Afternoon summary
- George Osborne has said 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 bloc. As Anushka Asthana reports, the chancellor said a 200-page Treasury analysis of the impact of Brexit showed it would make British families poorer, and he accused out campaigners of believing that was a price worth paying. The study concluded that a Canadian-style model, in which the UK negotiated a new trade deal with the EU that did not require freedom of movement, would reduce Britain’s GDP by 6.2%.
- A Guardian/ICM phone poll has shown Remain having an eight-point lead over Leave in the EU referendum. But an online poll by the same firm for the Guardian has shown Remain and Leave neck and neck. (See 5.20pm.)
- Labour has said older people should listen to the young when voting in the EU referendum. In a speech Seema Malhotra, the shadow chief secretary to the Treasury, said:
We want older people to think about what walking away will mean for their children and their grandchildren. So my appeal today for older people is: listen to the young people of Britain. Take note of what they think is best for their future.
It’s what we call the promise for the next generation. That each generation wants the future for the next to be better. If we leave, that aspiration withers and dies.
- The government has been defeated in the Lords over plans to push up rents for “high income” tenants of social housing in England. As the Press Association reports, voting was 240 to 176 - majority 64 - to make the so-called “pay to stay” scheme voluntary for local authorities to operate rather than mandatory. It was the fourth defeat inflicted on ministers by rebellious peers during report stage debate on the housing bill.
- Jeremy Hunt, the health secretary, has told MPs there will be “no retreat” on introducing a new contract for junior doctors. He told MPs:
Yes, we are imposing a new contract and we are doing it with the greatest of regret because the BMA refused to talk over three years, with three independent processes.
Hunt claimed a Guardian story saying he was abandoning his threat to impose the contract was “absolute nonsense” and he accused Heidi Alexander, his Labour opposite number of planting the story with the paper.
- The British foreign secretary, Philip Hammond, has visited Tripoli and offered £10m in support of the new government of national accord (GNA), saying the UK stands ready to help train Libyan state institutions. As Patrick Wintour reports, the British foreign secretary, Philip Hammond, has visited Tripoli and offered £10m in support of the new government of national accord (GNA), saying the UK stands ready to help train Libyan state institutions.
That’s all from me for now.
Later I will be covering BBC One’s London mayoral election hustings, which are being chaired by Andrew Neil, on a separate blog.
Guardian/ICM phone poll shows Remain eight points ahead, while online poll shows Remain/Leave tied
Since the general election the Guardian has still been commissioning polls from ICM although we have been cautious about promoting them while ICM and the polling industry in general have been learning the lessons from what went wrong in 2015.
A new poll is out today. Or rather polls, because ICM has been polling online and by telephone. (The two methods sometimes produce different results.) Here are the headline figures. The polling was carried out over the weekend.
- A Guardian/ICM telephone polls gives Remain an eight-point lead. It shows Remain on 54% and Leave on 46%, once don’t knows are excluded. A parallel online for ICM shows Remain and Leave tied on 50% each.
- The telephone poll shows the Conservatives five points ahead of Labour. It shows the Conservatives on 38%, Labour on 33%, Ukip on 13%, the Lib Dems on 7%, the Scottish Nationalists on 5%, the Greens on 3% and Plaid Cymru on 1%. The online poll also gives the Tories a five-point lead, although its figures are different. It shows the Conservatives on 36%, Labour on 31%, Ukip 16%, the Lib Dems 7%, the SNP 4%, the Greens 4%, Plaid Cymru 1% and others on 1%.
Here is my colleague Tom Clark with more on the poll the findings.
Professor John Curtice calculates a weighted average of all published polls, and says that the new data from ICM is very much in line with what he is seeing elsewhere. Whereas Remain had been running at around 54% overall in his series at the start of the year, this has now dropped to 51%, a figure that means “this referendum is now an awful lot closer than it was meant to be”.
The tightening, Curtice explains, is entirely explained by movement in telephone surveys. “Whereas internet polls have for months been suggesting a country that is split down the middle, until recently this was offset by the surveys done over the phone, which were recording a far higher share for Remain, sometimes approaching 60%”. But with the last few telephone polls, this proportion has dipped below 55%, a trend confirmed in today’s Guardian survey.
Curtice suspects that the true strength of anti-European sentiment is most likely to lie somewhere between the phone and the internet scores, recalling that at the general election online surveys tended to overstate Ukip, whereas telephone polls understated them. Martin Boon, director of ICM Unlimited, agrees, cautioning Remain campaigners against complacently assuming that the telephone polls must be right. “The majority of Labour voters are for Remain, and there are simply too many of them in telephone samples. Today’s monthly phone poll is the eighth since the general election where the sample recalls voting in Ed Miliband as prime minister last May.”
Both of today’s ICM polls used the same question wording, and deploy similar adjustments and weighting schemes. For general election voting intention, the telephone poll puts the Conservatives on 38%, Labour on 33%, Ukip on 13%, the Lib Dems on 7%, the Scottish Nationalists on 5%, the Greens on 3% and Plaid Cymru on 1%.
Today’s five-point lead for the Tories comes after a difficult couple of month for the government since the Budget, and contrasts with some other recent polls which actually put Labour ahead.
Since the general election ICM has toughened up some of the assumptions it makes about voters who decline to say which party they will back and further refinements are planned.
Updated
Boris Johnson, the Conservative MP and mayor of London, has dismissed the Treasury document. He said:
HM Treasury of course were the people who said we should stay in the ERM, and that turned out to be a disaster, they said there would be economic benefits of joining the euro, and that turned out to be a complete disaster. The Treasury has not been totally successful in all its economic forecasts let’s be honest.
The reality is that this country is giving at the moment £20bn every year to the EU, a £350m a week, which we would get back and we’d be able to spend that solid hard cash. I think our economy, our business our country would be liberated [if we leave the EU], it would be independence day on June 24.
Here are two blogs about the Treasury document that are worth reading.
