MPs have dismissed the Chancellor’s claim that there could be a Brexit “deal dividend” for the economy and described his wider goal of balancing the books as having “no credibility”.
The Treasury select committee said official forecasts already assumed there would be an orderly departure from the EU so a deal would not deliver a boost over and above that.
It also said the decision to give a £20bn a year funding boost to the NHS showed the Government’s priorities “clearly do not include running a budget surplus” and that this should be abandoned as a stated objective.
The report delivered a verdict on Philip Hammond’s Budget last autumn – a fiscal event that was heralded as marking the end of austerity as well as offering hope for a post-Brexit future.
But the MPs poured cold water on both of these.
Committee chair Nicky Morgan said Mr Hammond’s claims on austerity were “expansive and imprecise” – a judgment that comes a day after a respected economic think-tank said Mr Hammond would in fact need to find billions more to protect spending across Whitehall.
She added: “On Brexit, the Chancellor spoke of a ‘deal dividend’ of lower taxes and higher spending once a withdrawal agreement has been agreed.
“The OBR [Office for Budget Responsibility] already assumes an orderly Brexit, so there won’t be a ‘deal dividend’ beyond the forecast just by avoiding no-deal.
“Business confidence may improve with increased certainty, but it’s not credible to describe this as a dividend.”
The committee also took the Chancellor to task over the current stated aim of Government policy, to return the public finances to balance “at the earliest possible date in the next Parliament”.
It said that Mr Hammond could have been on course to achieve that, without having to cut spending or raise taxes, in October’s Budget.
But instead he opted for what was described by the OBR as the “largest discretionary fiscal loosening at any fiscal event” since the Tories came to power – initially as part of the coalition with the Liberal Democrats – in 2010.
Ms Morgan said: “The Chancellor appears to have disregarded the fiscal objective of achieving a surplus and says that he prefers securing economic growth as a better way of shrinking the debt as a proportion of GDP.
“As the objective now has no credibility, Parliament cannot use it to hold Government to account, and it should be replaced.”