UK Prime Minister Boris Johnson was urged not to press ahead with his plans for big tax cuts amidst warnings that a no-deal Brexit could blow a 100 billion-pound ($123 billion) hole in the public finances.
The Institute for Fiscal Studies said in its Green Budget published on Tuesday that the budget deficit is already set to exceed 50 billion pounds next year and that could double if Britain crashes out of the European Union without a transition deal.
Even with a “substantial” easing of monetary and fiscal policy, the British economy is facing two years of stagnation under a no-deal Brexit scenario, according to Citi, which provided analysis for the report.
“The government is now adrift without any effective fiscal anchor,” said IFS Director Paul Johnson. “Given the extraordinary level of uncertainty and risks facing the economy and public finances, it should not be looking to offer further permanent overall tax giveaways.”