Osborne then translates this reduction in potential GDP to household income – but they are two fundamentally different things. This is Osborne’s crowning deception, to allow him to conjure up his key figure of £4,300. This is what he wants households to remember. This is as intellectually dishonest as any manoeuvre ever attempted by Gordon Brown*. The Treasury and the OBR discuss GDP all the time: never do they convert it into a per-household figure. And it bears no relation to income. The average disposable income per household in the UK is around £45,400 (or, more usefully, it’s £18,600 per head), but if GDP is divided by householdsit’s £68,000. There’s no comparison between the two figures.
Any economic assessment of the impact of some unknown future event will have to incorporate many imponderables. And in broad terms, the Treasury has been relatively conservative. Its forecasts are more pessimistic than those from Oxford Economics, but less so than those from the London School of Economics. It has attempted to measure not just the impact on trade but also on the broader economy (a dynamic rather than a static projection). You can quibble to your heart’s content, but at least the Treasury has been open enough about its assumptions.
And if one takes the mass of evidence from economic analysts over the past few months, one overarching lesson is emerging from the statistical clouds. In most scenarios, the UK would probably be worse off in the event of Brexit. Whether that loss is a price worth paying for extra sovereignty is something the Leave camp must confront. It seems increasingly difficult to argue that people would be better off in the event of the UK’s departure.
Steven Woolfe, Ukip’s finance spokesman, says the Treasury’s assumptions are “questionable at best and useless at worst”. In a statement he goes on:
The whole premise of the report for example seems to be that a ‘Brexit Britain’ will be cast adrift into some sort of isolationist orbit outside of the global trading system. That no countries will want to trade with the UK either because they are angry with us for choosing our own sovereignty rather than allowing European bureaucrats to negotiate on our behalf or because our treasure has suddenly become worthless to potential bilateral trade partners. That if we Brexit, UK policymakers will be lethargic in pursuing an aggressive strategy of negotiating and signing bilateral trade deals which amplify the already substantial benefits that a Brexit Britain already has a founding member of the World Trade Organisation. The Treasury simply cannot envisage an outward-looking, global-trading Britain, post Brexit.
The CBI has welcome the Treasury report. This is from Carolyn Fairbairn, its director general.
The sheer weight of credible economic evidence, including from the government, the IMF and the London School of Economics, makes it crystal clear that there would be a serious shock to the UK economy should we leave the EU.
The alternatives to membership leave us on the outside, following rules without any say in how they are set, and in many cases still footing the bill. Those advocating an exit from the EU need to spell out exactly how the UK will be better off.
And here is ITV political editor Robert Peston’s assessment of the document.
He says that if the Leave campaign want to challenge the Treasury’s conclusions, it need to commission an equivalent report.
What the well-resourced Leave campaign needs to do, if it really wants to challenge the idea that Brexit makes us poorer, is to commission its own forecasts from credible independent economists.
If it fails to do so, voters will draw their own conclusions.
And, among many other points (the full post is worth reading), Peston addresses the immigration point raised by Jonathan Portes. (See 3.16pm.)
Another possible flaw in the Treasury calculations is that it is based on the forecasts for population growth and migration made by the Office for National Statistics, and does not assume any fall in migration as a result of quitting the EU.
The point is that if Brexit led to lower migration (which is disputable), our economic cake would would be shared between fewer people and in that sense those of us who live here would be relatively richer.
But a smaller population and fewer productive people coming from abroad would also mean slower growth in the cake. And that would mean we would be relatively poorer.
In other words the migration assumption made by the Treasury probably does not distort its conclusion in any serious way.
The FT’s economics editor Chris Giles has published his analysis of the Treasury report. He says its findings are reasonable.
Here is his article (subscription) and here is an excerpt.
Are the Treasury’s numbers realistic?
Realistic is a difficult word for economic models. The Treasury has decided against using one model to give all the answers because these models — called structural models, or computable general equilibrium models — cannot estimate many of the important and likely consequences of Brexit.
They tend to give weaker results. The Treasury’s modelling strategy is therefore more comprehensive. A better word to describe it than realistic is reasonable.
Vote Leave says Treasury report 'deeply flawed'
Vote Leave has now put out a detailed response to the Treasury documents. Here are some of the criticisms it is making.
- Vote Leave says the government is assuming it will break its promise to get annual net migration below 100,000. (See 2.17pm.)
- It says the document does not take into account a claim from the Treasury in 2005 that EU regulation could cost consumers the equivalent of 7% of GDP.
- It says the £4,300 figure is flawed because it is based on dividing the assumed net loss to the economy by the number of households there are now (27m) and does not take into account that the number of UK households is expected to increase by 2030 by more than 4m.
- It says that there would be no net loss per household at all by 2030 if lower net migration were to lead to a 6% reduction in the number of UK households.
And this is from Matthew Elliott, Vote Leave’s chief executive.
The headline figures in this report are deeply flawed. It is not credible to make these claims without showing your workings or the alternative you are comparing it to. It also ignores the Treasury’s own analysis that EU regulation costs the UK economy much more – a staggering £125 billion a year.
As the prime minister himself said, we are the fifth biggest economy in the world and outside of the EU we won’t stop trading with Europe. There’s a free trade zone from Iceland to Turkey and we will be part of that, securing jobs and boosting the economy.
Jonathan Portes, a former chief economist at the Cabinet Office and a research fellow at the National Institute of Economic and Social Research, has put out his assessment of the Treasury document. He says the growth forecasts are credible, but that the Treasury was wrong not to take into account the impact of cutting immigration.
The Treasury analysis is based on two key assumptions: that Brexit, under any plausible scenario, significantly reduces the UK’s openness to trade and investment, and that this in turn results in a significant reduction in UK productivity performance. The first assumption is obviously open to question, with some Leave campaigners arguing that the UK could both preserve its current trading relationships with the EU and conclude further free trade agreements with non-EU countries. However, if the government is indeed correct that this would be difficult or impossible, then the Treasury’s conclusion that productivity and hence output would fall is reasonable, and their estimates of the quantitative impact, while at the high end, are not outside the range of credible independent estimates. One important point to note is that the Treasury’s modelling is largely based on the historical experience of entering free trade areas and/or customs unions - the impact of leaving one might very well be different, and would of course depend, as noted above, on the arrangements agreed between the UK and the remaining EU post-Brexit.
