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At a briefing on the U.K. parties’ policy manifestos on Thursday, IFS Director Paul Johnson said failure to strike such a trade deal “seems to be more of a risk” under the Conservatives than under Labour. Such a scenario “would harm the economy” and “increase the debt and deficit,” he said.
If they win the upcoming election, the Conservatives plan to pull the U.K. out of the European Union by January 31 and then push for a trade deal with the EU by the end of a Brexit transition period, planned to run until December 2020. Prime Minister Boris Johnson says a Conservative government will succeed in striking an agreement with the EU and has pledged not to extend this negotiation period.
Labour's Jeremy Corbyn, meanwhile, wants to renegotiate the Withdrawal Agreement Brussels struck with Johnson's government within three months of winning power to keep the U.K more closely aligned to the rest of the EU. Such a deal would be subject to a referendum.
Soon after a collapse in U.K.-EU trade talks, there could be “big giveaways” by the British government, followed by spending cuts in the medium term, according to the IFS Deputy Director Carl Emmerson.
“A return to austerity would perhaps be the most likely outcome, not immediately, but in the medium term,” he said. [...]
According to the IFS director, the chances of a Conservative government being able to hold spending down over the course of a five-year parliament in the way that they outlined in their party manifesto “look remote.” It is “highly likely” that a Tory government would be forced to either increase taxes or borrowing, he added. [...]
IFS General election 2019 manifesto analysis