Liberal Democrat Manifesto: Brexit

5 June 2017

“The effects of Brexit are already being felt. The value of the pound has plummeted. Inflation has risen. Growth in the economy has slowed and the government is already borrowing billions more to fill the gap in lost tax revenue”

  • The value of the pound has fallen considerably since the Brexit vote, most sharply on the day of the result, although the International Monetary Fund and others argued that it was overvalued before that.
  • In turn, the falling pound has led to rising inflation, according to the Bank of England. It’s not the only factor though, and inflation is up in other countries too for different reasons.
  • It’s less obvious that there’s been an immediate hit to economic growth, despite forecasts to the contrary. GDP grew by 0.6% in the quarter leading up and including the vote, then by 0.5% and 0.7% in the following quarters. But we don’t have all the data in yet, and the very latest estimates do show growth slowing in the first quarter of 2017 to 0.2%.
  • Extra Brexit-related borrowing of £3.5 billion in 2016/17 was forecast by the Office for Budget Responsibility in November 2016, but that forecast was assuming lower economic growth. The OBR has since said that comparing the actual level of borrowing to a “no referendum” scenario can’t be done reliably anymore.
  • Fundamentally the question of borrowing comes back to economic growth. If Brexit does have a negative effect on the economy, we can expect lower tax receipts, higher welfare spending, and so more borrowing.

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