19 March 2019

Financial Times: UK tariff plan for no-deal Brexit will have limited impact on economy — OBR

The overall impact of the tariffs the government plans to impose in the event of a no deal Brexit on the economy would be “pretty small beer”, according to the Bank of England’s former chief economist.

Charlie Bean, a committee member of the independent Office for Budget Responsibility, said on Wednesday that if a no deal Brexit became government policy, the fiscal watchdog would need to take a view on how tariffs would affect the UK economy and the outlook for the public finances.

However, the effects of tariffs would “be completely swamped in all likelihood” by the much bigger effects of changes in the exchange rate, he told the parliamentary Treasury committee.

Contingency plans published last week, to eliminate most tariffs but impose a 10 per cent duty on imports of cars and some animal products, drew a fierce reaction from industries that would face fiercer international competition and consumer groups that say some prices would rise sharply.

However, OBR officials said the overall impact on the economy would be limited, and that the “real world” impact of tariffs would depend on how they were implemented and enforced, and how people changed their behaviour in response.

Robert Chote, the OBR chairman, told MPs that the “dominant effect” would come from the tariffs imposed on cars — but added that there might be “quite considerable compliance challenges”. Given different rates for finished and unfinished vehicles, he added, one would need to ask if “all that was needed . . . would be to stick on a wing mirror”. [...]

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