The Fiscal Impact of Brexit

The fiscal impact of Brexit is an area where even detractors concede that the UK will gain from withdrawal from the EU, as smaller (if any) contributions will be made to cover the UK’s share of EU programmes. The precise nature of this fiscal benefit is, however, uncertain. This is partly due to the way in which the EU budget is only finalised ex post facto, as relative gross national income only becomes known after the fact, whilst prior commitments are often only realised into payments after a time lag. Calculations additionally depend upon assumptions related to the UK budget rebate and whether gross or net contributions are used in calculations, or additionally, whether EU or UK Treasury figures are deemed to be the most appropriate for the particular application of the data. Future budgetary developments need to be estimated, for any comparative forecast to be accurate, and the final form of trade agreement reached with the EU will have a significant effect upon the size of fiscal gain, as some of the options contain fiscal payment implications. The size of the financial settlement is broadly known, albeit that aspects will remain indeterminate for a number of years. Finally, this chapter notes that whilst potentially significant, the direct fiscal gain from Brexit is likely to be relatively modest when compared to any impact upon GDP (and thereby overall fiscal balance) arising from Brexit’s broader economic impact.