One important omission in the HMT analysis is modelling the impact of changes to UK immigration policy post-Brexit. The Treasury assumes that immigration continues to evolve in line with ONS forecasts. This means that it assumes both that government policy - to reduce immigration to the tens of thousands - is ineffective, and that Brexit makes no difference either to the numbers or the skills mix. Given the centrality of immigration and free movement in the political debate on Brexit, this is difficult to understand. There is a strong consensus among UK economists that free movement has been beneficial to the UK economy and public finances, as outlined by the Bank of England, but simply ignoring this issue seems like a major omission.
Here is Larry Elliott, the Guardian’s economic editor’s, assessment of the Treasury document.
And here is how it starts.
Will the economy by 6% smaller by 2030?
The short answer is that it is impossible to say. The Treasury numbers are not wildly out of line with other forecasts and are more cautious than some. But officials find it difficult enough to forecast what is going to happen to the economy in a year or two, let alone how Britain will fare 15 years hence. As an example, at the time of the March 2008 budget, the Treasury was forecasting (pdf) growth of 2% for that year and 2.5% for 2009. However, officials had failed to spot that the economy was about to plunge into its deepest recession since the second world war. The economy shrank by 0.8% in 2008 and 5.2% in 2009.
Osborne has admitted ditching government's migration target, Brexit campaigns claim
This is what the Treasury document says about the assumptions it is making about immigration in its forecast for what will happen to the economy if it remains in the EU. It confirms what George Osborne said in his Today programme interview this morning. (See 9.19am.)
The population and migration projections which underlie the modelling were used by the OBR in their Economic and fiscal outlook accompanying Budget 2016. It is assumed that population growth will slow in line with the ONS’s current principal population projections. In the principal projection, total net international migration to the UK falls from 329,000 per year in 2014 towards 185,000 per year from 2021 onwards.64 This is a stylised projection rather than a forecast.
Vote Leave has said this amounts to an admission that the government has abandoned its plan to get annual net migration below 100,000.
Has George Osborne just admitted that the Government has abandoned the 100,000 immigration target? #r4today
— Vote Leave Media (@Vote_LeaveMedia) April 18, 2016
Treasury estimate assumes migration levels nearly double what was promised in manifesto. Chancellor admits they've abandoned taking control
— Vote Leave Media (@Vote_LeaveMedia) April 18, 2016
Leave.EU’s Arron Banks said much the same thing in his press statement. He said:
George Osborne’s analysis is interesting insofar as it assumes the extremely high level of immigration we are seeing now would continue. Evidently, the prime minister and his Chancellor do not believe their own lines about the trivial benefits changes which they hope the EU will approve bringing down the numbers.
Leave.EU says £4,300 per family to leave the EU would be 'a bargain'
Leave.EU, the Ukip-linked group founded by Arron Banks, has issued its response to the Treasury document. Like other Brexit campaigners, Banks claims the forecasts are implausible. But he also claims that, even if they were true, £4,300 per household would be a price worth paying. He said:
[The Treasury’s] flimsy report hasn’t even successfully produced the sort of nightmare vision which George Osborne wants to sell us. Their worst-case scenario of £4,300 per household is a bargain basement price for the restoration of national independence and safe, secure borders.
There are 6.7 million households in Britain, averaging about 2.3 people. £4,300 per year per would cost the average Briton just 21p per hour, and in exchange we’d be getting back the power to control immigration, set our own laws, manage our own farms and fishing waters, and strike our own trade deals.
This is significant because it give the impression that Leave.EU are accepting the Treasury’s claims. (Or, to be fair, it gives that impression if you ignore the first half of hte news release.)
In party politics terms this would amount to a Brexit split. And in party politics terms that would be a mistake. (Imagine John McDonnell going on TV to say a Treasury attack line was factually wrong, while Angela Eagle gave an interview saying it would not matter if the Treasury were right; the press would attack them for being unable to agree.)
But a referendum is not like a general election, and it is not clear whether the Brexit camp suffers at all by giving out mixed messages.
On the World at One Bernard Jenkin, the pro-Brexit Conservative MP, offered a different critique of the Treasury figures.
What they want you to hear is that somehow you’re going to be worse off. In fact, they are making a forecast out to 2030. The economy will generate lots of jobs between now and then. Everyone agrees that, whether we are inside or outside the European Union. The question is, they are forecasting it will be slightly less than it might have been, not that you’ll be worse off. That’s not what they want you to hear, is it?
Leave campaigners are arguing that it is ridiculous for the Treasury to pretend that it knows what will be happening to the economy in 2030. But Giles Wilkes, who worked as a special adviser to the Lib Dem business secretary Vince Cable and how now writes for the Financial Times, has a reply to them on Twitter.
There's going to be a lot of confusion between forecasting and analysis in the next 48 hours. Put it this way:
— Giles Wilkes (@Gilesyb) April 18, 2016
I can't forecast what my weight will be next year. I can accept analysis that eating s pound of butter a day will make me much fatter.
— Giles Wilkes (@Gilesyb) April 18, 2016
Similarly, we can't predict the size of the economy, 2030. We do know Brexit will make it significantly smaller.
— Giles Wilkes (@Gilesyb) April 18, 2016
And we do know you'd be a 1st class moron to be impressed by "can't predict economy 2 years out how can you assess cost of Brexit hur hur?"
— Giles Wilkes (@Gilesyb) April 18, 2016
The Conservative MP Kwasi Kwarteng, who is backing Leave, told the Daily Politics that he thought the Treasury forecasts were “absurd” and “dishonest” because it was impossible to know what the economy would be doing in 2030. He told the programme:
I think these figures are absurd, frankly. The Treasury were the same people who said at the beginning of the last parliament that we would have eliminated the deficit by 2015. The deficit has not been eliminated.
