmanaged no-deal scenario would be “vanishingly inexpensive”, as he stated during a head-to-head debate.
“You are looking here at something that could increase borrowing by £30bn-a-year, so most people would say that’s a significant sum of money,” OBR chairman Robert Chote said.
Shadow chancellor John Mcdonnell said the report shows the Tories are a “clear and present danger to the economy and the wellbeing of everyone in the UK”.
The Prime Minister’s official spokesman she has “repeatedly said that it is better to leave with a deal and that it is up to her successor to take forward the Brexit process”.