New claims have surfaced suggesting that the economic impact of Brexit has been exaggerated.
The Budget will take place later this month. (Image: Getty)
The Office for Budget Responsibility (OBR) has faced criticism for allegedly exaggerating the economic impact of Brexit, with some accusing the watchdog of producing forecasts influenced by political bias. Critics have argued that the OBR‘s predictions, which suggest that the UK’s post-Brexit trading relationship with the EU could reduce long-term productivity by 4%, may overstate the reality. The watchdog attributes this largely to the increase in non-tariff barriers, which it says hampers the exploitation of comparative advantage.
The fiscal body assumes that both exports and imports will decline by roughly 15% in the long run compared to remaining in the EU, while new trade agreements outside the bloc are expected to have only a marginal impact on economic growth. Higher-than-expected tariffs on EU imports are estimated to have added an average of £1.9 billion per year in revenue compared with earlier forecasts.
The Chancellor will soon announce the government’s plans for taxation, spending and the OBR forecast (Image: Getty)
Lord Moynihan, a Conservative peer and businessman, has written to OBR chairman Richard Hughes, calling for a review of the agency’s Brexit forecasts or risk having them revised downward ahead of the upcoming Budget, The Telegraph reported.
He highlighted that the International Monetary Fund (IMF) predicts the Brexit-related impact on GDP to be closer to 2%, rather than the OBR’s 4% projection.
In his letter seen by The Telegraph, Lord Moynihan argued that the productivity estimates misrepresent the UK’s economic trajectory and risk encouraging overly cautious government policy.
He claimed that the projected 4% drop in productivity was probably inaccurate, noting that the OBR’s estimate relied on an average of 10 independent forecasts, several of which assumed the UK would fail to secure a trade deal with the EU.
He wrote: “I call on you urgently to ensure that the OBR reviews not just its latest forecast, but past ones, and after reviewing the above, agrees to amend and caveat them as soon as possible.
“It is important that the Government get good, not ideologically biased, economic commentary on the impact of its policies.”
