George Osborne: UK would be ‘permanently poorer’ outside EU – BBC News

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Media captionGeorge Osborne says the poorest will be hit hardest if the UK leaves the EU.

The UK would be “permanently poorer” outside the European Union, Chancellor George Osborne has warned ahead of the in-out vote on membership on 23 June.

A Treasury analysis suggests an EU exit could see the UK economy 6% smaller than it would otherwise be by 2030.

Mr Osborne said the smaller size of the economy projected in the report was the equivalent of £4,300 per household.

Leave campaigners called the claims “absurd” and “worthless” given the Treasury’s past forecasting record.

Conservative MP John Redwood, who is campaigning for an Out vote, said: “This is a Treasury which failed to forecast the huge damage membership of the European Exchange Rate Mechanism inflicted on us and they were always very keen to join us and it gave us a huge recession. They failed to forecast the damage to the UK of the Eurozone crisis of 2011.”

But Mr Osborne defended the report’s findings on BBC Radio 4’s Today programme, saying: “The conclusions could not be clearer. Britain would be permanently poorer if we left the EU to the tune of £4,300 for every household in the country. That’s a fact everyone should think about “

Analysis, BBC economics editor Kamal Ahmed

The report suggests leaving the European Union and signing a “Canada-style” bilateral agreement with the rest of the EU could mean tax receipts falling by £36bn, or a third of the annual NHS budget.

The report says that could mean an 8% increase in the basic rate of income tax.

The Treasury report does admit there are better scenarios. Or, to be more accurate, less bad scenarios.

Critics say that forecasts out to 2030 are open to a great deal of interpretation and have to be based on assumptions that can be disputed.

Read more from Kamal

The chancellor said “it would be the poorest” who would be most affected by an EU exit, citing people whose jobs “depend” on the car plants and steel making factories.

“They are the people whose incomes would go down, whose house prices would fall, whose job prospects would weaken, they are the people who always suffer when the country takes an economic wrong turn,” he said.

The chancellor later said in a speech setting out the report’s details that EU membership had increased UK trade with EU countries by about “three quarters”.

“Greater openness leading to higher productivity and rising living standards,” he said, adding that the UK economy could be “4% greater” by staying in.

The 200-page Treasury document, written by government economists, also says there would be a £36bn a year hit for the UK’s public finances if it left the EU – equivalent to raising the basic rate of income tax by 8p, the chancellor said.

Media captionTreasury forecast is “completely worthless” says John Redwood of Vote Leave

BBC political editor Laura Kuenssberg said the figure allowed the Remain side to make the argument that there would have to be big spending cuts or tax rises to plug the gap.

The report looks at three scenarios in the event of a vote to leave the EU on 23 June.

  • First, the UK gains a “Norway-style” deal and joins the European Economic Area (EEA)
  • Second, the UK executes a bilateral deal with the EU similar to the one being agreed with Canada – a trade deal that has taken seven years to negotiate
  • Third, the UK has a trade relationship with the EU under World Trade Organization (WTO) rules, similar to the relationship between the EU and countries like Russia and Brazil

Each scenario has a strong negative impact on the economy, according to the report, but the forecasted 6% hit to national income growth is based on the Canadian trade model with the EU.

Leave campaigners, including London mayor Boris Johnson, have said there would be no downsides to leaving, and suggested the UK could ape Canada’s trade arrangement with the EU.

‘Usual suspects’

But Mr Osborne said it was “economically illiterate” to say the UK could retain “all the benefits” of EU membership and “none of the obligations or costs”.

Any trade arrangement would lead to less access to the EU single market unless Britain was prepared to pay into the EU budget and accept the free movement of people, he said.

In his Daily Telegraph column, Mr Johnson said the referendum was on a “knife edge” and accused the “usual suspects” of trying to convince Britons to accept “the accelerating loss of democratic self-government as the price of economic prosperity”.

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The London mayor says the UK could have “a glorious future” outside the EU

“We have heard from the IMF (who got the Asian crisis completely wrong),as well as the banks and the CBI, all of whom were wrong about the euro.

“Davos man – the kind of people whose club class air tickets are paid by the taxpayer, all the lobbyists and corporate affairs directors of the big companies: they are all increasingly nervous that they have been rumbled, that people can see the emperor has no clothes and that Britain could have a glorious future outside the EU,” he said.

Meanwhile, another pro-exit Conservative MP, Bernard Jenkin, criticised the Treasury analysis and said in a tweet it was “an utterly misleading and disreputable way to conduct the EU debate”.

Andrew Mackenzie, head of mining giant BHP Billiton, said there would be a decade of uncertainty if the UK voted to leave the EU, and that the country would be reduced to “rule takers”.

“On trade, the EU has negotiated broadly effective deals for Europe and the UK. Restoring these agreements after Brexit would take years, perhaps a decade, of negotiation,” he said.

George Osborne: UK would be ‘permanently poorer’ outside EU – BBC News