Treasury analysis of effects of Brexit on UK economy: key points

A negotiated bilateral trade agreement like Canada’s would leave British households £4,300 worse off a year, it says

George Osborne and Liz Truss, the environment secretary, spell out the costs to the nation of leaving the EU.

George Osborne and Liz Truss, the environment secretary, spell out the costs to the nation of leaving the EU.
Photograph: Matt Cardy/AFP/Getty Images

The Treasury has published its analysis of what it thinks would happen to the UK economy in the event of a vote to leave the EU in June’s referendum.

Here are the key points:

1. Britain will be worse off by £4,300 a year per household if it leaves the EU.

This is based on a scenario in which the UK seeks a negotiated bilateral trade agreement similar to Canada’s.

UK GDP would be 6.2% lower outside the EU after 15 years, compared with its size if it votes to stay in the bloc.

2. The UK would receive £36bn less in tax receipts outside the EU. This again would be 15 years after a leave vote and based on the Canada model.

The Treasury says that amount is equivalent to 35% of the annual budget of NHS England, or of raising the basic rate of income tax by around 8p to 28p.

3. The economic losses associated with leaving the EU would “significantly outweigh” any potential gain from making lower contributions to the bloc, currently a little over 1p for every £1 of tax paid once the UK’s rebates and receipts are taken into account.

4. If the UK leaves the EU and instead becomes a member of the European Economic Area (EEA), like Norway, it would also be worse off than inside the EU.

After 15 years, the UK economy would be 3.8% smaller under this scenario, the equivalent of £2,600 per household.

5. Leaving the EU to join the EEA would transform the UK from a rule maker to rule taker in the Treasury’s eyes. That in turn could hit productivity and living standards.

Being in the EEA “would maintain considerable [but not complete] access to the single market”, but it would mean having to introduce a customs border with the EU.

It would also mean accepting EU regulations, the free movement of people and financial contributions.

6. The UK economy would be 7.5% smaller if it left the EU and adopted the rules of the World Trade Organisation (WTO) without any form of specific agreement with the EU, like Russia or Brazil.

That equates to £5,200 per household.

The WTO model is seen as the worst alternative to EU membership and would amount to a “significant closing of the UK’s access to global markets” and likely see the introduction of more trade barriers, including tariffs.

7. The estimates above are based on the EU as it is today, without further reform. If the bloc manages to complete the next phase of its single market reforms, there would be an additional benefit for the UK economy to the tune of 4% of GDP in 15 years’ time.

Under this rosier scenario of the EU’s economic future, the cost to the UK of leaving would be 8.2% of GDP, which equates to £5,700 per household.

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