Treasury document warns of Brexit implications
20 April 2016
George Osborne unveiled a 200-page Treasury document on the potential long-term impacts of Brexit this week. The analysis in the document includes a warning that if the UK leaves the EU, every household could end up £4,300 worse off by 2030. According to the document, the basic rate of income tax may also have to increase by 8p to fill a £36 billion gap in the government's finances.
Mr Osborne, while launching this new offensive in the ever increasingly bitter referendum debate, accused Brexit supporters of "dishonesty" and stated that the UK would end up "permanently poorer" if it left the EU. Mr Osborne said: "This is a sober and serious look at the costs and benefits of remaining in the EU or leaving it; not just for Britain but for the individual families of Britain." However, Kwasi Kwarteng, a Tory MP, said: "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 report has also suggested that the Prime Minster’s target for cutting immigration will not be met. David Cameron had made a policy pledge to reduce UK net annual migration to below 100,000. However, officials stated there would be no post-Brexit scenario that they could foresee that would enable the immigration figure to decrease. If the Office for National Statistics (ONS) forecast of 185,000 a year entering the UK until 2030 comes to fruition, then the population will increase by more than three million people.
Jonathan Portes, former chief economist at the Cabinet Office, has said that the Treasury has produced the report under the assumption that immigration will continue to increase in direct correlation 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." He then went on to say that this is especially difficult to understand, given the importance placed on free movement and immigration in the political debate on Brexit.
US President Barack Obama, who is due to visit the UK this week, has been vocal in his endorsement of the UK remaining in the EU. However, former Cabinet minister Iain Duncan Smith has criticised Obama’s intervention, saying: "On June 23, I think the British people will be advised to vote to get Britain to look a little bit more like the US and a lot less like it does at the moment with regard to the power of the EU."
Mr Osborne has warned that Brexit could lead to an increase in mortgage rates as a result of the uncertainty regarding the repercussions of a vote to leave the EU. Stephen Crabb, the newly appointed Work and Pensions Secretary, who is pro-Remain, also claimed a "reckless" vote to leave the EU could potentially cause an economic upset; triggering similar hardship to that seen after the 2008 banking crash. The referendum vote will take place on 23rd June.