The Office for Budget Responsibility says the Government refused to give it additional information on Brexit relevant to its economic forecasts, instead referring the independent agency to publicly available speeches and white papers.
The OBR says it has no meaningful basis to form outlooks for the UK economy.
Chancellor Philip Hammond announced in yesterday’s Autumn Budget that the productivity estimates from the Office for Budget Responsibility had remained “stubbornly flat”, meaning that GDP growth will have to be revised down.
In 2017, growth is now expected to come in at 1.5 per cent, falling to 1.4 per cent in 2018, Hammond announced. Through 2019 and 2020, growth is set to fall again to 1.3 per cent, before picking up to 1.5 per cent in 2021 and then to 1.6 per cent in 2022.
In its fiscal and economic outlook, published in tandem with the Autumn Budget, the OBR said it asked the Government for additional information to inform the forecasts it is required to produce on the basis of current policy.
However, it was referred to Prime Minister Theresa May’s Florence speech from September and a white paper on trade policy published in February.
The agency says it has therefore made “broad-brush assumptions” that the UK leaves on 29 March 2019, new trading arrangements with the EU and others slows the pace of import and export growth over the 10 years since the referendum, and immigration slows, but not to the tens of thousands desired by the Conservative government.
The OBR notes some of its earlier predictions about Brexit have come to pass.
For example, it predicted weaker pull factors would reduce inward migration, due to factors such as the falling pound, which reduces migrant worker wages relative to their home currencies. It also anticipated the fall in the pound would raise inflation and that business investment would be weaker.
However, it notes real consumption has held up better than expected. It also underestimated inflation in its November 2016 forecast.
The OBR overestimated the impact of weakened sterling on net trade, even though it has risen modestly.
It noted that the UK was one of only four countries out of 21 analysed by the IMF that have seen their economic growth downgraded while inflation forecasts have been upgraded for 2017. Other countries included are the US, Switzerland and Greece.