OBR sees no Brexit dividend as Carney warns on no deal

The government’s fiscal watchdog has rejected the prime minister’s claim there will be a “Brexit dividend” for the public finances as the governor of the Bank of England warned of serious economic consequences if the UK leaves the EU with no deal.

The Office for Budget Responsibility’s fiscal sustainability report dealt with Theresa May’s assertion that an extra £20.5bn for health spending by 2022-23 will mainly come from funds released by Brexit.

The OBR said its provisional analysis suggested Brexit was “more likely to weaken the public finances than strengthen them over the medium term, thanks to its likely effect on the economy and tax revenues".

The UK’s £13.3bn contribution to the EU in 2022-23 if it remained a member will be largely eaten up by a £7.5bn withdrawal bill and various other government commitments related to Brexit, the OBR said.

“Pending a detailed withdrawal agreement and associated spending decisions, we assume in this report that the extra health spending adds to total spending and borrowing rather than being absorbed in whole or in part elsewhere,” the OBR said.

The OBR’s analysis is unhelpful for the prime minister as she battles to shore up the Brexit plan announced earlier in July against attacks from both wings of her party.

With the government in chaos, Mark Carney, the BoE’s governor, repeated his warning that a no-deal Brexit would be bad for the UK economy. He told the Treasury committee there would be “big economic consequences” if Britain fails to agree terms before leaving at the end of March 2019.

Carney’s session with MPs, alongside other BoE officials, was affected by technical trouble. The meeting was held at the Farnborough air show but the attempt to take the committee on the road failed when a live stream on YouTube cut out.