Risk and responsibility

Bryan Davies on the need for fresh OBR analysis to help better inform Parliament of the likely consequences of the Brexit deal

The most significant actor in forecasting the development of the UK economy is of course, the Office for Budget Responsibility – mandated as it is to provide two forecasts each year. Yet there has been no updated forecast on the impact of Brexit since the Economic and Fiscal Outlook of November 2016.

Uncertainty of how the government will respond to the choices and trade-offs it faces during the Withdrawal negotiations renders forecasting extremely difficult. There has been no meaningful basis on which to form a judgement on the final outcomes.

The government has given the OBR short shrift, referring it to the Prime Minister’s Florence speech as definitive. In that speech, Theresa May said the UK would seek to achieve a deep and special partnership with the EU and this should span a new economic relationship. Not surprisingly, the OBR did not consider this a basis on which to update its analysis.

The OBR did however, set out to forecast the outcome for certain parameters of the negotiations. It made several key assumptions about what will happen when the UK leaves the EU next March. New trading arrangements with both the EU and leading states will slow down the pace of import and export growth over the ten years following the 2016 referendum. The UK will adopt a tougher migration regime following Brexit but not sufficiently tough to reduce inward migration to the government’s stated target of tens of thousands

The Treasury Select Committee finds this situation highly unsatisfactory, given that the OBR is required to produce regular reports analysing the risks surrounding the economic outlook for the UK.

Committee members saw no reason why the OBR should not provide an update – its rationale being that it already has information on migration flows and can assess the likely state of the public finances. Plus, the OBR has already formed the judgement that the consequence of Brexit on economic growth – positive or negative – are likely to be so substantial as to dwarf the impact of the financial settlement. A settlement that has so exercised members of the Cabinet through and since the referendum campaign.

While the Select Committee report came too late to be considered in the Commons during MPs debates on the EU Withdrawal Bill, it will be discussed in the Lords today during the latest round of debates on the legislation. An amendment in my name, with formal support from Labour colleagues Denis Tunnicliffe and Frank Judd, offers this opportunity and calls on the OBR to publish a fresh economic outlook. Something that would incorporate the terms of the Withdrawal Agreement and inform Parliament`s consideration of whether or not to act on the outcome of the negotiations.

Challenging as this task might be, the flow of firm and up to date information will obviously be in demand over the course of this year. Parliamentarians have the right to ask the OBR, the best placed institution, to provide the information we so clearly require.   

Lord Bryan Davies is Shadow Treasury Minister in the House of Lords

Published 14^th March 2018