“Brexit tax” has already cost us £11 billion and rising – new figures - People's Vote

“Brexit tax” has already cost us £11 billion and rising – new figures

The Chancellor will have to raise an extra £11 billion in tax or additional borrowing in next week’s Budget because Brexit has lost Britain £32 billion in economic activity through drained investment, business confidence and growth over the past two years - even before the UK is due to leave the European Union. 

The figures, based on an analysis of the Institute for Fiscal Studies “Green Budget,” demonstrates the damage already caused by the prospect of a bad deal or no deal Brexit to the tax receipts on which vital public services depend. The revelations expose Treasury spin of a Brexit windfall ahead of the budget as smoke and mirrors at best and downright dishonesty at worst.

The £11 billion could have been used to pay for a number of policy proposals made by both the Conservatives and Labour Party, including scrapping National Insurance contributions for the self-employed or boosting early years child care and Sure Start budgets. 

Commenting, Alison McGovern MP, leading supporter of a People’s Vote, aid:

“These figures should be a Budget week wakeup call because Brexit is turning into a disaster for our businesses, our public services and the future of young people. Already, it means we have less money to spend on real priorities and it’s only going to get worse if Britain is stuck with the choice of a bad deal or a no deal Brexit.

“The problem with next week’s Budget has less to do with the Chancellor or any politician, it is simply that ever before the UK us due to leave the EU, Brexit is draining the life out of our economy and wrecking our public finances. It makes it harder to clear the deficit, harder to fund our NHS and harder to end austerity.

“These figures show we are all paying a Brexit tax of at last £11 billion this year. No wonder those who promised us a Brexit dividend have gone quiet as a mouse now. The Brexit they once promised is a million miles from the mess now being delivered. No one voted to be poorer, no one voted for a worse NHS, no one voted for this miserable Brexit. That’s why 700,000 people marched on Parliament last Saturday to demand a People’s Vote.”

/ends

 

Notes to editors

  • The IFS Green Budget was clear that forecasts predicting economic damage post-referendum were “not very far off after all” and identifies 1.6 percent of lost growth since the referendum.

“Post-EU-referendum forecasts were not very far off after all. Instead of a short-term hit and quick rebound, Brexit slowed growth more gradually. GDP in 2018 looks set to be only marginally higher than forecasters expected immediately after the referendum, and almost 2% lower than implied by pre-referendum forecasts predicated on a Remain vote.” (IFS Green Budget, 16 October 2018, link)

  • Using the OECD’s tax to GDP ratio, this lost growth translates into £11.2 billion in lost tax receipts for the Treasury since the referendum.

GDP (2017) £bn

Lost Growth (IFS)

Tax to GDP Ratio

PV Dividend £bn

2,040

0.016

0.343

11.2

 

  • The £11.2 billion could be used to pay for a variety of potential Conservative and Labour Party policy proposals.

Potential Conservative policy

Cost (£bn)

Potential Labour policy

Cost (£bn)

Scrapping Class 2 National Insurance contributions 

0.36

Recruit an additional 10,000 police officers to work on community beats

0.3

Reverse cuts to tax credit and UC support for children from 2018-19

2.7

Addressing social care funding crisis

2.1

Reverse cuts to UC work allowances from 2018-19 

3.2

Double paternity pay and paternity leave

0.3

Cancel benefit freeze in 2018-19 and 2019-20

3.6

Childcare and early years including more money for Sure Start

5.3

Keeping fuel duty frozen rather than increase in line with inflation

0.8

Skills: introducing free FE tuition, equalising 16-19 funding and restoring EMA

2.5

 

 

Restore nurses’ bursaries

0.6

TOTAL

10.66

TOTAL

11.1

(Sources: Government impact assessments, Resolution Foundation analysis, Labour manifesto costings)