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18 April 2016

George Osborne’s economic assault will wound the Brexiters

The risk for the Leave campaign is that financial fears trump immigration concerns.

By George Eaton

In recent weeks, George Osborne has been charged with returning to submarine mode. The Chancellor was said to be lying low during the EU referendum campaign in the hope of preventing even greater damage to his Tory leadership ambitions. He certainly isn’t now. Following the official start of the campaign, Osborne has unleashed the Treasury’s arsenal in defence of the EU.

The headline figure from the economic analysis published today is that Britain would be worse off by the equivalent of £4,300 a year per household in 2030 were the UK to leave (through a 6.2 per cent fall in GDP). This is based on the assumption that a bilateral agreement, such as Canada’s (the model recently floated by Boris Johnson), would be negotiated with Brussels. Were the UK to follow Norway’s example and join the European Economic Area, the cost would be smaller at £2,600 per household (though the UK would be required to permit free movement of people and contribute to the EU Budget). Were it to trade with the EU under WTO rules, the cost would be greater at £5,200.

What unites the figures is more important than what divides them. Under every scenario, the UK is forecast to be significantly worse off. As in the case of the currency question during the Scottish referendum, Osborne’s aim is to discredit every option but the status quo. The Treasury’s forecast of a 6.2 per cent fall in GDP is more pessimistic than others (NIESR projected a 2.25 per cent fall, Oxford Economics a 3.9 per cent fall). But the difference, again, is one of degree. It hardly helps the Leave campaign to contend that the economy won’t shrink by quite as much as suggested. Voters will only hear the message that the economy will shrink.

For that reason, Leave’s response has largely been to try and change the subject – to immigration. The Treasury’s non-Brexit growth forecasts assume that the government continues to overshoot its net migration target of “tens of thousands” a year (with an extra 3.2 million people by 2030). Voters are certainly troubled by the prospect of perpetually high immigration. The problem for the Brexiters is that may be even more troubled by the prospect of economic decline. Indeed, a ComRes poll for today’s Sun shows that the economy trumps immigration (by 47 to 24 per cent) as the most important influence on voting intention. Unlike its online counterparts, the phone survey also gives Remain a healthy lead of seven points (just as such polls favoured the Tories during the general election).

Like Labour, Ukip and the SNP before them, the Brexiters confront the risk that economic trust will again deliver a victory for David Cameron.To counter Osborne’s blitzkrieg, the Leave campaign needs to demonstrate that the economic cost of withdrawal would either be negligible or non-existent. Ideally, it needs to publish its own Treasury-style analysis showing how much each household would gain from Breixt. The problem for Leave is how many economists say that is something it simply can’t do: because, based on all reasonable assumptions, the UK will be worse off outside the EU.

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