Boris Johnson warned against big tax cuts as UK faces no-deal shock

The budget deficit is already set to exceed 50 billion pounds and that could easily double within a year if Britain crashes out of the European Union without a transition deal

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Even with a “substantial” easing of monetary and fiscal policy, the British economy is facing two years of stagnation under a no-deal Brexit scenario(Source: AP Photo/A. Pezzali)

Prime Minister Boris Johnson was urged to rein in his tax-cutting plans amid warnings that a no-deal Brexit could blow a 100 billion-pound ($123 billion) hole in the public finances and lift government debt to its highest for half a century.

The budget deficit is already set to exceed 50 billion pounds and that could easily double within a year if Britain crashes out of the European Union without a transition deal, the Institute for Fiscal Studies said in its Green Budget published Tuesday.

Even with a “substantial” easing of monetary and fiscal policy, the British economy is facing two years of stagnation under a no-deal Brexit scenario, according to Citi, which provided analysis for the report. It estimated that output could be over 5% higher in 2022 than it is today if the opposition Labour Party takes office.

“The government is now adrift without any effective fiscal anchor,” said IFS Director Paul Johnson. “Given the extraordinary level of uncertainty and risks facing the economy and public finances, it should not be looking to offer further permanent overall tax giveaways.”