by Jamie Cater 18th April, 2016

EU Referendum series: Osborne risks wrath of Vote Leave campaigners

Following the beginning of the referendum campaigns in earnest at the end of last week, the Treasury has published its assessment of where the UK will stand if, on 23rd June, it votes to leave the EU. Not surprisingly, the document has ruffled feathers in the Leave campaign and emboldened those arguing to remain, with its central claim that the British economy would 6% worse off than it otherwise would be should a Brexit occur in two months’ time.

George Osborne’s claim that each household could lose as much £4,300 were Britain to leave the EU has immediately been decried by the Leave campaign as a tactic straight out of the so-called ‘Project Fear’ handbook, with some even using the Chancellor’s apparently chequered history of economic forecasting to cast doubt on the Treasury’s analysis. Osborne has been accused of ‘intellectual dishonesty’ by publishing the document, in addition to seasoned Eurosceptic and former Tory leadership contender John Redwood calling the paper ‘worthless’. Whether or not it is simply a scare tactic, it certainly seems to have the Leave campaign a little rattled.

The cynicism of Redwood and his colleagues may be an effective technique to appeal to those in the electorate tempted by a vote to leave, dubious about the intentions of senior politicians who pontificate on the effects of the vote on ‘ordinary working people’. The Remain campaign may be fearful that the Treasury’s intervention may do more harm than good, but its weighty contribution – coming in at over 200 pages – constitutes an important part of the debate that will not be easily brushed aside by the Eurosceptics.

The paper does its best to appeal to voters who elected the Conservatives in 2015 but are sceptical about the value of the EU, deploying arguments that look remarkably similar to those used against Labour in last year’s general election. A Brexit, it argues, would lead to higher taxes and more borrowing to sustain public services; it implies that there would be an 8p rise in the basic rate of income tax as a result. These are well-rehearsed arguments for activists, but it remains to be seen whether this analysis holds sway with wider electorate.

The purpose of the paper is not, of course, to provide a full and accurate forecast of the UK’s economic prospects over the next decade and a half. Rather, it is to summarise the difference between two potential versions of the UK’s future based on the possibility of a substantial change in the country’s trading relationship with the world. It is deliberately cautious in its outlook, despite taking a comprehensive view of the potential risks of leaving the EU, and arguably presents a more politically-constricted version of the case to remain than some campaigners would perhaps have liked to have seen, despite the protestations from the Leave camp.

In this light, one of the potential weaknesses of the Treasury’s argument that, unsurprisingly, has not been pounced on by the Leave campaign is that it does not account for any significant economic shock of leaving the EU. The paper’s calculations of the impact on trade and GDP growth are made on the assumption that any immediate economic consequences of leaving would have been rectified, which some in the Remain campaign may well view as too cautious and optimistic.

All in all, while neither side will be completely satisfied with the Treasury’s analysis, it provides as authoritative a foundation on which the Remain campaign can hope to build its economic argument. With the Leave campaign maintaining its argument that the UK will prosper once it is freed from the shackles of the apparently protectionist EU, it will need its own comprehensive economic analysis to support its claims if it is to compete with the Treasury.

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