Would be interesting to see this government paper on Brexit

Brexit would leave the UK worse off under three possible scenarios: a comprehensive free trade deal, single market access and no deal at all, according to a leaked government analysis of the economic impact of leaving the EU.

The document was meant to be shown confidentially to cabinet ministers this week but was leaked in an embarrassing development for Theresa May and David Davis, the Brexit secretary.

It said national income would be 8% lower under a no deal scenario, around 5% lower with a free trade agreement with the EU and about 2% lower with a soft Brexit option of single market membership over a 15-year period.

Because the outcome of such studies always, but always, depends upon the assumptions made.

My prediction – based upon no evidence at all of course – is that the WTO option will assume that we charge the maximum WTO tariffs allowed upon imports. Something we don’t have to do and something which would be stupid to do. But they’ll assume that we will…..

17 thoughts on “Would be interesting to see this government paper on Brexit”

  1. All scenarios leave the UK better off, just not as much better off as not voting to leave the EU at all.
    How this is being spun to say we will be worse off is a mystery to me – biased press reporting perhaps, or just thickos repeating a press release from an agency.

  2. Tim’s spot on. I went to a presentation by someone who does these forecasts. The unmentioned assumption on inward tariffs was made. I asked *explicitly* about the tariff assumption and was told yes. I said surely that’s crazy as tariffs are incident on UK taxpayers so reducing our welfare. Answer was that is what they were assuming the UK Gov would do Which is nuts.

  3. Oh and the range of plausible answers was huge but they only mention the central estimate. So my challenge was how can they tell whether the actions they take make any difference whatsoever? Apparently lots maths.

    Oh and what immigration and population forecast is assumed? What is GDP per capita under each scenario compared to the base case? Surely that is the key?

  4. Project Fear II – by the people who brought you Project Fear I.

    Is it laughable or deranged for officials whose credibility is shot to bits to warm over their previous nonsense and serve it up again with slightly improved numbers?

  5. Buzfeed says the WTO option “would reduce growth by 8% over that period”.

    But the Guardian writes: “It said national income would be 8% lower under a no deal scenario”

    Surely those are two very different things? If our national income is say 1.00 and we grow at 2% a year, then in 15 years it will be 1.35.

    Reducing the *growth* by 8% would mean we only got to 1.32

    But if it, as the Guardian says, it would be 8% lower as an absolute, would mean 1.25.

    Please correct me if I’m wrong here, but I’m guessing the Guardian is incorrect. If I’m right and we only get to 1.32 instead of 1.35, then meh.

  6. “Something we don’t have to do and something which would be stupid to do. But they’ll assume that we will…..”

    Given the level of economic understanding and decision-making shown by our politicians in recent [s]years[/s] [strikethrough]decades[/strikethrough] generations, I’d actually regard the assumption that they’d take the stupid route as pretty damn high, really.

    (Actually, looking game-theory-logically, it’s even a rational choice for them: tariffs look like they’re safeguarding jobs (very visibly) for some while in fact increasing costs (far less visibly) for everyone. Those who have been very visibly helped will be grateful and reward the politicians electorally, whilst those who have been harmed will probably never know why. See Trump-vs-free trade in the US for a living example)

  7. The stupid route is rational also because Whitehall is hostile to Brexit, so doing what it can to screw it up at the very least enables them to tell us they told us so (so we really, really ought to listen to them next time), if it does not create a volte face among the electorate who suddenly clamour for readmission.

  8. Presumably the counter-factual assumption is that everything would be tickety-boo with the EU and that would be no Euro-related crises ‘unexpectedly’ requiring greater input and cash from us.

    If these people had produced a report on the economic future of the EU in, say, 2005 it almost certainly would not have predicted the Greek crisis or anything like it, because the assumption was that the Euro was a splendid idea opposed only by nativists.

    In practice, though, you can’t make a prediction about future growth without making a great many economic and political predictions in both scenarios.

  9. The outcome of such studies always, but always, depends upon the outcome the writers the people paying the writers want it to have.


  10. @Tim W

    Your assumption is correct.

    C4 News allowed Patrick Minford edited ~30 secs on Free Trade, but not 0% WTO. Followed by long slot for chap who said “only 1% of economists agree Brexit can be good”.

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