Britain's chancellor of the exchequer George Osborne outlined the bleakest scenario yet if the UK votes to leave the European Union, saying that Britain's economy would suffer permanent damage, hitting the public in the pocket.
Quitting the EU would leave the UK economy 6 per cent smaller by 2030, according to a treasury analysis released on Monday. The forecast opened the first week of formal campaigning ahead of the June 23rd referendum, as the government turned its biggest guns on the arguments advanced by those backing a Brexit.
“Britain would be permanently poorer if we left the EU,” Mr Osborne said in a speech near Bristol on Monday. “Under any alternative we’d trade less, we’d do less business, there would be less investment and the price would be paid by British families.”
Mr Osborne's intervention came the day after French economy minister Emmanuel Macron told Britain that outside the EU it would be "completely killed" in trade talks with countries such as China, and less than a week before US president Barack Obama is due to visit the UK and offer his own warning against leaving.
The treasury report examines three alternative models for Britain’s trading arrangements post-Brexit and argues that leaving the EU would cause permanent rather than temporary damage to the economy due to lower trade and investment. Brexit would cut spending on services such as the National Health Service and defence, Mr Osborne said.
A Canadian-style post-Brexit agreement with the EU, as advocated by some campaigners to leave, would shrink gross domestic product by more than 6 per cent, making each household £4,300 pounds (€5,400) a year poorer by 2030, Mr Osborne said.
“The most likely bill” for Britain’s public services is £36 billion per year, or the equivalent of an increase of 8 pence on the basic rate of income tax, he said. “British families will pay a heavy economic price if we leave the EU,” Mr Osborne said in his speech. “Higher taxes and a smaller economy are not a price worth paying.”
Trade deals
Staying in the EU and driving reforms to the bloc to deepen the single market and complete trade deals currently under negotiation “offers a huge prize for Britain – it could add up to four per cent to our GDP over the coming 15 years”, Mr Osborne said.
John Redwood, a senior Conservative member of parliament who has long argued Britain should leave the EU, rejected the analysis."It's an absurd claim from the treasury," he told the BBC. "I'm very sorry that they've degenerated to these levels. Germany has made it very clear they don't want new barriers in the way of their very successful export business to Britain."
Mr Redwood offered his own vision of a post-Brexit Britain: “We’re going to be better off, we’re going to banish austerity, we’re going to spend our own money, we’re going to have the power to make our own laws, we’re going to control our own borders.”
Monday's report is the latest in a series of economic warnings issued by prime minister David Cameron's government as it seeks to convince voters to remain in the 28-nation bloc. It counters claims by campaigners for Brexit, including justice secretary Michael Gove and mayor of London Boris Johnson, that leaving the EU would free up billions of pounds for the NHS and other public programmes.
The chancellor’s speech came a day after his return from the International Monetary Fund’s spring meeting in Washington, at which concerns about the UK’s potential exit dominated discussions. Both the IMF and the World Bank said an exit would damage global growth.
Bloomberg