The Treasury did not predict the 2008 credit crunch, neither did they predict the Greek blowout and so, for a bunch of officials and economists to say they can describe within a pound what the state of the British economy and people’s economic wellbeing will be in 2030, 14 years’ time, is simply absurd. None of the predictions made in 2002, 14 years ago, about 2016 have stood the test of time, none of them – so to project that far forward is actually, I think, intellectually dishonest.
Updated
Here are five of the more interesting graphs from the Treasury document (pdf).
1 - EU tariff levels. This shows the tariffs the EU applies to on imports from non-EU countries, and it is included to show how British manufacturers would find their goods getting more expensive when sold in the EU. The report says “industries would need to rapidly adjust, which may involve job losses”.
2 - Importance of the service sector. This shows how services make up a larger proportion of UK exports than in Norway, Switzerland, Turkey or Canada, other countries that have trade relationships with the EU. This is included because the alternatives to EU membership tend not to include tariff-free agreements on services.
3 - Comparative advantage. This shows the sectors where the UK does better and worse than the G7 average at exports. The dots show the UK’s performance, and the black line shows the G7 average. The UK does particularly well at insurance, financial services, personal services and other business services (all on the left.)
4 - Services as a proportion of output. This shows the UK is the leader service exporter in the G7 as a proportion of output.
5 - EU membership groupings. This is intended to show the UK has a special status in the EU.
Updated
Andrea Leadsom, the pro-Brexit energy minister, has also been tweeting about the Treasury report.
@steve_hawkes - where is balance? No HMT analysis of ec impact of schools/doctors overwhelmed by EU immigration? Or risks of EU mass unemp?
— Andrea Leadsom MP (@andrealeadsom) April 18, 2016
@bbclaurak - extraordinary propaganda! Open Europe (unbiased view on Ref) say c. + or - 1%. See Bootle/Woodford - City forecasts.
— Andrea Leadsom MP (@andrealeadsom) April 18, 2016
Downing Street has defended the government’s decision to publish today’s Treasury report. This is what the prime minister’s spokeswoman told the lobby briefing.
In response to the debate in parliament as the EU referendum bill was being taken through in order to become an act, we committed to producing this. In the debate in parliament, which MPs and peers were involved in, a number expressed an interest in hearing more about the economic consequences of our membership and we committed then to doing this.
Paul Johnson said other economic forecasts all suggest leaving the EU is likely to have a negative effect on GDP. (See 12.30pm.)
Recently the Economist listed six such forecasts. Here are the figures showing the predictions they are making about the impact leaving the EU would have on GDP. They all make their predictions within a range.
Two of the six reports say leaving the EU could have a positive impact on GDP, but even those two reports suggest a negative impact would be more likely.
Centre for Economic Policy Research (2013)
GDP impact: From -1.24% to -1.77%
Institute of Economic Affairs (2014)
GDP impact: From +1.1% to -2.6%
Open Europe (2015)
GDP impact: From +1.55% to -2.2%
Centre for Economic Performance, LSE (2016)
GDP impact: From -1.3% to -2.6%
PwC (2106)
GDP impact: From -3% to -5.5% (in 2020)
Oxford Economics
GDP impact: -0.1% to -3.9%
Paul Johnson, director of the Institute for Fiscal Studies and the media’s preferred referee on any dispute about economic policy, was on the BBC’s Daily Politics talking about the Treasury report a few minutes ago. Here are the key points he made.
- Johnson said the Treasury report was consistent with other economic analysis which all suggest leaving the EU would have a negative effect on growth. He said it was impossible to forecast exactly how big the economy would be by 2030. But it was reasonable to look at the “direction of travel”, he said.
What we can say, I think, is about the direction of travel. So what this is trying to do is to say, not how big will the economy be in 15 years time, but how much difference there will be under two different scenarios.
- He said it was probably a mistake to focus on the ‘households £4,300 worse off” figure.
It is probably a mistake to focus on £4,300. For one thing, it is not actually an income number. That’s a GDP number. And secondly there is an awful lot of uncertainty around it.
- He said there was general agreement that leaving the EU would involve short term costs.
- But he said it was much harder to predict what the impact of leaving would be in the long term and that conceivably the UK could be better off.
If we governed ourselves particularly well, you can see a world in which in the long run we would be better off.
Frances O’Grady, the TUC general secretary, has welcomed today’s Treasury figures as “a reality check”. In a statement she said:
Today’s figures are a sobering reality check. For working people the message is clear: vote leave, get poorer.
Brexit campaigners have yet to come up with any convincing answers for how a post-Brexit economy would function. They have nothing to offer but a future of lower pay and fewer jobs.
They would rather divide and distract voters than come clean about the dangers of leaving the European Union.
Tim Farron, the Lib Dem leader, has welcomed the Treasury report. In a statement he said:
The sheer volume of serious and sobering evidence against turning our backs on Europe is overwhelming. The Treasury assessment today, showing a £4,300 cost to families, gives another stark warning about the impact on every household in Britain.
There is no doubt in my mind that the economic impact of us rejecting the European market of 500 million consumers would be devastating to our country’s finances; to the work prospects of British people, and to our ability to attract world class investment.
The dramatic and dangerous impact of Brexit on on the economy will clearly blow a hole in public finances, and offer the biggest threat to public services since the recession. I am not prepared to stand by and let Boris Johnson and Nigel Farage throw a hand grenade into our economic recovery, and then be left in charge of looking after the NHS, our schools, and local services.
Andrea Leadsom, the pro-Brexit energy minister, has told the Guardian that the Treasury’s report is “unfair and biased”.
These are from the Sun’s Tom Newton Dunn.
Treasury EU report now published: states net immigration will fall to only 185,000 by 2021. So an extra 3.2 million people in UK by 2030.
— Tom Newton Dunn (@tnewtondunn) April 18, 2016
Treasury's EU membership report has not modelled the effect PM's benefits delay will have on net immigration. No good reason why not.
— Tom Newton Dunn (@tnewtondunn) April 18, 2016
In relation to his second tweet, one “good reason” might be that the prime minister’s “emergency brake” covering benefits for EU migrants will probably have very little impact ...
