I noticed a bit of a Twitter spat yesterday about the Treasury's estimate that Brexit will cost Britain 4% of its GDP, roughly £100 billion a year. The figure was originally given as being "in the long run" which was defined as 15 years, dating from April 2016 when the impact of Brexit was being assessed by Whitehall. When the Treasury published its long-term impact document the executive summary predicted a bilateral trade agreement would cost us somewhere between 4.6 and 7.8% of GDP. This was described as the "annual impact of leaving the EU after 15 years." In short, GDP would fall gradually until it was 4% less than it would have been had we remained in the EU.
The leaked Cross Whitehall briefing paper from January 2018 put the range slightly better at -3.1% to -6.1% with a central estimate of -4.8%. This was in the middle of a series of independent forecasters, most of which thought that Brexit would be negative.
The IEA thought an FTA with Brussels would mean the impact of Brexit would be neutral. That figure was based on Britain negotiating new FTAs with the USA, China, Brazil, Russia, Australia, and India. Some hope. The only one we've signed is with Australia. The others look to be further away now than in 2016.
The only forecasters who believed Brexit might have a positive impact were Open Europe and the hopeless Economists for Free Trade (the EFT). Before the referendum, this group was known as Economists for Brexit, including the discredited Sir Patrick Minford.
The OBR now regularly assumes the loss of GDP to be about 4% by 2030.
Gully Foyle @TerraOrBust (I assume that isn't his real name) defends Brexit to the hilt and seems to think everything is going well. He ridiculed Catio Miles @CatioMiles (again not sure if that's a pseudonym or not) for suggesting this was 'per year.' I don't think Mr Miles suggested or ever thought the UK economy was shrinking by 4% every year (i.e. 8% after two years).
Then Maureen Brown butts in:
My dear, it isn't.Educate yourself.The claim was a loss of 4% GDP growth, not GDP, over the next few years.— Maureen Brown (@bro69018) June 2, 2024
She has a different take and thinks we are only losing a small fraction of the one or two percent growth at best that we are seeing now. In other words, we are still getting 96% of the economic expansion we would have seen in the EU. This too is wrong.
Catio Miles also believes we'll lose 4% of GDP by 2030 and then stay at that position in perpetuity:
It’s growing to 4% per year and then that gap remains per year in perpetuity.
— Catio Miles 🇺🇦🇪🇺 (@CatioMiles) June 2, 2024
Unless we rejoin.
But I know you know it but want to remain a brave troll for your hapless followers.
Again, I don't think this is what the Treasury or the OBR are saying. The 15-year horizon is simply a reasonable time frame. Beyond that, it's hard to be taken seriously since so many things could change assumptions.
But there is zero reason to think there is some economic law that will just keep us shadowing the EU, just 4% behind. Brexit means we will almost certainly continue to fall back at a similar rate.
In the 1960s we were anxious to join the EEC because it was growing faster, but MacMillan, Wilson, and Heath didn't think the bloc would get 4% ahead and then we would stay that far behind forever. They were worried the EEC would just keep growing faster until they were massively ahead of us.
How can we test if the Treasury/OBR forecast is true? If GDP was slowly shrinking, assuming we want to fund public services at more or less the same level as before, we would expect taxes as a percentage of GDP to rise to higher and higher levels. And this is precisely what we are seeing. Taxes are at a 75-year high while services are being cut to the bone. I rest my case.
Gully Foyle has produced a list of 50 Brexit benefits, most of which aren't benefits at all (although it has to be said, some are).
One (No 33 on his list) is this:
[ 33 ]As found by the National Federation of Fishermen's Organisations (NFFO) "Brexit Balance Sheet" report in September 2021, the UK fishing industry as a whole is now better off by over £50 million a year (£250 million by 2026), than it was when inside the EU.With this… pic.twitter.com/IIBtWJoFdT— Gully Foyle #UKTrade (@TerraOrBust) May 21, 2024
Intrigued, I click on the link and read a paper by Gary Taylor, former DEFRA lead fisheries negotiator in the TCA talks. The paper begins:
"The assessment shows that there are very few winners and a great many losers. Gary Taylor’s analysis suggests that the bulk of the UK fishing fleet is on a trajectory to incur losses amounting to £64 million or more per year, with a total loss in excess of £300 million by 2026, unless changes are secured through international fisheries negotiation."
