Chancellor blames Brexit deal for long-term damage to economy
In her speech to a key international economic committee at the International Monetary Fund (IMF), Rachel Reeves chose to highlight the long-term damage the 2020 Brexit deal has inflicted on the UK economy.
“The UK’s productivity problem has been compounded by the way the UK has left the European Union,” the Chancellor told the world’s leading finance ministers and central bankers in a speech broadcast this weekend.
He cited the OBR’s calculation of a 4% long-term hit compared to remaining in the UK and said the UK “recognised this” in its pursuit of stronger trade relations.
Labor has been reluctant to highlight arguments about the economic downsides of Brexit.
But since last month’s conference ministers have become increasingly harsh on making such claims.
It would not be surprising if this argument was used openly at the table at the top global economic policy council, including the G7, China, India, the EU and the European Central Banks. This confirms a notable shift in emphasis domestically.
This is expected to be a key part of the government’s argument in the election process. Budget on November 26 Much of the need for new measures, which are expected to be tax increases, will come from lowering Britain’s long-term productivity.
The Office for Budget Responsibility is expected to detail why any downgrades have occurred when it publishes its forecast in next month’s Budget.
Brexit is expected to come to the fore. Foreign economists pointed to a decline in investments due to post-referendum uncertainty as well as poor performance in goods trade. Others point to strong trade in services and new freedoms to strike trade deals around the world.
The issue is currently sensitive as the government decides on negotiating positions for a Brexit “reset”, including scrapping most post-Brexit controls on food and agricultural trade and helping UK manufacturers join consortiums to bid for Europe’s increased defense budgets.
European ministers called for maximum efforts in talks to help ease the impact of trade wars elsewhere in the world.
In his first budget last November, Reeves announced tax increases worth £40bn a year, including increases in payroll taxes paid by employers, and insisted he would not have to repeat the move in subsequent years.
But the chancellor now faces the prospect of a new overhaul of the public finances.
The Conservatives laid out a clear dividing line on the issue at their conference, pledging to cut public spending by £47bn a year if they win the next election through cuts to welfare, utilities and foreign aid.
