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George Osborne: UK would be 'permanently poorer' outside EU George Osborne defends Treasury's gloomy EU exit forecast
(about 2 hours later)
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. Chancellor George Osborne has defended claims an EU exit would cost households an average £4,300 a year - after Leave campaigners said it was "absurd".
A Treasury analysis suggests an EU exit could see the UK economy 6% smaller than it would otherwise be by 2030. A Treasury analysis says the UK economy would be 6% smaller if it left the EU 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. This would leave a £36bn hole in the public finances said Mr Osborne, who called the report "serious and sober".
Leave campaigners called the claims "absurd" and "worthless" given the Treasury's past forecasting record. But exit campaigners said the estimates were "worthless" and "unbelievable" given the Treasury's past 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." Former Conservative Chancellor Lord Lamont, of Vote Leave, said: "The chancellor has endorsed a forecast which looks 14 years ahead and predicts a fall in GDP of less than 0.5% a year - well within the margin of error.
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 " "Few forecasts are right for 14 months, let alone 14 years. Such precision is spurious, and entirely unbelievable."
Meanwhile, Conservative MP John Redwood, also campaigning for an Out vote, pointed out the Treasury had "failed to forecast the huge damage membership of the European Exchange Rate Mechanism inflicted on us", as well as the impact of the 2011 Eurozone crisis.
"I think their 2030 forecast is completely worthless," he said.
But Mr Osborne told BBC Radio 4's Today: "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 AhmedAnalysis, 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 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 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.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.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 KamalRead 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.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."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". Mr Osborne 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, says there would be a £36bn a year hit for the UK's public finances if it left the EU - which is equivalent to £4,300 a year per household in the UK or equivalent to raising the basic rate of income tax by 8p.
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.
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.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.The report looks at three scenarios in the event of a vote to leave the EU on 23 June.
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.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.
'How negative?'
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.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".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.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". Commenting on the Treasury report, Paul Johnson, director of economic think tank the Institute of Fiscal Studies, said voters can "put quite a lot of store" by the idea that a vote to leave would have a negative impact on the UK economy.
"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. "Exactly how negative? Much more difficult to be clear about," he said.
"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. Vote Leave said the report failed to consider the impact of continued high migration to the UK, as the document was based on an assumption that net migration would fall to 185,000 a year from 2021 - exceeding the government's "tens of thousands" target.
'Biased' Energy minister Andrea Leadsom, a Vote Leave supporter, said: "A much fairer way to present this argument would be to also look at the impact if we remain in on further migration, further pressure on public services, the impact on security and so on."
Energy minister Andrea Leadsom, a Vote Leave supporter, said the report was "extraordinarily biased" and the UK would have a "massively bright" future outside the EU. UKIP finance spokesman Steven Woolfe, meanwhile, accused the chancellor of politicising the Treasury and said the report's "base assumptions are questionable at best and useless at worst".
The Treasury analysis, she said, did not take into account the benefits of not having to to pay into the EU budget and the greater flexibility to negotiate trade deals or the impact on levels of migration and pressure on public services, such as school places, of remaining in the EU. He said there were "more potential benefits, less uncertainties" in leaving than staying in, and added: "It's a pity that the UK Treasury was not tasked to investigate this scenario rather than disappearing down a forecasting rabbit hole dug by George Osborne."
Leaving the EU would merely represent a "change of governance", she told Radio 4's World at One, with a smaller economic effect than the UK's exit from the Exchange Rate Mechanism in 1992.
"My own view is that in the early days people would be horrified at how little would change," she said.
But 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".But 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."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.