Government spending on Brexit preparations was raised by £500m in the Budget, a move that recognises the heightened possibility that the UK could leave the EU next year without a deal.
In previous fiscal statements, Philip Hammond, the chancellor, had allocated £2.2bn to Brexit preparations across Whitehall up to and including the current 2018-19 financial year and £1.5bn for 2019-20.
But in Monday’s Budget, the chancellor raised the figure for planned spending next year by another £500m. This means he has now earmarked £4.2bn for EU exit preparations between 2016 and 2020.
The chancellor’s move is likely to appeal to Conservative MPs who feel the government has been far too slow to prepare for no deal, undermining its negotiating clout in Brussels. But the announcement of more money will anger Remainers who feel that the full costs of Brexit were not made clear to the public before the 2016 referendum.
Mr Hammond had one specific announcement on no-deal planning: he left open the possibility that his Spring statement in March could be upgraded to a “full fiscal event”, in effect an emergency Budget, in the event of no withdrawal agreement.
The chancellor paved the way for this announcement on Sunday when he told Sky News that if the UK were to leave the EU without a deal, “we would need to take a different approach to the future of Britain’s economy and frankly we’d need to have a new budget that set out a different strategy for the future”.
Until now, the bulk of the cash spent by the Treasury on Brexit preparations has gone to a few core departments most affected by Brexit. These are the Home Office, the Department for Environment, Food and Rural Affairs, and HM Revenue & Customs.
The Treasury said it would announce early next month how the £2bn allocation for 2018-19 would be allocated among these and other departments.
If there is no Brexit deal, the government is likely to suddenly find itself spending a lot on immediate operational challenges. For example, the UK would suddenly need new arms-length bodies and national regulators that are currently in the remit of the EU.
But even if there is a Brexit deal, March is likely to see the start of significant new implementation costs for Brexit departments. The Home Office, for example, will have to start recruiting immigration staff to manage new controls on EU nationals coming to the UK and the rights of EU nationals currently in the UK to remain.
Lewis Lloyd, an analyst at the Institute for Government think-tank, said there were various reasons why spending on Brexit preparations was going up.
“While it may be that there are growing concerns about a no-deal Brexit across Whitehall, it’s more likely that departments are now clearer than they were a year ago about what they need to do after Britain leaves the EU,” he said.
Mr Lloyd also noted that one thing missing from the Budget was cash to help small businesses to manage the possible impact of Brexit, in contrast to Ireland and the Netherlands, where government grants of this kind have been given.
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