Hammond's post-Brexit growth claims "not credible": Treasury Committee

The Committee's report on the 2018 Budget focused on Hammond's claims of a 'deal dividend' where he claimed that there would be a “boost from the end of uncertainty, and a boost from releasing some of the fiscal headroom that I am holding in reserve at the moment.”

The Office for Budget Responsibility said it was “odd” to refer to this as a dividend and instead said that “what is being talked about is avoiding something really very bad.”

The Treasury Committee agreed, stating that as the OBR already assumes an orderly Brexit in its forecast, no ‘deal dividend’ over and above the existing forecast could be attained simply by avoiding a disorderly, or no-deal, outcome.

In its report, the Treasury summised that is "not credible that this be described as a dividend", going as far to say that the government’s "fiscal objective has no credibility and should be replaced".

Nicky Morgan MP, Chair of the Treasury Committee, said: “The great cloud of uncertainty hanging over Budget 2018 was Brexit. And as the Chancellor has said, a new Budget may be needed in the event of no-deal. But the Treasury Committee has nevertheless scrutinised this Budget and made a series of recommendations to Government.

“On Brexit, the Chancellor spoke of a ‘deal dividend’ of lower taxes and higher spending once a withdrawal agreement has been agreed. The OBR 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.

“It’s clear that the Government should update its Charter for Budget Responsibility. 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.

“The fiscal mandate – also in the Charter – has provided the Chancellor with over £15 billion of what he has referred to as ‘fiscal headroom’, the spending of which would form part of the ‘deal dividend’. The Chancellor has suggested that he will spend all or part of the headroom regardless of the Brexit scenario, but the OBR has not included this expenditure in their forecasts, so there is an inconsistency between the OBR’s figures and those described to parliament.

“The upcoming Spring Statement may be the OBR’s first opportunity to assess the UK’s short-term prospects post-Brexit, and for Parliament to scrutinise the finances behind any withdrawal deal. The Government must, therefore, ensure that the OBR has the resources and information it needs to produce an accurate forecast.”