EU referendum: What impact would Brexit have on the economy?
The Treasury has published a report suggesting that Brexit would leave the UK’s economy permanently smaller in the long term.
Chancellor George Osborne launched the report, examining the potential impact of Brexit on the economy by 2030, and claimed it could mean the economy being 6.2% smaller – the equivalent of £4,300 a household.
Here we look at some of the key issues:
:: The kind of deal the UK could have after Brexit
The report says: The three options considered by Treasury officials are becoming part of the European Economic Area but not the EU, like Norway; a bilateral deal with the EU such as that negotiated by Canada; or World Trade Organisation membership without any form of specific deal with the EU.
Brexit campaigners say: The UK would be able to strike a better deal with Brussels than other countries because of the market it offers to industries from other EU nations – such as French wine producers or German car manufacturers. It would also be able to focus more on trade links with the Commonwealth and emerging markets.
:: The long-term economic impact of Brexit
The report says: A Norwegian-style EEA membership would see GDP 3.8% lower than it would be as part of the EU; a Canadian-style bilateral agreement could see the economy 6.2% smaller and a WTO approach would see GDP 7.5% lower.
Brexit campaigners say: The Government is not predicting a contraction in the size of the economy between 2015 and 2030, but is claiming that the economy would grow less quickly than if we remained in the EU. They also claim the report does not take into account the UK’s ability to strike its own free trade deals with countries around the world.
:: The impact of Brexit on immigration
The report says: No country has been able to agree significant access to the single market without accepting the free movement of people, so net migration would not be affected by membership of the EEA or a comprehensive bilateral deal. Any action to restrict access from the EU could result in reciprocal agreements making it harder for Britons to emigrate. The report used an assumption that net migration would fall towards 185,000 a year by 2021 – well above the Government’s “tens of thousands” target – and does not model the impact that David Cameron’s EU welfare curbs will have on the numbers arriving in the UK.
Brexit campaigners say: The EU’s open door policy has put the NHS and public services under strain. Leaving the EU would allow the UK to restrict immigration from Europe and potentially allow the UK to attract more highly-qualified migrants from the rest of the world.
:: The effect of Brexit on the public finances
The report says: The smaller economy would mean that public sector receipts would be £20 billion lower under the EEA mode, £36 billion lower under a bilateral deal and £45 billion lower under WTO rules. That is assuming that the UK does not pay a penny to Brussels under the new arrangements – a saving of £7 billion a year.
Brexit campaigners say: The Government has downplayed the savings from severing ties with Brussels. The Vote Leave campaign highlights Office for National Statistics figures showing a £12.3 billion balance of payments deficit with the EU institutions in 2014, the last year for which data are available. They also claim that the report fails to properly take into account the high cost of EU red tape.