This is from Sky’s Faisal Islam.
The four horsemen of exit apocalypse... pic.twitter.com/y1WCCBWOc2
— Faisal Islam (@faisalislam) April 18, 2016
Here is a table from the Treasury document setting out the forecasts about what might happen to the economy if Britain were to leave the EU, under the three possible scenarios, in a bit more detail.
Treasury claims - Key figures
The Treasury document uses economic modelling to estimate what might happen to the UK economy after 15 years if we leave the EU. It focuses on three options.
1 - The “Norway option”
By “Norway” option, it means Britain remaining part of the European Economic Area, like Norway, Iceland and Liechtenstein, with access to part of the single market, but having to accept EU rules, including free movement.
GDP: 3.8% lower (than if UK remained in EU)
Annual cost per household of lower GDP: £2,600
Annual lost tax revenues: £20bn
2 - The “Canada option”
By “Canada option”, it means the UK having a bilateral free trade agreement with the EU, such as the one Canada has just negotiated. In his first proper speech as a Vote Leave champion Boris Johnson proposed this (although he has subsequently pulled back from this somewhat.)
George Osborne is treating this as the Treasury’s central forecast for what might happen if the UK left the EU.
GDP: 6.2% lower
Annual cost per household of lower GDP: £4,300
Annual lost tax revenue: £36bn - or the equivalent to an 8p in the pound increase in the basic rate of income tax, as Osborne said.
3 - The “WTO option”
By “WTO option”, it means the UK not having an specific free trade deal with the EU, but instead relying on WTO trade rules to minimise the impact of tariffs.
GDP: 7.5% lower
Annual cost per household of lower GDP: £5,200
Annual lost tax revenue: £45bn
Treasury publishes its EU report
Here is the full text of George Osborne’s speech.
Here is the Treasury news release about its report.
And here is the report itself (pdf).
Updated
Q: [From the Guardian’s Anushka Asthana]. Do you accept Andrea Leadsom’s point that you are not looking at other factors, like the impact of immigration on public services? And are you calling Tory colleagues economically illiterate?
Osborne says it is legitimate for Leave campaigner to say that some advantages might be worth the economic cost. But they need to accept that there will be economic costs, he says.
He does not answer the point about whether he was referring to Conservative colleagues.
And that is it. The Osborne speech and Q&A are over.
Q: [From the BBC’s Laura Kuenssberg] Do you accept that the Treasury often gets its forecasts wrong. And can you confirm you are not saying families would lose £4,300? This is a notional sum, comparing how families might have less in the future.
Osborne says this is a credible analysis. The Treasury has put its figures on the table. Now it is for the Leave camp to produce their figures for what might happen in the future.
Stephen Crabb says this decision would have a real impact on family. The Treasury is talking about things that would have a real impact.
- Crabb says the Treasury will be publishing another paper, setting out the “short-term shock” that leaving the EU would cause.
Osborne is now taking questions.
Q: [From ITV] Why did you not include any potential advantages of leaving in the document? Or don’t you think there are any?
Osborne says being in the EU has costs. But it has benefits too. He repeats the point about the basic rate of income tax having to go up 8p in the pound to compensate.
He says only today John Van Reenen, director of the Centre for Economic Performance at the LSE, has only this morning come out and said the Treasury’s forecasts are reasonable. He is referring to this article at The Conversation.
He says the ITEM club has also said the Treasury is being reasonable.
Q: Given that Boris Johnson is saying you are like Gerald Ratner, peddling crap, how will the Conservative party unite after this?
Osborne says all Conservatives supported the plan to give people a vote in a referendum.
Osborne says income tax would have to rise by 8p in £ to compensate for impact of leaving EU
George Osborne is speaking again.
He says, for leaving the EU to have a benefit, the increase in trade with the rest of the world would have to compensate for the loss of trade with the EU.
But Britain would lose its trade deals with 50 other countries around the world. Trade with the rest of the world would not make up for the lost EU trade.
He says the Treasury’s central forecast is that GDP would be 6% lower in the long term. That is equivalent to £4,300 per household, he says.
That is in the long term. In the short term there would be a “profound economic shock”.
And he says people should not believe the “flimsy” claim that we would at least get some money back, because we would not have to pay into the EU budget.
But we would lose money from lower tax revenues, Osborne says.
- Tax revenues would be £36bn a year lower if we left the EU according to the central forecast in the Treasury document, Osborne says. By central forecast, he is referring to what might happen under the Canada scenario.
- Osborne says the basic rate of income tax would need to rise by 8p in the pound to compensate for the lower tax revenue.
He says the Treasury’s analysis is “rigorous”, “rooted in fact” and in line with what other forecasters are saying.
Updated
This is from ITV’s Chris Ship.
PM Osborne's new Cabinet top team??? pic.twitter.com/6gyQVNAXPK
— Chris Ship (@chrisshipitv) April 18, 2016
GDP would be 6% lower after 15 years if UK adopted Canadian model, Rudd says
Amber Rudd, the energy secretary, is speaking now.
She says she is looking at the final alternative scenario the Treasury has modelled - a Canada-style free trade agreement.
She says the Canada deal runs to over 1,500 pages. More than 800 pages relate to exemptions.
When it comes into force, it may work well for Canada and the EU. But it would not necessarily work for the UK, she says.
She says the Canada deal offers some liberalisation on services. But Canada sells only around one tenth the services to the EU that the UK does.
She says the Treasury analysis shows that 50% of the UK’s services providers would have materially less access to the EU market under the Canadian arrangements.
- GDP would be 6% lower after 15 years if Britain adopted the Canadian model, according to the Treasury analysis, Rudd says.
GDP would be 7.5% lower if UK adopted WTO model, Crabb says
Stephen Crabb, the work and pensions secretary, is speaking now.
He is talking about the second alternative model - relying on WTO rules to reduce trade barriers with the EU.
But he says under WTO rules the UK would face 36% tariffs on diary products when trading with the EU, 12% tariffs on fish, 12% tariffs on clothes, and 10% tariffs on cars.
