Chancellor Rachel Reeves gives Brexit impact warning ahead of major Budget

Chancellor Rachel Reeves told business leaders the Office for Budget Responsibility (OBR) would be 'pretty frank' about Brexit ahead of next month's make-or-break Budget

View Image

Brexit and Tory austerity have had an even bigger impact on the UK's economy than first feared, Rachel Reeves has suggested.

The Chancellor hinted the Office for Budget Responsibility (OBR) would be "pretty frank" about the issues ahead of next month's Budget. The economic watchdog has previously suggested the Brexit deal would reduce productivity by 4% - compared to remaining in the EU. It will publish its latest economic forecasts alongside the Budget on November 26.

It came as Ms Reeves addressed a regional investment summit in Birmingham on Tuesday - promising to slash red-tape for businesses. The Chancellor acknowledged the economy is "not working as it should" as she vowed to use next month's Budget to "take the necessary steps" to secure stability.

During a Q&A, Ms Reeves went on: "We also know - and I think the OBR are going to be pretty frank about this - that things like austerity, the cuts to capital spending and Brexit, have had a bigger impact on our economy than even was projected back then. That's why we are unashamedly rebuilding our relations with the European Union to reduce some of those costs that in my view were needlessly added to businesses since 2016 and since we formally left a few years ago."

She added: "The Budget will continue to focus on growth. I recognise that businesses have absorbed tax increases and other challenges over the last year, the geo-political uncertainty, the higher barriers to trade. I want to make sure this Budget is pro-growth whilst also addressing the deep challenges we face in ensuring we've got stability in our economy."

In recent days Ms Reeves has criticised the Tories' Brexit deal as she faces tricky decisions over tax and spending at next month's Budget. She said last week the "UK’s productivity challenge has been compounded by the way in which the UK left the European Union".

Ms Reeves also insisted on Tuesday energy prices are "too high" for consumers and is still one of the "biggest concerns" of households across the country.

The Chancellor is examining ways to cut bills, including slashing the 5% VAT on energy bills as part of the Budget in a bid to help struggling households. A Treasury source told The Mirror last week: "We know Brits are still struggling with cost of living and that is why we are determined to take action where we can, including reducing people's energy bills."

But the gathering of business leaders and investors in Birmingham came after more gloomy news emerged for the Chancellor as Government borrowing in September hit the highest level for the month in five years.