Chancellor George Osborne has defended an analysis of how the British economy would fare in the event of a referendum decision to leave the EU, after Leave campaigners branded it as ‘spurious’.
The analysis, carried out by HM Treasury, claimed to consider three alternative arrangements for international trade, post-Brexit:
- membership of the European Economic Area (EEA), like Norway
- a negotiated bilateral agreement, such as that between the EU and Switzerland, Turkey or Canada
- World Trade Organization (WTO) membership, without any form of specific agreement with the EU – like Russia or Brazil.
It estimated that the annual loss of Gross Domestic Product (GDP) per household under the three alternative arrangements after 15 years would be: £2,600 in the case of membership of the EEA; £4,300 in the case of a negotiated bilateral agreement; or £5,200 in the case of membership of the WTO.
The Treasury then estimated that the resulting total reduction in UK tax receipts under each scenario would be: £20 billion in the case of EEA membership; £36 billion in the case of a negotiated bilateral agreement; or £45 billion in the case of WTO membership. It also claimed that the UK would be between 4.6% and 7.8% of GDP better off inside the EU than with a negotiated bilateral agreement like Canada, Turkey or Switzerland.
Leave campaigners have been heavily critical of the Treasury forecasts. Former Conservative Chancellor, Lord Lamont, said: ‘The Chancellor has endorsed a forecast which looks 14 years ahead and predicts a fall in GDP of less than 0.5% a year – well within the margin of error.
‘Few forecasts are right for 14 months, let alone 14 years. Such precision is spurious, and entirely unbelievable.’
The Conservative supporter of Brexit, John Redwood MP, said that the Treasury had ‘failed to forecast the huge damage membership of the European Exchange Rate Mechanism inflicted on us’.
Defending the Treasury analysis, Mr Osborne told the BBC: ‘The conclusions could not be clearer. Britain would be permanently poorer if we left the EU, to the tune of £4,300 for every household in the country. That’s a fact everyone should think about.’