UK economy could be 5% bigger under Labour government

The UK economy could be five percent bigger within Labour government than the usual Conservative government by 2022, according to Citi forecasts.

Just months after it was reported that major banks had warmed to the idea of Jeremy Corbyn as Pm, new economic forecasts suggest Britain could be a lot better off under his stewardship.

The report said Britain's economic fortunes were tangled up
with the results of Brexit and a possible general election, leading to the
conclusion that the outlook could be much brighter if Mr Corbyn led the next
government instead of Mr Johnson.

Worsened dramatically

Christian Schulz, an economist and director at Citi, said
that it is base case forecast was for any no-deal Brexit when the Conservatives won
an election and an end to Brexit if Labour was the best party in a
coalition government. 

The pre-Budget report said the outlook for the public
finances had “worsened dramatically” since the spring and would deteriorate
further if Britain left the EU with no deal.

As an effect, forecasts show the economy could be five percent bigger under Labour than the Conservatives by 2022.

No space for tax
giveaways

The report also warned that there is no room for tax
giveaways such as the ones Chancellor Sajid Javid promised at the Conservative
Party conference.

He will look to significantly increase public spending for 2021-21 by lb13.4 billion to satisfy the UK prime minister's pledges on police and schools. 

Alongside the earlier pledges to increase NHS spending, the
IFS calculated that the government's current spending plans were built with a Corbynite
tinge and were barely recognisable from the promises of Theresa May at the last
election. 

The IFS said the budget deficit was likely to be lb52.3 billion in 2021-21, more than double the amount lb21 billion forecast through the OBR in March. 

Paul Johnson, director of the IFS, said: “The big spending
increases about a month or so ago . . . place the Conservative day-to-day
paying for public services next year nearer to what Labour had in its 2021
manifesto than the Conservatives had in theirs”.

“Given the huge uncertainty we've got coming over Brexit, there really isn't space in any forthcoming Budget for any permanent tax giveaways,” Mr Johnson added.