Brexit: Michael Gove's attack on OBR forecast for 'missing £200m-a-week dividend' dismissed by watchdog

The independent Office for Budget Responsibility hit back - pointing out that, in its gloomy economic calculations, the so-called ‘Brexit dividend’ had already been spent

Rob Merrick
Deputy Political Editor
Friday 25 November 2016 14:11
Michael Gove
Michael Gove

Michael Gove has been left red-faced after the Treasury watchdog dismissed his claim that its gloomy economic forecast missed a £200m-a-week "Brexit dividend".

The former Justice Secretary hailed the small print of the Office for Budget Responsibility (OBR) document, arguing it confirmed a huge potential spending boost from Brexit.

An open letter, signed by two other Tory former cabinet ministers, said: “The OBR has revealed that the British people will get back over £10bn net a year once we leave the EU.

“We believe that this Brexit dividend should be spent on our priorities - the most important of which is our NHS.”

But OBR chairman Robert Chote immediately dismissed the claim, pointing out the watchdog had included the money in its calculations – and had already assumed the money would be spent.

Therefore, Mr Gove and the other signatories were wrong to say the refund – even if Britain achieves it in full, in the Brexit negotiations – would temper the OBR’s stark warnings.

After the Autumn Statement, its report said Britain will have borrow an extra £122bn by 2022 – of which almost £58.7bn is a ‘black hole’ opened up because of the uncertainty created by EU withdrawal.

The annual budget deficit is forecast to be £30bn in 2019-20, instead of the £10bn projected in March, a staggering £40 billion swing into the red.

And Chancellor Philip Hammond will even struggle with his fresh target to wipe out the Budget deficit in the next Parliament - which could mean as late as 2025.

Mr Chote told the BBC: “We assumed that any money that is saved from the net expenditure transfers we currently make to the European Union will be spent on something else.

“That’s why the public finances don’t improve to the degree that they would if we saved that money altogether.

“If you do spend all of it, then obviously the public finances are affected by that.”

The position is confirmed by page 158 of the OBR report, which reads: “For this forecast, we have made the fiscally neutral assumption that any reduction in these transfers to the EU would be recycled fully into extra domestic spending.”

The Labour MP Chuka Umunna said: “It's hard to believe someone with such a dodgy grasp of basic maths ever managed to become Education Secretary.

“We know what Michael Gove needs for Christmas - a calculator. And he ought to apologise for still peddling misleading figures and trying to pull the wool over the eyes of the British people.”

The letter was also signed by former ministers John Redwood and Peter Lilley, along with leading Leave-supporting Labour MP Gisela Stuart.

Even the claim of a £200m-a-week payback from Brussels is little more than half the £350m-a-week which the Leave campaign claimed during the referendum campaign – emblazoning it, notoriously, on the side of a red bus.

Mr Gove’s letter formed part of a furious onslaught launched by pro-Brexit Conservative MPs and newspapers against the OBR’s forecasts.

Iain Duncan Smith, the former Cabinet minister accused the watchdog of putting out “another utter doom and gloom scenario”, on the back of past failures.

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