Britain could be paying into EU coffers until 2064
LONDON — Britain could be paying into the European Union's coffers for nearly another half century even though Brexit day is little more than a year away, according to independent forecasts compiled for the government.
In documents released Tuesday, the Office for Budget Responsibility estimated that Britain's Brexit divorce bill would amount to $52 billion, in the middle of most projections.
Most of that sum is due in the next couple of years as Britain honors short-term budget commitments it had already made to the EU. But payments will continue until 2064 to meet liabilities such as pensions that Britain has incurred through its 45-year membership of the bloc.
“These liabilities will fall due over a very long period, so there is clearly uncertainty over how and when this or future governments would decide to meet the estimated cost,” the OBR said.
In December, the British government and the EU made some progress on Brexit issues, including citizens' rights, the border between EU member Ireland and Britain's Northern Ireland and the divorce bill. The talks have now been broadened to include future relations, notably trade.
In a budget update Tuesday, Treasury chief Philip Hammond said very little about the Brexit impact on the economy but said he hoped for a “step forward” at next week's meeting of EU leaders in Brussels.
Britain wants the remaining 27 EU nations to grant a transition period after Brexit, which the EU says should last until the end of 2020. During the transition, Britain would remain in the tariff-free single market and customs union even though it will be outside the EU and have little, or no, say over policy changes.
The main point of the budget update was to provide the OBR's new forecasts, which Hammond sought to paint in as rosy a light as possible.
He said the British economy is set to grow 1.5 percent this year, up modestly on the previous 1.4 percent forecast but markedly below the country's long-run average. Growth is predicted to remain paltry, 1.5 percent or lower in every year through to 2022.
“Forecasts are there to be beaten,” Hammond said. “As a nation, we did it in 2017 and we should make it our business to do so again.”
In spite of the modest upgrade, the economy is set to be one of the slowest-growing in the Group of Seven industrialized nations, as it was last year.
“Against a long term trend of at least 2 percent a year growth, after poor growth since 2008, and compared with growth across rest of the OECD, these are not encouraging forecasts,” said Paul Johnson, director at the Institute for Fiscal Studies.
The British economy has slowed sharply since the country voted to leave the EU in June 2016 as businesses reined in investment and consumer spending eased after inflation spiked following the pound's fall, a development that raised the cost of imported goods such as energy and food.
Brexit is the biggest cloud hanging over the outlook. Britain is due to leave the EU, its biggest export market, on March 29, 2019, but there is uncertainty as to what the future trading relationship will be.
In making its forecasts, the OBR sought more clarity on what the government anticipates from Brexit. The agency factored in a “smooth” Brexit process but said it will update its analysis as it is furnished details of the withdrawal agreement, which is due to be hammered out by autumn.
Hammond made a point of lauding an improvement in public finances. He said there is “light at the end of the tunnel,” with public debt due to peak this financial year at 85.6 percent of GDP.
John McDonnell, the Treasury spokesman for the opposition Labour Party, said Hammond's statement showed “just how cut off from the real world that he is.”