The Government’s leaked analysis of Brexit costs

Transcript:The Government’s leaked analysis of Brexit costs:
The Government’s leaked analysis of Brexit costs after 15 years: Labour forced the release of the Government’s (DExEU) analysis of the costs of Brexit. But what does a % figure like -4.8% lower growth from a Free Trade Agreement scenario mean? And what are the implications for tax and public spending? The following slides convert the DExEU GDP estimates into £bns, showing a stylised future growth path of 1.5% per annum (consistent with OBR and DexEU estimates) and then the effect of lower growth paths for 3 types of Brexit: Single market membership (EEA) Free Trade Agreement World Trade Organisation Expressed in £s, growth continues, but is lower than might have been. Normal growth rate is estimated by OBR to be 1.5%. To arrive at -7.7% lower growth in 2032 under WTO rules implies an average annual growth rate of 0.939%. FTA type Brexit implies annual growth of 1.148%. EEA type Brexit implies annual growth rate 1.371%. E.g. a Free Trade Agreement leads to foregone GDP of over £100bn pa by 2032 Labour, of course, would not contemplate a no deal / WTO type Brexit. Instead the choice is between some form of single market membership and FTA. The next slide draws out the difference between those two options. Labour has a choice of supporting single market membership or an FTA: the difference between these options is c. £80bn p.a. in foregone GDP by 2032 Adding up each years’ foregone GDP: the cumulative total over 15 years is c. £600bn difference between single market membership and an FTA To put this figure in perspective the Labour manifesto promised a National Transformation Fund of £250 billion, to be spent over 10 years, to invest in the UK’s infrastructure. With an FTA foregone tax revenue reaches over £40bn per annum by 2032 Again, the next slide draws out the difference between single market membership and an FTA. The choice for Labour: the difference between an FTA and single market membership is nearly £30bn per annum tax revenue foregone by 2032 Foregone tax revenue quickly adds up: cumulative total by 2032: over £200bn difference between single market membership and an FTA Notes and assumptions The spreadsheet containing the data and calculations can be found at https://www.nickdonovan.org.uk/npf. I am grateful to four macro-economists for checking the data and calculations, and their helpful comments. I have stressed the difference between an FTA and single market