Wednesday’s Autumn Statement came with a warning from the Office of Budget Responsibility (OBR) that the UK’s finances could plunge by £59bn because of Brexit.
Lower migration alone will leave a £16bn hole in the country’s economy which could increase if Theresa May manages to hit her target of cutting immigration below 100,000.
The news prompted an angry backlash from Leave campaigners, spear-headed by the Daily Mail, which still managed to put a positive spin on things.
The attack continued in the paper with a piece by Andrew Pierce that described OBR Chairman, Robert Chote as “Osborne’s creature” and a “Lib-Dem sympathiser”.
Former Cabinet minister Iain Duncan Smith, a leading Leave campaigner, said it was “another utter doom and gloom scenario” by an organisation “that simply hasn’t got anything right”.
“The key thing is that the OBR has been wrong in every single forecast they’ve made so far,” he told the Daily Telegraph. “On the deficit, on growth, on jobs, they’ve pretty much been wrong on everything.”
Jacob Rees-Mogg, Conservative MP for North East Somerset, told Newsnight the OBR was “wrong” because it had taken “lunatic” assumptions about future trade tariffs and likened experts to soothsayers.
He added: “Experts, soothsayers, astrologers are all in much the same category.”
But in the summary of the OBR’s report is the following statement:
The OBR is required by legislation to produce its forecasts on the basis of current stated Government policy (but not necessarily assuming that specific objectives will be met). In the current context of looming Brexit negotiations, this is far from straightforward. Quite appropriately, we have been given no information regarding the Government’s goals or expectations for the negotiations that is not already in the public domain.
Currently, the information in the public domain is sparse.
A leaked memo prepared by Deloitte claimed the Tories simply have no plan for Brexit and are split over how to manoeuvre through negotiations.
The report was swiftly condemned and disowned by the Government but no clarification of plans was given in its place.
Another think-tank, the Institute for Government, later backed up the findings of the memo, arguing parts of the exit strategy is “chaotic and dysfunctional”.
Ed Miliband led criticism of the Brexiteer reaction to the Autumn Statement.
Philip Hammond confirmed he was abandoning plans to achieve a budget surplus by the end of the decade after revealing the country is set to take a hit of almost £60 billion over the coming five years as a result of the referendum vote to leave the European Union.
The Chancellor set out how the Office for Budget Responsibility had slashed growth forecasts and predicted higher than previously expected borrowing.
Respected economic think thank the Institute of Fiscal Studies will give its assessment of the Chancellor’s policies in an in-depth analysis of the plans later.
Labour said the Autumn Statement placed on record the “abject failure of the last six years”.
The OBR said the Government could be expected to borrow £122 billion more over the five years to 2020/21 than it predicted at the time of the Budget in March - three months before the Brexit vote. And it said that some £58.7 billion of this was directly attributable to the referendum result and the cost of leaving the EU.
Of this, some £16 billion would be caused by lower immigration, said the OBR - though it added the figure, largely caused by the loss of taxes which migrants would otherwise pay to the Treasury, would be even higher if the Government achieved its ambition of reducing net migration to the tens of thousands.
However, its calculations did not include any gains from ceasing contributions to the EU’s budget, currently running at around £13 billion a year.
Overall, the OBR predicted potential economic growth over the five-year period would be 2.4 percentage points lower than if the UK had voted to Remain in the EU. It downgraded growth for next year from the 2.2% forecast in March to just 1.4% and for 2018 from 2.1% to 1.7%.
Hammond said the slowdown was due to “lower investment and weaker consumer demand, driven, respectively, by greater uncertainty and by higher inflation resulting from sterling depreciation”.
In an illustration of how sharply the public finances have deteriorated since March, the OBR forecast that rather than the £10.4 billion surplus Osborne had been hoping to achieve in 2019/20, the UK will still have a deficit of £20.7 billion at the end of a decade of austerity.
The national debt will breach the symbolically important 90% of GDP mark in 2017-18.
Hammond set out new fiscal rules which will require him to balance the books “as early as possible in the next Parliament”, to get the structural deficit below 2% and debt falling as a share of GDP by the time of the next election and to cap spending on welfare.