The Brexit effect will slash 2.4 per cent off Britain’s economic output, the Chancellor has revealed.
Philip Hammond told MPs that growth is now forecast to be 2.4 per cent lower in 2020 than predicted back in March – because of the referendum result.
The announcement came as Mr Hammond revealed that the budget deficit is forecast to be £30bn in 2019-20, instead of the £10bn surplus projected in March, a staggering £40 billion swing into the red.
Over the six years from last April, Britain will borrow an extra £122bn – the budget ‘black hole’ opened up following uncertainty created by EU withdrawal.
Delivering his first Autumn Statement, Mr Hammond confirmed he is no longer seeking a budget surplus in 2019-20, as his predecessor, George Osborne, had pledged.
Instead, the Government is now committed to returning public finances to balance "as soon as practicable" in the next Parliament, which could mean as late as 2025.
During the speech, the Chancellor Hammond explicitly blamed the referendum decision for the enormous hit to anticipated economic growth.
The independent Office for Budget Responsibility (OBR) had downgraded its 2017-18 forecast for next year alone from 2.2 per cent to 1.4 per cent, partly because of higher inflation due to sterling’s plunge.
The June 23 vote “makes more urgent than ever the need to tackle our economy's long-term weaknesses", including the “shocking” productivity gap, Mr Hammond said.
However, the Chancellor insisted the economy had so far “confounded commentators” with its “strength and resilience” since the Brexit vote.
He said, of the 2017-18 growth forecast: “That's slower, of course, than we would wish, but still equivalent to the IMF's forecast for Germany, and higher than the forecast for growth in many of our European neighbours, including France and Italy.”
Mr Hammond also announced he is abolishing the Autumn Statement – insisting no other major economy makes hundreds of tax-and-spend changes every year.
After next year, the Budget will be staged in the autumn, with a downscaled spring statement, responding to the forecasts from the OBR - but with no major announcements.
