Wednesday’s budget will be remembered as the Brexit budget as Philip Hammond revealed the extent to which the decision to leave the European Union has and could affect the economy. The new chancellor’s first budget will have big effects for almost all political parties, even more so if the gloomy predictions for the UK economy realise.
In a gloomy announcement the Office for Budget Responsibility predicted that by 2020 the UK economy would have grown by 2.4% less than it predicted before the referendum. The government now also plans to borrow an extra £122bn over the next five years in order to continue with the current spending commitments. It appears Brexit will have a much less positive impact than some had predicted and this could force all political parties in to rethinking their approach in the coming months and years.
For the Conservative Party the figures are unlikely to change the thoughts of those who have long wanted to split from Europe. However for those Conservative MP’s that campaigned and voted for remain the figures may restore a belief that suddenly becoming pro-Brexit is not necessarily the right decision. It may at the least convince some MP’s that a rush toward a hard Brexit is going to be incredibly difficult for the country and that the figures show the importance of access or membership of the single market.
The statistics that Philip Hammond produced may also make Theresa May’s job easier as MP’s may unite around a decision to aim for a Brexit deal that limits the economic damage predicted in Wednesday’s announcement. While there will always be strident anti-Europe MP’s within the Conservatives, the argument for what is labelled as a softer Brexit may have been strengthened by the chancellor’s intervention.
For Labour the announcement was both a gift and a problem. Management of the economy under the Conservatives provides fewer and fewer results which is a huge opportunity for Labour attacks however Brexit is a thorny issue for the party. 65% of Labour voters backed remain but the party has since taken a much more positive Brexit stance with John McDonnell saying it could be, “an enormous opportunity,” and declaring Labour would not vote against any article 50 bill.
The extra borrowing and the pressure that Brexit has placed on the country’s finances does not agree with the party’s current rhetoric and the financial situation for many British households could soon follow a similarly gloomy pattern. Labour must now decide whether to, as they have so far, back the decision made in June this year or put up more of an opposition as evidence mounts of the negative effects Brexit could have. This decision will be a huge moment in Labour’s electoral future, especially as a recent poll placed a pro-Brexit Labour behind a Lib Dem party promising a second vote on the deal.
The budget announcements will further strengthen the argument being made by the Liberal Democrats who are united on a pro-European stance and on offering a second referendum on the terms of any deal. The statistics showing a huge increase in the borrowing figures for the next five years adds fuel to Tim Farron’s argument that Brexit will be a net negative and that the public should have the final say on any deal which could have a big impact on jobs, wages and prices. The IFS this week said the outlook on wage growth was “dreadful” which increases the pressure on all parties to make a decision that will limit the potential damage.
For UKIP it is unlikely that any negative economic figures will be enough to push the party away from the anti-European policies that worked effectively in the past few years in building a voter base. There was further proof of the benefits of immigration in the Autumn Statement as the OBR revealed that £16bn of the extra borrowing is predicted to be as a result of fewer migrants but again it is unlikely this will cause any change in UKIP rhetoric.
For the Conservatives, still polling with a double figure lead, Labour and the Liberal Democrats there are major decisions to make which could have a long lasting and major impact on their political futures.