The impact of Brexit on the UK economy will be worse than that caused by the pandemic, according to the chairman of the UK fiscal watchdog.
Richard Hughes said the Office for Budget Responsibility (OBR) had assumed leaving the EU would “reduce our long run GDP by around 4%”, adding in comments to the BBC: “We think that the effect of the pandemic will reduce that (GDP) output by a further 2%.”
Gross domestic product, or GDP, is a measure of the size of the economy.
“In the long term it is the case that Brexit has a bigger impact than the pandemic”, Mr Hughes told the broadcaster hours after the OBR responded to Rishi Sunak’s latest Budget by saying it expected inflation to reach 4.4% while warning it could hit “the highest rate seen in the UK for three decades”.
Asked on Thursday whether a 4% long-term reduction to GDP was a price worth paying for Brexit, Downing Street said the Budget had shown the “agility, flexibility and freedom” that the European Union divorce had afforded the Government.
The Prime Minister’s official spokesman told reporters: “I think this is a Budget settlement that sets out the agility, flexibility and freedom that has been provided by Brexit, and how valuable that is in a global 21st century economy.
“There were a number of approaches and announcements linked to that yesterday, things like APD (air passenger duty) and alcohol tax, which we wouldn’t have been able to do if we remained in the European Union.
“Our view is that having that ability to act unilaterally in this area is hugely beneficial.”
It came as Downing Street vowed to retaliate against France if Paris goes ahead with a “disappointing and disproportionate” threat to impose sanctions in an escalation of a row over fishing boats.
The French Government dramatically warned it will block British vessels from some ports next week if the post-Brexit dispute over fishing licences is not resolved.
Paris even went as far as suggesting it could restrict energy supplies to the Channel Islands if no deal is reached with the UK as relations since the EU departure further soured.
No 10 said the threats do not seem to be compatible with “international law” and vowed an “appropriate and calibrated response” if Paris does not back down.