There is a dark cloud casting a long shadow across the Chancellor’s Budget numbers. The spectre of Brexit is looming large now on the prospects for the economy and public finances.
Businesses are holding back on investment because of the uncertainty about trade and tariffs, which in turn is holding productivity down. If we cannot generate more output per hour worked, living standards will stagnate. As a consequence, the Office for Budget Responsibility downgrade for future growth prospects means the days of 2 per cent growth rates may be a thing of the past.
With growth and productivity so moribund, the impact on tax revenues for the exchequer has to be factored in. That’s why the Treasury’s own documents predict a depressing collapse in receipts: down £8bn in 2019, down £13bn in 2020 and down by an astronomical £20bn in 2021.
If you want an illustration of the austerity that #Brexit will create – just look at the Treasury’s own figures predicting a collapse in revenues available for our public services. We can still prevent this! pic.twitter.com/MyyrT1OSKM
— Chris Leslie (@ChrisLeslieMP) November 22, 2017
If this is added to borrowing, taxpayers will fork out debt interest for many years. But more likely, if it results in fiscal tightening it will drag on the vital resources our public services need – our schools and NHS will pay the price.
So when the government talks of a new £3bn committed for Brexit “preparations” (which could otherwise have been spent productively elsewhere), that is just a start. This £20bn hit to revenues by 2021 is the real statistic that should send shivers down the spines of those who care about levels of public investment.
This comes, of course, on top of the “divorce bill” that the government has yet to negotiate. Interestingly, the OBR suggest it may be as much as £67bn – equivalent to two further years of budget deficit!
Brexit austerity will shape the fortunes for our public services for the decade ahead. These Budget figures should be a wake up call for MPs in all parties. None of this is a fate set in stone – it can still be changed if MPs pull back from that Brexit cliff edge in 2019. Those who fail to fight for our single market and customs union membership could find they share the responsibility for the next wave of austerity likely to befall Britain in the post-Brexit era.
Chris Leslie is the Labour MP for Nottingham East. He was shadow chancellor between May and September 2015.