George Osborne Project Fear May 2016
The decision that the British people will make in exactly one month’s time – whether to remain in the European Union or to leave it – will affect families, jobs and the future of our country for decades to come.
I promised to set out a serious and sober assessment of the economic facts, to inform this vital decision for our country.
The Treasury document published five weeks ago set out a rigorous analysis of the long-term impact of leaving. It showed that under any alternative relationship with Europe, we would trade less, do less business and receive less investment. Its central estimate was that Britain would be permanently poorer by the equivalent of £4,300 per household by 2030 and every year thereafter. Depending on the new relationship with the EU, these long-term costs could be even larger.
This paper focuses on the immediate economic impact of a vote to leave and the two years that follow. Such a vote would change fundamentally not just the UK’s relationship with the EU, our largest trading partner, but also our relationship with the rest of the world. The instability and uncertainty that would trigger is assessed.
The Treasury analysis in this document uses a widely-accepted modelling approach that looks at the impact of this uncertainty and instability on financial markets, households and businesses, as our economy transitions to a worse trading arrangement with the EU.
I am grateful to Professor Sir Charles Bean, one of our country’s foremost economists and a former Deputy Governor of the Bank of England, who has reviewed this analysis and says that it “provides reasonable estimates of the likely size of the short-term impact of a vote to leave on the UK economy”.
The analysis in this document comes to a clear central conclusion: a vote to leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000, GDP would be 3.6% smaller, average real wages would be lower, inflation higher, sterling weaker, house prices would be hit and public borrowing would rise compared with a vote to remain.
These findings sit within the range of what is now an overwhelming weight of published estimates for this short-term impact, which all find that UK GDP would be lower following a vote to leave.
The analysis also presents a downside scenario, finding that the shock could be much more profound, meaning the effect on the economy would be worse still. The rise in uncertainty could be amplified, the volatility in financial markets more tumultuous, and the extent of the impact to living standards more acute. In this severe scenario, GDP would be 6% smaller, there would be a deeper recession, and the number of people made unemployed would rise by around 800,000 compared with a vote to remain. The hit to wages, inflation, house prices and borrowing would be larger. There is a credible risk that this more acute scenario could materialise.
My first duty as Chancellor is to seek to deliver economic security and higher living standards for the people of Britain. We already know the long-term effects of a vote to leave: Britain would be permanently poorer. Now we know the short-term shock too: an economy in recession, major job losses and a self-inflicted blow to living standards and aspirations of the British people.
A vote to remain in the EU, however, would be the best way to ensure continued growth and safeguard jobs, providing security for working people now and opportunity for the next generation.
This document provides the facts that I hope the people of Britain will consider when they make this historic decision one month from today.
George Osborne
Chancellor of the Exchequer
May 2016
Read Full News Story » I Used to be a Remainer, but I'm Alright Now!
