UK seeing ‘biggest squeeze on living standards’ on record, says head of fiscal watchdog
The impact of Brexit on the UK economy is on the same “magnitude” as the Covid pandemic and energy price crisis, the chairman of the Office for Budget Responsibility (OBR) has said.
In a grim assessment, Richard Hughes also warned that it would take five years before people’s spending power recovers to pre-coronavirus levels.
Britain’s gross domestic product (GDP) will be 4 per cent smaller than if the country had stayed in the EU, the head of the government’s fiscal watchdog confirmed on Sunday.
Asked how much stronger the economy would have been without Brexit, he told the BBC: “We think that, in the long run, [Brexit] reduces our overall output by around 4 per cent compared to had we remained in the EU.”
While the OBR first predicted a 4 per cent long-term hit to GDP in 2021, the chairman has been reluctant to be drawn into assessing the seriousness of the damage from Britain’s exit from the bloc.
Grilled by host Laura Kuenssberg on the scale of the harm done, Mr Hughes said: “I’ve struggled to put it in any kind of sensible context. It’s a shock to the UK economy of the order of magnitude to other shocks that we’ve seen from the pandemic, from the energy crisis.”
The OBR chief said the country is undergoing the “biggest squeeze on living standards” on record. “But we do expect, as we get past this year and we go into the next three or four years, that real income starts to recover.”
He added: “But it’s still the case that people’s real spending power doesn’t get back to the level it was before the pandemic even after five years, even by the time we get to the late 2020s.”
Mr Hughes said economic growth had been held back because of “supply constraints” – pointing to labour shortages and an investment slump.
“We’ve lost around 500,000 people from the labour force, we’ve seen stagnant investment since 2016 and also our productivity has slowed dramatically since the financial crisis and not really recovered,” he said.
Cabinet minister Michael Gove blamed the Ukraine war and Covid for Britain’s economic woes. “We’re dealing with the aftershocks of two significant events,” he told the BBC.
Asked if he accepted that Britain has become a “poorer country”, he said: “Everyone accepts if we hadn’t had the war … if hadn’t had the pandemic we would have been in a position when the growth rate was significantly higher.”
In December, the Centre for European Reform (CER) found that Brexit cost the UK a staggering £33bn in lost trade, investment and growth. The CER also estimated the tax loss from Brexit at around £40bn.
The research – first shared with The Independent – showed that by June of this year Britain’s economy was 5.5 per cent smaller than it would have been if the country had remained in the EU.
Brexit has cost households more than £5.8bn in higher supermarket bills – pushing up UK food prices by 6 per cent, a study by the Centre for Economic Performance also found in December.
Source: Independent
Recent Comments