The Budget and Brexit that never were

Sunday, December 1, 2019

October and November seemed ripe with promise, with the Brexit deadline seemingly set and the new Chancellor’s first Budget due. Alas, it was not that straightforward; throughout the Autumn the world of British politics tilted on its axis. In this article, the CPAA reflects on what never was and what may still be, as we look at the Brexit and Budget that never were.

 

A Budget put on ice

It was only in mid-October that the government announced Sajid Javid’s first Budget would be presented on 6th November. It was then a matter of days before they lost a key vote on Brexit that stopped the 31st October Brexit deadline in its tracks. In a BBC interview, Mr Javid confirmed that “the Budget is not going ahead because we are planning now to dissolve parliament on the 6th, so clearly you can't have a Budget on the same day.” And like that, his first outing with the red dispatch box was denied.

 

We may never have heard from the Chancellor himself, but there have still been predictions about what his Budget might have contained. There were efforts made to block the publication of an update to the Office for Budget Responsibility’s forecasts. Little wonder, given growth has been hovering just above recession levels. Forecasts would have shown at least a doubling of government borrowing compared with the predictions published in March.

 

ONS data shows that government borrowing in October soared to its highest level in five years, hitting £11.2bn (£2.3bn more than last year). And with big spending pledges made by the main political parties, the figure is only set to rise. All major parties seem keen to boost spending on health, schools, police and infrastructure.

 

A Brexit rain-check

As we know, 31st October was meant to be Brexit day.  Despite the Prime Minister having claimed he would rather be “dead in a ditch” than approach the EU for an extension, an extension was requested and no demise in a ditch occurred – the saga continues. This time however, the general election will provide some clear routes for the public to decide if and how they wish to see Brexit carried out.

 

Here is a short recap of the various moments in Parliament that thwarted Brexit:

  • The Benn Act passed in September, pushing the PM to ask for another extension to the deadline until 31st January if no deal had been approved by 19th
  • The 19th October – known as Super Saturday – was when the PM hoped MPs would pass his negotiated Brexit bill. It did not go as planned.
  • The Letwin amendment was tabled, declaring that MPs were delaying approval for the PM’s bill until legislation to implement it had been passed, increasing the chance of the UK ‘crashing out’ of the EU.
  • The next day the PM asked the EU for a delay. The official letter requested an extension from the president of the EU Council – but the PM refused to sign it.
  • The PM then brought in the Withdrawal Agreement Bill; legislation needed to pursue his Brexit deal. MPs voted down the timetable, which would have seen it pass in a few days.
  • Following the defeat of the propose timetable, the government put Brexit on hold. This ultimately became the point where the government felt a general election was necessary to break the gridlock – and potentially for Boris Johnson to win a mandate for his deal.

 

Winter wonderland or winter of discontent?

What next for both Brexit and the Budget? A general election will be held on 12th December, the last Thursday – standard day for elections – before the Christmas close-down. The motion to call for a general election only passed when a no deal Brexit was taken off the table and the EU permitted a three-month extension to the Brexit deadline until 31st January.

 

So, where do the various political parties stand on Brexit?

  • Conservatives: Boris Johnson wants the UK to leave the EU with his revised deal. It includes scrapping the controversial Irish backstop, replacing it with a new customs arrangement.
  • Labour: wants to renegotiate the Brexit deal and put it to a public vote within six months. The choice would be between a ‘credible’ Leave deal or Remain.
  • Liberal Democrats: have pledged to cancel Brexit. If they do not win a majority, they would support another referendum.
  • Green Party: Caroline Lucas has been a vocal campaigner for another referendum and believes the UK should remain part of the EU.
  • SNP: pro-Remain and wants the UK to stay in the EU. They are also pushing for another independence referendum so Scotland can remain a full member of the EU.
  • Democratic Unionist Party: brokered a deal where it lent it support to the Conservatives, however it is unhappy with the revised deal and wants a veto, to potentially reject the new customs arrangement in the future.
  • Plaid Cymru: wants to remain in the EU, despite Wales voting Leave. It is campaigning for another referendum and to Remain.
  • Brexit Party: wants to leave the EU without a deal and does not rate the deal the PM has negotiated. Willing to form a pact with the Conservatives to avoid splitting the Leave vote.

 

It is not just the public growing weary of political indecision; it also believed responsible for a sharp drop in activity for private sector companies. Service providers say the recent slump has seen weaker demand, delayed decision-making and subdued consumer spending. And economists have confirmed the UK economy is slowing.

 

As the CPAA’s North West representative, Warren Gradden, puts it, “Guiding business in general and offering advice is inherently problematic when the political establishment is in flux. Advising businesses to put in place business plans to quantify and counter disruption to supply lines, in the event of Brexit, is possibly prudent, but it could prove futile, when considering that some political parties are actively campaigning to block an EU exit altogether.

 

“However, Brexit has potential opportunities alongside significant challenges. In the event of Brexit, there will be new processes for businesses who import and export goods and services, potentially new tariffs and customs procedures to contend with. Not knowing what those measures may be, forces us to be more reactive to the situation. One area where we can be proactive, is assisting with sourcing grants to assist with recruitment, training and IT software for those completing customs declarations.”

 

Whether a boost in political certainty following the election, January’s potential Brexit activity, and a new Spring Statement or Budget can reverse the UK’s fortunes and steer a steadier ship