UK would lose £36bn in tax receipts if it left EU, Treasury report says

Treasury predicts impact of Brexit would be equivalent to 8p on basic rate of income tax or 7p on VAT

George Osborne

George Osborne warned that the impact of Brexit would mean significant barriers blocking Britain from a market with 500 million consumer.
Photograph: Lauren Hurley/PA

The Treasury has claimed that the British government would lose £36bn in net tax receipts – equivalent to 8p on the basic rate of income tax or 7p on VAT – if the UK leaves the EU and negotiates a bilateral trade agreement with the EU.

George Osborne warned that the impact of Brexit would mean significant barriers blocking Britain from a market with 500 million consumers, as he published the report that looked at three different models that Britain could potentially follow.

The chancellor was flanked by three cabinet colleagues: the work and pensions secretary, Stephen Crabb, the energy secretary, Amber Rudd, and environment secretary, Elizabeth Truss, who warned that a Canadian-style deal with the EU would cause GDP to fall by 6.2%.

Rudd argued that the Canada deal was the most likely option in a post-Brexit world, and said it would cost British families £4,300 each by 2030.

The government analysis also looked at the potential impact a Norway-style model that would require freedom of movement and signing up to World Trade Organisation model.

It concluded that the WTO option would lead to a £45bn drop in tax receipts, and a 7.5% drop in GDP, a position described as “extreme” by Crabb. Even the Norway model would mean a £20bn drop in receipts and a 3.8% hit to the economy.

Osborne said: “Under any of these alternative models our influence is diminished, we trade less, we receive less investment and our openness to Europe is reduced.”

He claimed that people campaigning for out believed the economic hit was a “price worth paying”.

He said the EU was Britain’s most important trading partner. He said if the Norway model was followed then free movement would still have to be followed. He added: “We are not Canada,” pointing out that the deal does not include services. He said British families would pay a “heavy price” and would be “poorer” if the UK leaves the EU.

A Conservative minister accused the Treasury of publishing a deeply “unfair and biased” analysis of the impact of Britain leaving the EU, arguing that the government ought to provide both sides of the story if it wants British voters to have a truly free vote.

Andrea Leadsom, the energy minister, told the Guardian that remain supporters were talking down the economy in an unpatriotic way.

“This Treasury report is extraordinary. For a start, it is only looking at one issue, which is their thesis on what happens if we leave. A Treasury report that is a genuine choice for the people should look at the impact if we remain,” she said.

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