EU exit would 'make Britain permanently poorer'

Chancellor of Exchequer steps up drive against Brexit; finance ministry says move could shrink economy by 6%

LONDON • British Chancellor of the Exchequer George Osborne has used the publication of an analysis by his finance ministry of the potential consequences of Britain voting to leave the European Union to ramp up his campaign to stay in the bloc.

He said in a speech yesterday that Britain's economy would suffer permanent damage and that the public would be hit in the pocket.

The Treasury's report on the cost of a so-called Brexit, released yesterday, said the move could result in Britain's economy shrinking by 6 per cent, making each household £4,300 (S$8,285) a year poorer by 2030. It also predicted permanent economic damage due to lower trade and investment, which would cut government income at "enormous costs" to public spending.

The 6 per cent forecast was based on the assumption that if Britain left the bloc, it would negotiate a trade deal similar to the EU-Canada pact, according to extracts from the report. The agreement will remove most EU-Canada duties by 2023.

"Britain would be permanently poorer if we left the EU," Mr Osborne said. "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. In the short term, we'd face a profound economic shock and real instability."

Drinkers at this London pub can choose their ale tap according to their views on Brexit as the debate brews. Britain will vote on whether to remain in the European Union on June 23. Online polls show the two camps neck and neck. PHOTO: EUROPEAN PRESSPHOTO AGENCY

"The most likely bill" for Britain's public services would be £36 billion per year, or the equivalent of an increase of eight 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 warned "Higher taxes and a smaller economy are not a price worth paying."

Describing as "complete fantasy" the belief that Britain, if it left the EU, could negotiate an advantageous trade deal with the bloc, with all the benefits but no obligations, he said: "How could other European countries give us a better deal than they have given themselves?"

Staying in the EU and driving reforms to deepen the single market and complete trade deals now under negotiation "offers a huge prize for Britain - it could add up to 4 per cent to our GDP over the coming 15 years", he said.

In an article in The Times published ahead of his speech, Mr Osborne said that under all scenarios examined in the report, Britain would have a "less open and interconnected economy", calling it "the most extraordinary self-inflicted wound".

Yesterday's 200-page report was 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 countered 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 National Health Service and other public programmes.

Mr John Redwood, a pro-Brexit lawmaker and former minister, dismissed the Treasury analysis.

"We wouldn't attempt to put precise numbers on the economy for 2030 because who knows what's going to happen," he said. "I think their 2030 forecast is completely worthless."

Mr Johnson wrote in The Daily Telegraph: "All the usual suspects are out there, trying to confuse the British public and to persuade them that they must accept the accelerating loss of democratic self-government as the price of economic prosperity."

However, the Treasury's words chime with those of other economic institutions such as the International Monetary Fund (IMF).

Concerns about Britain's potential exit dominated discussions at the recent IMF meeting in Washington, where both the IMF and the World Bank said an exit would damage global growth.

Britain will vote on whether to remain in the union on June 23. Online polls show the two camps neck and neck, with about a fifth of voters still undecided.


A version of this article appeared in the print edition of The Straits Times on April 19, 2016, with the headline 'EU exit would 'make Britain permanently poorer''. Subscribe