This would be the most extreme of the three options, in terms of changes from the status quo. And it would have the worst impact on the UK.
- GDP would be 7.5% lower after 15 years under the WTO option, according to the Treasury analysis, Crabb says.
- Tax receipts would be £45bn a year lower as a result, Crabb says.
GDP would be 4% lower if UK adopted the Norway model, says Truss
Truss says countries like Norway in the EEA still have to accept EU regulations, and accept the free movement of people.
The Treasury has run the numbers, and concluded that an EEA/Norway option would reduce trade, leading to a fall in productivity and living standards. That means wages would be lower, she says. People would be poorer.
- The Treasury analysis says UK GDP would be 4% lower if it adopted the Norway model, Truss says.
- Tax revenues would be £20bn a year lower within 15 years as a result, according to the Treasury analysis, Truss says.
Updated
Liz Truss is speaking about the Norway option.
Britain would still be able to trade with the EU. But we would have to abide by EU rules, and Britain would have no say in drawing them up.
She says EEA members like Norway accept not having a vote on EU matters. Norway would have 1% of the EU vote share if it were a member. But Britain is one of the biggest countries in the EU, and therefore has one of the biggest vote shares. It would see this fall to zero if it left, she says.
Osborne is now handing over to Liz Truss, the environment secretary, to get her to explain more about what the Treasury document says.
Images from the report are starting to leak out on Twitter:
Osborne says achieving reform of the single market could add up to 4% to GDP over the next 15 years.
Osborne says the Treasury analysis says EU membership has increased trade with the EU by about three quarters.
Osborne says the aim of economic policy is to produce higher living standards. And for years it has been a doctrine of British policy that greater openness promotes greater prosperity.
Some advocate a different approach, a closed command economy. But that has never been the view in Britain, or in the rest of the world in recent decades.
He says the Treasury document looks at various factors, and assesses the three alternative models by how they would perform by these criteria. They are: trade, economic influence, and costs.
Osborne says the Treasury went back to first principles. It looked at what we put into the EU, and what we get out of it.
And it examined in detailed what the alternatives to EU membership look like. We know what they are, although we don’t know what the EU would accept, he says.
He mentions three alternatives: the Norway model, being part of the European Economic Area, having access to the single market, but having to accept all the conditions; the WTO model, negotiating trade using WTO rules; or the Canadian model, a half-way house, a free trade agreement.
George Osborne's speech
George Osborne has started his speech.
He says the Treasury report is a “sober and serious” look at the costs and benefits of being in the EU.
The Financial Times’ economics editor, Chris Giles, wrote an overnight analysis looking at the Treasury’s claims. He says they seem credible.
My initial analysis of Treasury Brexit numbers (Spoiler: thay are both large and credible) https://t.co/2G0tZnRyuh via @FT
— Chris Giles (@ChrisGiles_) April 17, 2016
Here is an extract.
The Treasury’s work is similar to the dynamic model of the Centre for Economic Performance at the London School of Economics, the most complete academic analysis of Brexit to date.
The Leave campaign dismissed that report last month as the writings of Europhiles who had also urged the adoption of the euro. They cannot use the same critique against the Treasury, since the lead official who wrote the report, Treasury chief economist Dave Ramsden, also authored the 2003 Five Tests report rejecting euro membership for Britain.
While almost every economic model has suggested Brexit will hit economic performance and productivity, the government’s estimate is higher than those published by the CBI employers’ organisation, Oxford Economics and Open Europe. The main reason for this appears to be the dynamic modelling strategy which is broader, but less certain than models which give smaller results.
This is from the BBC’s Norman Smith.
Understand Osborne will warn public services will be £36 billion worse off under Brexit by 2030
— norman smith (@BBCNormanS) April 18, 2016
Smith is at the event in Bristol where George Osborne is due to start speaking now.
He has also got a copy of the report. The rest of us are not going to see it until about 11am.
The release of the document is tied to a Commons written statement. The Treasury is not planning for a minister to make an oral statement about it in the Commons, although it is possible that an MP may table an urgent question in order to get a minister to the despatch box.
John Redwood's Today interview - Summary
As I reported earlier, the Conservative MP John Redwood was on the Today programme rebutting the Treasury claims on behalf of Vote Leave. Here are the key points he made.
- Redwood claimed that the Treasury claim about how growth would be lower and families worse off if Britain left the EU was “absurd”. The Treasury had a history of getting its forecasts wrong, he said.
It’s an absurd claim from the Treasury, I’m very sorry that they’ve degenerated to these levels. This is a Treasury which had to make huge changes to its forecast for the next two years just between November and March because it decided its November forecast was completely wrong. This is a Treasury which failed to forecast the huge damage membership of the exchange rate mechanism inflicted on us and they were always very keen to join and it gave us a huge recession. They failed to forecast the damage to the UK from the eurozone crisis of 2011.
- He said it was pointless trying to make precise forecasts for the economy for 2030.
We will be better off out, we will be richer and more successful, but it’s not very easy to put precise numbers on it and we wouldn’t attempt to put precise numbers on the economy for 2030 because who knows what’s going to happen.
- He claimed that trade arrangements with the EU would remain largely the same if the UK left because it was in everyone’s interests to maintain free trade.
[The government] wish to make the argument that our partners in Europe are going to damage our trade. Well, we know that, because I and others have talked to the German government who are the leaders in all this, and Germany has made it very clear they don’t want new barriers in the way of their very successful export business to Britain. They want to carry on selling us cars and manufactured goods and they understand that they mustn’t impose barriers on us because we would immediately retaliate and impose barriers on them. And as they sell us twice as much as we sell them that would be a ludicrous thing for them to do …
It’s a completely idiotic idea that we won’t trade with them [EU countries] after we left the EU, but I’d go further than that, I would say I see no reason to change most of the arrangements currently in place.
I think he’s completely wrong and he’s not a British government minister. We would get our full place back on the World Trade Organisation and all the standards bodies around the world, and once we got our vote and our voice back on international trade matters the world would want to talk to us. We are the fifth largest economy and we are a very big market for many of them.
