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Hard Brexit to cost UK up to £66bn a year, says Treasury

Published 11/10/2016

Brexit Secretary David Davis said the referendum vote for Brexit was 'clear, overwhelming and unarguable'
Brexit Secretary David Davis said the referendum vote for Brexit was 'clear, overwhelming and unarguable'

Treasury coffers will take a £66 billion annual hit if Britain goes for a so-called hard Brexit, Cabinet ministers have been warned.

Leaked G overnment papers suggest leaving the single market and switching to World Trade Organisation (WTO) rules would cause GDP to fall by up to 9.5% compared with if the country remained in the European Union.

The d raft Cabinet committee paper seen by The Times is based on forecasts from the controversial study into the predicted impact of quitting the EU published by George Osborne in April during the referendum campaign.

Although the then chancellor faced widespread criticism over the report, the Treasury stands by its calculations, according to The Times.

The documents says: "The Treasury estimates that UK GDP would be between 5.4% and 9.5% of GDP lower after 15 years if we left the EU with no successor arrangement, with a central estimate of 7.5%."

It adds: "The net impact on public sector receipts - assuming no contributions to the EU and current receipts from the EU are replicated in full - would be a loss of between £38 billion and £66 billion per year after 15 years, driven by the smaller size of the economy."

Brexit backers who have seen the documents told the newspaper the figures were unrealistic and claimed there was a push to "make leaving the single market look bad".

But prominent Remain campaigners pushing for a "soft" Brexit that would keep Britain in the single market said the documents showed the "horrific damage" of leaving the trading bloc.

Conservative former minister Anna Soubry, a supporter of the Open Britain campaign, said: "The horrific damage of a hard Brexit is clear. Less tax revenue means less to invest in schools and hospitals, lower trade and investment means businesses and jobs at risk.

"This danger is precisely why Parliament must be involved in the principles to guide the Brexit negotiations.

"Britain will leave the EU, but we must do so in a way the protects our prosperity and reduces risk. The Government should now make clear the 'WTO option' isn't on the table."

Prime Minister Theresa May is facing growing pressure to allow MPs a vote on Brexit and the Government is also fighting a legal challenge over the use of royal prerogative to invoke Article 50, the process for leaving the EU.

Brexit Secretary David Davis told MPs the Government will "observe the constitutional and legal precedents" on giving MPs a vote on any treaty setting out Britain's new relationship with the European Union.

Liberal Democrat leader Tim Farron said the leaked documents showed quitting the single market would wreck the economy.

" This is yet more proof that hard Brexit would be an act of sheer economic vandalism," he said.

"The Liberal Democrats will stand up for Britain's membership of the single market.

"We cannot stand by while this reckless, divisive and uncaring Conservative Government wrecks the UK economy."

A Government spokesman said: "We want the best outcome for Britain. That means pursuing a bespoke arrangement which gives British companies the maximum freedom to trade with and operate in the single market, and enables us to decide for ourselves how we control immigration."

Shadow chancellor John McDonnell said: "Losing access to the single market would be devastating for jobs, livelihoods and our public services, yet the Tory Government are prepared to take this desperate step, despite being warned by their own experts of the consequences.

"The British people voted to leave the European Union and all sides must respect that decision, but what they certainly didn't vote for was economic misery and the loss of jobs.

"The Tories should be sticking to their manifesto promise and fighting tooth and nail for access to the single market. Instead they are abandoning Britain's clear national interests by putting narrow party political concerns first."

In a speech to the CBI, London's Labour Mayor Sadiq Khan said : "There's been a lot of tough talk from the Government in recent days with what looks like a lurch towards a 'hard Brexit' approach. It seems some people at the heart of Government are willing to lead us ever closer to the cliff edge.

"Not only would hard Brexit be the wrong approach for our country, but the strong rhetoric from ministers - and the unnecessary rush to trigger Article 50 - is sending all the wrong signals to investors during this uncertain period.

"For if we were to leave the single market without an agreement in place for privileged access for British business, the consequences could be disastrous. Not just to London, but to the whole of the British economy - hitting jobs and growth.

"A hard Brexit approach could never be defended as being done in the name of principle or 'taking back control', as the clear motivation would be political expediency in an attempt to turn an extremely complex argument into a simple one. An approach that would not only be deeply irresponsible, but could cause significant economic damage."

Mr Khan urged ministers to be "on the side of business and the City of London" in Article 50 negotiations and called for a new work permit system to ensure the capital can continue to attract talent from around the world.

The Scottish National Party's Westminster spokeswoman for international trade, Tasmina Ahmed-Sheikh, said: " This leaked report not only shows the deep divisions at the centre of Theresa May's Government, but also clearly demonstrates that Cabinet ministers like Liam Fox, who advocate a hard Brexit, value ideological purity over economic competence or the greater public good.

"Everyone already knows that abandoning the single market would be bad news for business and the wider economy - what this Treasury report does is calculate the scale of the damage that would be done.

"It's little wonder that, by abandoning all economic reason, the Tories are running scared from any proper parliamentary scrutiny of their damaging plans."

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