Brexit had an even bigger impact on Britain’s economy than critics predicted, Rachel Reeves has said, as ministers become increasingly bold in blaming the dire state of the nation’s finances on the decision to leave the European Union.
Speaking at the government’s regional investment summit in Birmingham, the chancellor said Brexit “needlessly” added costs to UK businesses, saying ministers are now “unashamedly rebuilding our relations with the European Union”.
It comes with just over a month to go until the Budget, where the prime minister and the chancellor are expected to blame Nigel Farage and Brexit for Britain’s ailing economy.
Speaking about the upcoming Budget at the Birmingham summit, Ms Reeves said: “I don’t think that the past has to define our future. That’s why we are doing things differently.
“That’s why we are deregulating. It’s why we’re overturning the planning system. It’s why we are backing all regions of the UK with the capital spending that we’re putting in.
“Because I’m determined to defy those projections [from the OBR] and grow our economy quicker.”
She added: “We also know – and the OBR, I think, is going to be pretty frank about this – that things like austerity, the cuts to capital spending and Brexit, have had a bigger impact on our economy than even was projected back then.
“That’s why we are unashamedly rebuilding our relations with the European Union to reduce some of those costs that were, in my view, needlessly added to businesses since 2016 and since we formally left a few years ago.”
Her comments come just days after Wes Streeting said he is delighted that the government can now speak about the problems caused by Brexit, as the prime minister gears up to blame the UK’s exit from the EU for the expected downturn in productivity, which is expected to blow a hole in the public finances.
“I’m glad that Brexit is a problem whose name we now dare speak,” the health secretary said on a panel at the Cliveden Literary Festival in October.
“This has been my frustration about it … We were warned it was going to have an economic impact, and it has. And it’s hit our country hard, so we’re having to deal with Brexit.”
Treasury officials are bracing for the OBR to lower its forecasts for productivity growth – a downgrade that is likely to create an extra shortfall of around £20bn. The shortfall is expected to be filled by a swathe of tax rises.
The PM and chancellor are reportedly planning to argue that this downgrade would not have happened were it not for Brexit, pinning the blame on the Reform leader for leading the campaign to take Britain out of the EU.
Over the weekend, Bank of England governor Andrew Bailey warned that Brexit will have a negative impact on the UK’s economic growth “for the foreseeable future”, highlighting a decline in the UK’s potential growth rate from 2.5 per cent to 1.5 per cent over the past 15 years.
He linked the decline to lower productivity growth, an ageing population and trade restrictions – including post-Brexit economic policies.
“For nearly a decade, I have been very careful to say that I take no position per se on Brexit, which was a decision by the people of the UK, and it is our job as public officials to implement it,” Mr Bailey said.
But, speaking at the G30 40th annual International Banking Seminar on Saturday, he added that the economy is likely to adjust and find balance again in the longer term.