- Redwood rejected claims that concern at the prospect of Britain leaving the EU was responsible for the pound falling in value.
I don’t believe [sterling has] slumped on the prospect of Brexit. It was falling against the dollar long before Brexit became a main news item because the dollar was very strong and interest rate differentials were making people buy dollars rather than the pound. But why don’t they say then that the fact that government borrowing costs have been going down this year is also attributable to Brexit? At one point they were threatening us with higher mortgage rates but unfortunately from their point of view the markets have said that Britain is more credit-worthy this year and has lowered the cost of government borrowing.
I’ve taken the quotes from PoliticsHome.
The Treasury’s document will be published on its website at around 11am, when George Osborne’s speech has concluded, the Treasury says.
Osborne's Today interview - Summary and analysis
Although he’s chancellor of the exchequer, and not formally involved in devolution politics, George Osborne was a leading figure in the government’s campaign to ensure the Scots voted no to independence and the single most important thing he did in that campaign was declare unequivocally, with Labour and Lib Dem support, that England would not enter a currency union with an independent Scotland. The SNP never really recovered from the fact that it could not explain what currency arrangements an independent Scotland would have.
Today Osborne is engaged in something similar; he is trying to show the public that the Leave campaign have not got a vision of what kind of trade relationship the UK would have with the EU if it left that would be both credible and attractive.
The Treasury’s document says British families could eventually be worse of by £4,300 a year if the UK adopted a Canadian-style free trade deal - as originally proposed by Boris Johnson. That is because a Canada deal would involve tariffs on services and some goods, at a long-term cost to growth. In his Today interview Osborne effectively threw down the gauntlet to Leave, saying that if they did not accept the Canada model as their preferred way forward, they would have to come up with another. Leave campaigners claim the UK could continue to enjoy free trade arrangements similar to the status quo, but Osborne dismissed this argument.
In his interview Osborne was strong on this point. He repeatedly mocked this approach as wanting to have your cake and eat in a not-so-subtle dig at Boris Johnson (who has famously turned wanting to have his cake and eat it into effectively his life philosophy). And he quite effectively made the point that countries like Germany and France would not accept this.
But the interview was not wholly successful. Osborne did not really have an answer when Nick Robinson challenged him with a quote from David Cameron about how the UK could fare perfectly well outside the EU. The BBC’s Laura Kuenssberg says his response suggests Osborne and Cameron were being dishonest when they said before the EU renegotiation was concluded that they were willing to contemplate Brexit.
If Osborne believes all that, did he REALLY mean it when he said he'd be ready to leave EU if UK didn't get renegotiation?
— Laura Kuenssberg (@bbclaurak) April 18, 2016
Other commentators also thought Osborne sounded just a little shifty. Here is the Guardian’s Patrick Wintour.
Plays to every untrustworthy negative that Chancellor wants to be interviewed on Treasury Brexit forecast without publishing actual analysis
— Patrick Wintour (@patrickwintour) April 18, 2016
And this is from the Mirror’s Kevin Maguire.
Osborne may be right Britain would lose economically if the country left Europe but the Chancellor sounded slippery in @BBCr4today interview
— Kevin Maguire (@Kevin_Maguire) April 18, 2016
Here are the main points from the interview.
- Osborne accused Leave campaigners of being “economically illiterate” in thinking the UK could have all the benefits of the single market outside the EU with none of the disadvantages. His point seemed to be directly particularly against Boris Johnson. Osborne said:
If you want to have tariff-free, quota-free access to the single market, if you want to crucially have the common standards that mean you can get of the plane in Madrid or Munich, if you are an architect or an engineer, or if you are working in a car plant in the north east of England your car is automatically accepted into the European Union market without extra checks for safety and the like, if you want all those things, then you have to bear some of the obligations of European Union membership. You can’t have your cake and eat it. And these people who go around saying Britain would have all the benefits of the European Union without any of the obligations, that is economically illiterate and it frankly misunderstands the nature of the relationship that Britain might be able to strike outside the EU.
These are from the Sunday Times’s Tim Shipman
Hilarious that Osborne won't even say "Boris". Keeps referring to him as "the mayor of London". Ain't much love lost there...
— Tim Shipman (@ShippersUnbound) April 18, 2016
Osborne makes clear it is Boris he is attacking as "economically illiterate" by wheeling out "that is having your cake and eating it"
— Tim Shipman (@ShippersUnbound) April 18, 2016
- Osborne said that it was legitimate to argue for leaving the EU on the grounds that the economic cost would be worth it, but that it was not legitimate to argue Brexit would be cost-free.
There are some people in this debate who say ‘you know what, it’s a price worth paying, I know there will be a hit to the economy but we will pay that price so that Britain can go it alone’. At least that’s an honest debate. What is not honest and what is economically illiterate is to say that we can have all the economic benefits of being in the EU and at the same time leave. That is having your cake and eating it.
- He challenged the Leave campaign to produce any reputable body or international partner saying Britain could leave the EU without economic cost.
Just in the last week, we’ve had the IMF, we’ve had the monetary policy committee of the Bank of England, we’ve had the OECD, we’ve had businesses like Lloyds Bank, we’ve had academics come out and all say the same thing [Brexit would harm the economy.] I would say to those arguing we should leave, where is your document? Where is your assessment? Where is your economic analysis? Where is a single ally or trading partner or credible international organisation that thinks it is a good idea for Britain to leave the European Union?
- He said France and Germany would never allow the UK to have full access to the single market without having to accept conditions like free movement.
What I would reject, however, is the idea that Britain can sign up to some kind of deal where we get all the benefits of European Union membership, but none of the obligations or costs. The Germans or French would not give that to us because it is a better deal than Germany or France and it is not credible. You completely misunderstand Britain’s negotiating hand if you think we could get a better deal than France or Germany. It is just not credible.
- He said the decision over EU membership was the biggest political decision for the country since the second world war.
