Budget 2017: Economic forecasts do not include Brexit divorce bill

Economic forecasts relied on by chancellor Philip Hammond in his Budget make no allowance for a so-called Brexit divorce bill, likely adding a significant extra burden to public finances.

The independent Office for Budget Responsibility (OBR), which produces the forecasts, said: “No allowance for any one-off or ongoing EU exit-related payments – the ‘divorce settlement’ – can be made until more information becomes available.”

Hammond today set aside an extra £3bn for Brexit preparations, on top of £700m already spent. However, that money only covers the cost of work carried out by civil servants, not the money the UK is likely to pay to the EU to cover commitments already made.

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Some estimates of the divorce bill put the figure likely to be demanded by the EU as high as €60bn (£53bn). Recent media reports have claimed the government could offer the EU a payment of around €40bn.

An extra payment in the billions of pounds would likely make Hammond’s target of balancing the books by 2025 even harder.

Weak productivity forecasts from the OBR meant the chancellor had much less elbow room for extra spending, although he still found some room to increase spending in the near term.

Read more: Budget 2017: Government’s economic forecasts revised down significantly