The government has finally been forced to admit that leaving the European Union is bad for our wealth. Its admission was hedged with attempts to soften the stark consensus among economists that new barriers to trade between the United Kingdom and the EU27 would have a negative effect on our prosperity.
The Treasury analysis, published today, suggested that national income would be 1-2 per cent lower after 15 years than if we stayed in the EU, which sounds trivial. But this was assuming that our future trade with the EU would be frictionless – under the terms of the Chequers plan set out by the cabinet in the summer.
Those terms have been rejected by the EU, and the more realistic assumption is that, although there would be no tariffs on UK-EU trade, there would be new non-tariff barriers. Any goods arriving in the EU’s single market would be subject to checks to ensure they meet EU regulations.
In that case, the Treasury predicts that national income per person would be 2-3 per cent lower than if we stayed in the EU. This is a significant cost and, although this estimate is subject to a lot of uncertainty, the direction of the effect is not in doubt.
To his credit, Philip Hammond, the chancellor, was reasonably honest with people in a series of interviews this morning – so honest that someone decided that he would not come to the House of Commons to answer questions from MPs this afternoon.
Theresa May, on the other hand, was less straightforward. At prime minister’s questions, she refused to accept that Britain would be poorer than under the status quo, by talking about the “status quo today”. She is entitled, of course, to point out that the economy is expected to grow over the next 15 years, but she is not entitled to ignore the likelihood that it will grow less than if we stayed in the EU.
Nor was it being straight with people to say that they “would be better off with this deal” – comparing it not with staying in the EU but with leaving the EU without a deal.
We should have been warned: she commented earlier in the week that it was a matter for debate as to “the extent to which economic forecasts can be described as facts”. Well, the idea that barriers to trade make people poorer than they otherwise would be is about as close to fact as the laws of economics can be.
The government’s grudging, partial and belated acceptance of this reality is a small step forward, and it is part of the growing case for giving the British people the Final Say on the terms of Brexit – or whether they want to go ahead with it at all.
It was significant that John McDonnell, the shadow chancellor, took the opposition a small step closer to support for another referendum by saying it “might be an option we seize upon”, that Remain should be on the ballot paper, and that, if the vote were held, he would vote Remain again – something Jeremy Corbyn has avoided saying.
The Treasury analysis contains one other important message, by confirming that the damage of leaving the EU without a deal would be substantial. And it was notable that Mr McDonnell said that, although Remain should be an option on the ballot paper in a new referendum, a no-deal Brexit should not be.
No one knows what is going to happen in the next few weeks, but it is becoming clearer that going back to the people for a final say is the main alternative to the prime minister’s deal – and that if there is a new referendum, the choice should be between that deal and staying in the EU.
Today’s Treasury analysis clarifies that choice: do the British people believe the intangible gains of sovereignty are worth being slightly but significantly poorer than they would otherwise would be? Parliament must now allow the people to be asked that question in a Final Say referendum.
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