- He said the Treasury’s document assumed a high level of immigration when making a forecast about how the economy would continue to grow if Britain remained in the EU. It used the ONS’s central immigration forecast, he says. This assumes the government will not achieve its target of getting net migration below 100,000 a year.
- He said the poorest would suffer if Britain left the EU.
We would not all be in this together if we left the EU. The richest in our country would go on being rich, it would be the poorest - the people whose jobs depend on the car plants, whose jobs depend on the steel-making factories and the like - who would be hit if we left the European Union.
They are the people whose incomes would go down, whose house prices would fall, whose job prospects will weaken. They are the people who always suffer when the country takes an economic wrong term.
Updated
Q: You have a problem with trust. And did not Iain Duncan Smith sum it up; he said we are not all in it together. You are proposing something [EU membership] that benefits the rich.
Osborne says it would be people dependent on the EU, like people in car factories, who would be hit if Britain left the EU.
Q: If staying in the EU cost you the chance of being prime minister, would you back it?
Osborne says this is not about one person, or one job. This is as big a decision as any Britain has taken since the war.
He wants Britain to be a country that engages with the world, and does not turn its back on other countries.
And that’s it. The interview is over. I will post a summary soon.
Q: These forecasts today are from the same people who said the UK should join the EU. And they also gave you economic forecasts in your autumn statement that you have to revise down.
Osborne says today’s report is a sober one. Its analysis is backed up by the LSE. Just this morning the LSE academic behind their research said the Treasury’s claim might be an understatement.
Q: Does the document assume that immigration continues at the current level - far above your target (under 100,000 a year.)
Osborne says the document uses the OBR forecast for immigration.
Q: That is much higher than the government’s target.
Osborne says his forecast is the central one the Office for National Statistics use.
If he had not used that, people would not find it credible, he says.
He says he is setting out the facts.
Q: We buy more from Europe than they buy from us. So they would offer us a free trade deal?
Osborne says that is not the case if you include services. And he says you cannot have all the benefits of the EU without any of the obligations. That is “economically illiterate”.
Q: Why would it be in the interests of France and Germany to mess up their trade by denying us a free trade deal?
Osborne says they would only give us free trade if we accepted free movement. That is what the French finance minister said yesterday, and the Germany finance minister said recently.
He accuse the Brexit camp of wanting to have their cake and eat it.
George Osborne's Today interview
Nick Robinson is interviewing George Osborne.
Before the interview starts Kamal Ahmed, the BBC’s economics editor, talks about the Treasury’s document. He says the Treasury is not saying households will lose £4,300 from their current income. It is claiming that growth would be slower over the long term if Britain left the EU, and it is saying what this would be worth to every household.
Q: You are assuming that the best trade deal Britain could get with the EU would be a Canada-style one. Isn’t that too negative?
Osborne says any alternative to the status quo would lead to less access to the single market, unless the UK paid into the EU budget and accepted the free movement of people. But those campaigning for Out are not proposing that.
Q: But those campaigning for Out say the Canadian model is defeatist. [He quotes from David Cameron saying the UK could thrive outside the EU.]
Osborne says the issue is not whether the UK could cope outside the EU, but whether it is better off in.
He says the Canadian free trade deal does not cover services, which account for 80% of our economy.
He says a complete free trade deal with no obligation to accept free movement would be better than the deal France and Germany currently have. They would not give Britain a a better deal that the one they have already.
The Conservative MP John Redwood was interviewed on the Today programme earlier, responding to the Treasury claims on behalf of Vote Leave. He said the Treasury claims were worthless.
John Redwood @vote_leave says Treasury 2030 EU exit forecast “completely worthless”. Listen: https://t.co/5ckOAah1Fh pic.twitter.com/amkufxtMJU
— BBC Radio 4 Today (@BBCr4today) April 18, 2016
I will post quotes from his interview later.
Speaking soon to @bbcnickrobinson about @hmtreasury analysis showing UK worse off to tune of £4,300/household if it votes Leave @BBCr4today
— George Osborne (@George_Osborne) April 18, 2016
David Cameron has repeatedly argued that Britain should vote to remain in the EU because EU membership makes the country “safer”, “stronger” and “better off” but he always argues that the third argument, the economic one, is the most important and today the government is going to play what is probably the strongest card in its pack to reinforce this case - a hefty Treasury document saying Britain will be significantly worse off it it leaves the EU.
By significantly, I mean £4,300 per household, as the Guardian’s story explains.
The document will be published this morning, but George Osborne, the chancellor, has flagged up its key findings in an article in the Times (paywall). He says:
Put simply: over many years, are you better off or worse off if we leave the EU? The answer is: Britain would be worse off, permanently so, and to the tune of £4,300 a year for every household.
It is a well-established doctrine of economic thought that greater openness and interconnectedness boosts the productive potential of our economy. That’s because being an open economy increases competition between our companies, making them more efficient in the face of consumer choice, and creates incentives for business to innovate and to adopt new technologies.
He is about to appear on the Today programme. I will be covering that live.
Here is the agenda for the day.
8.10am: George Osborne is interviewed on the Today programme.
10am: Seema Malhotra, the shadow chief secretary to the Treasury, gives a speech on Labour’s case for EU membership.
10am: Nigel Farage, the Ukip leader, makes a campaign visit to Sheffield.
10.15am: Osborne gives a speech to mark the publication of the Treasury’s EU document.
I will mostly be focusing on the Treasury’s EU report today, with reaction and analysis, but but, as usual, I will also be covering other breaking political news as it happens, as well as bringing you the best reaction, comment and analysis from the web. I will post a summary around lunchtime and another in the afternoon.
If you want to follow me or contact me on Twitter, I’m on @AndrewSparrow.
I try to monitor the comments BTL but normally I find it impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer direct questions, although sometimes I miss them or don’t have time. Alternatively you could post a question to me on Twitter.
If you think there are any voices that I’m leaving out, particularly political figures or organisations giving alternative views of the stories I’m covering, do please flag them up below the line (include “Andrew” in the post). I can’t promise to include everything, but I do try to be open to as wide a range of perspectives as possible.
