As the Conservative Party attempts to find its new leader, the progress of Brexit has been slow, to say the least. As a result, it is now entirely possible that the UK will leave the EU without a deal. The costs of this are unknown, but the Office for Budget Responsibility has today published a report on the potential impact on the UK economy of a No Deal Brexit.
The report, titled ‘Fiscal risks report’, assesses a number of potentialities that may affect the UK economy in coming years. One of these assessments, the potential impact of a No Deal Brexit, will be a difficult pill to swallow. In no uncertain terms, it outlines some pretty dark truths about a No Deal Brexit’ impact on the UK economy. In the event that the next Prime Minister pursues a No Deal, such a move would be deeply damaging.
For example, the OBR has forecasted that in the event of a No Deal Brexit, public borrowing would increase by £30 Billion. What is more, the OBR make it clear that this is not the worst scenario they have simulated. Nonetheless, the report does not make for easy reading for politicos and politicians alike. If one were to summarise the OBR’s report, it would be that in the scenario devised by the OBR, the economy would enter a recession following a No Deal outcome, with GDP taking a significant hit.
How did we get to a no deal Brexit?
The referendum on Britain’ membership of the EU took place over three years ago. Since that time, the government spent the better part of two years negotiating an agreement with the EU. This became the Withdrawal Agreement, and was defeated three times in the House of Commons. As this process continued, and the Brexit deadline was extended, the possibility of a No Deal has loomed over the UK economy.
There is no current majority for the Withdrawal Agreement, but the prospects of a No Deal majority are even smaller. The deal agreed by the government was far from perfect, hence why it failed to pass through the Commons three times. However, as shown by votes in the Commons earlier this year, a No Deal Brexit will not pass through either.
It’s worth noting however that the current legal position is that the UK will leave the EU on October 31. This will apply, even if the UK has a deal with the EU or not. However, today’s report will surely cast a doubt on the No-Deal rhetoric espoused by Brexiteers.
Is this all just ‘Project Fear’?
Whilst the projections of the OBR are a simulation, they must be heeded by those in power. The report casts doubt on the prosperity that No-Deal would apparently bestow upon the UK. It casts doubt on our ability to forge a new path for ourselves outside the EU. Without a strong economy, we cannot function as a world power.
There is a tendency by some in Britain to claim that because we have the fifth strongest economy internationally, we’d be able to shrug off no deal. This, I’m afraid to say, is categorically untrue. If the UK economy is affected by something remotely close to the OBR simulations, then we must be prepared for the economic dislocation that would follow.
I admire those who believe wholly in the No Deal project, but I am afraid I cannot sympathize with them.
Boris Johnson last night attended the final Leadership Hustings before the ballots close. In his speech, he attempted to describe the whole Brexit process using a Kipper and an Ice pillow. In his demonstration, he wrongly claimed that this rather trivial issue was down to EU legislation.
However, there is one problem. The Isle of Man, from where the Kipper originated, is not a member of the EU. Instead, it is considered a ‘Crown dependency’ by the UK, and it was, in fact, UK legislation that forced the Kipper salesman to package his products with an ice pillow.
Why a No Deal Brexit is not ‘what the people voted for’.
The whole modus operandi of Brexit was that it was a cry from those at the bottom of society. It was a cry from those who had been left behind by society and increased globalization, who had seen their towns run down, and communities change before their eye.
Brexit was meant to be the opportunity by which those voices were heard. But in the throes of ideological predispositions, the government have seemingly failed. Instead of providing an olive branch for the poorest, the government is set to betray them.
Now, more than ever, in light of the OBR report, a deal must be reached. A deal is the only option that can secure our exit from the EU, whilst maintaining economic stability. If the government is to save face, they must face the realities of Brexit. Brexit cannot be handled with a can-do attitude. Instead, the new Prime Minister must be ready to compromise.
We can no longer wave the threat of a No Deal in the faces of the EU twenty-seven. The OBR report today has shown both parties the damage a No deal would have on the UK, and one would imagine it would be worse for the EU. Instead, the new Prime Minister must find a way to come to an agreement with the EU, which would then pass in the House of Commons.
It is only then can the government begin to answer the calls of those who voted to leave. If the UK leaves without a deal, then it poses a threat to disadvantaged communities. If a deal is reached, and agreed upon, then the government can use the stability it brings to build on a policy that can help the disadvantaged.
In any event, a No-Deal Brexit produces some uncertainties which have yet to be answered, even with the OBR’ scenarios. And this is where the question lies. Is a further dislocation of the economy, and society, worth a no-deal Brexit? The answer to this question, if we are to consider the wellbeing of our citizens, and the prosperity of the economy, is no.