Hammond's "dividend" request to Brexit rejected because UK economy stagnates | Policy

Philip Hammond's claim that Britain can derive an economic dividend from Theresa May's Brexit deal has been categorically rejected by MEPs, while official figures confirm that the UK has had its worst year of GDP growth since 2012.

In an extremely critical report, the Treasury Selection Committee warned that the Chancellor's statements on the "dividend of the deal" if Britain avoided an exit without agreement lacked credibility.

The criticism came after Monday's data showed that the economy had only grown 0.2% in the last three months of 2018, down from 0.6% in third trimester. Fourth-quarter data showed signs of further deceleration, with the economy slipping 0.4% in December as signs of growing uncertainty over Brexit emerged.

For the whole of 2018, GDP growth has fallen to its lowest level since 2012, from 1.8% in 2017 to 1.4%.

Nicky Morgan, MP, the Conservative chairman of the committee, said Hammond's "dividend" claim at last year's Conservative Party conference had already been undermined by the government's independent forecaster, the fiscal responsibility. The OBR told the committee that the dividend was not an economic boost, but rather "to avoid something very serious" in the form of a departure without agreement.

"The OBR already supposes an orderly Brexit, so there will be no" transaction dividend "higher than forecast, it is enough to avoid the" no-deal ". Business confidence can improve with greater certainty, but it is not credible to call it a dividend, "said Morgan.

The OBR moved safely away from the EU a key element of its forecasts, which led the Treasury Committee to declare that there was no evidence of economic stimulus to support the transaction. beyond these central estimates.

Hammond has repeatedly said that, if Parliament supported Theresa May's plan for Brexit, it would generate a double economic boost for the country by lifting the fog of uncertainty that blocks business investment, while allowing it to spend public funds scenario without agreement.

Reacting to Morgan's comments, Treasury insiders rejected the idea that Britain would not see MPs backing the Prime Minister's plan on Brexit, as this would give companies more clarity about future trade relations between the US and the UK. United Kingdom and the EU.

"The Chancellor made it clear that when we agree, we will reap a dividend. Companies will have the certainty they need to invest, grow and create jobs that will improve public finances, "said the source.

Most economists believe that Britain's conclusion of an agreement on Brexit with Brussels would help to enlighten companies for the future, thus risking unleashing projects that have been suspended due to the # 39; uncertainty.

Amit Kara, head of British Macroeconomics Research at the National Institute for Economic and Social Research, said: "This could be a dividend because all we say is that we are moving from one country to another. 39, a phase of acute uncertainty to remain within the EU for at least the next two years. "

He added, "The dividend is just because of the mess of the moment."

The committee's intervention contradicts one of Theresa May's main arguments for persuading members to support her withdrawal agreement within 50 days of Brexit. This is also due to the fact that the UK economy is showing increasing signs of stress as the deadline for the Article 50 implementation process gets closer, prompting more companies to suspend their investment plans in Britain. .

The growth figures from the Office for National Statistics revealed that business investment in the last three months of 2018 has declined sharply. Business spending dropped for the fourth consecutive quarter – a 1.4% decline in the last quarter of 2018 – for the first time since the 2008 financial crisis.

Companies have stepped up their contingency plans to deal with the possibility of a disruptive Brexit. Car manufacturers stock spare parts, banks have transferred their employees to Ireland and mainland Europe, and two Japanese electronics companies, Panasonic and Sony, have moved their headquarters to continental Europe.

Unions and unions have called on the Prime Minister to abolish Brexit without agreement as an option to boost confidence in Britain, which May has so far refused to do in negotiations with Brussels.

Frances O'Grady, Secretary General of the TUC, said: "The Prime Minister's failure to exclude a Brexit without agreement is undermining confidence in the economy and slowing growth. While our manufacturing sector is in recession, the Prime Minister must act now to eliminate the threat of a collapse. "

GDP growth in December reversed, with a widespread collapse of each of the key sectors of the economy. The manufacturing sector, which accounts for about one-tenth of the economy, has entered recession, with six months of the longest negative growth since September 2008 to February 2009, at the height of the financial crisis.

The 0.4% monthly drop in GDP helped push quarterly GDP growth down to 0.2% by the end of the year, slightly below the Bank of England's expectations and falling compared to the rate of 0.6% in the third quarter.

While the slowdown reflects a slowdown in the global economy, including a deterioration in the eurozone, most badysts believe that the unique challenges of Brexit have further hampered growth in the UK.

Ben Brettell, senior economist at Hargreaves Lansdown, said: "There is little doubt that the Brexit uncertainty is behind the disappointing figures, although concerns about global trade have also played a role. "

The committee also warned that Hammond's deficit reduction target of eliminating the gap between government spending and revenue early in the next decade was now lacking in credibility. The exit of Britain from the EU without an agreement is expected to have significant negative consequences on public finances, with a potential for widening the deficit.

In the last budget, Hammond had opted for an increase in public spending, with an increase of 20 billion pounds a year for the NHS by 2023-2024, without making any significant tax increases for balance the budget.

Referring to this decision, the committee said: "The government's budget target has no credibility and should be replaced."