Osborne warns Brexit will force us into ‘DIY’ recession
Don’t throw it all away’ he pleads Slump ‘would last for a year’ But IDS slams ‘biased’ forecasts
BRITAIN will be plunged into a year-long ‘DIY recession’ if it votes to leave the EU, George Osborne will claim today.
In the latest of a series of increasingly lurid warnings, the Chancellor will urge the public not to ‘throw it all away’ by voting for an outcome that would lead to an inevitable downturn.
He will publish new analysis by the Treasury suggesting the economy will be tipped into a recession, with Gross Domestic Product (GDP), a key measure of economic strength, up to a staggering 6 per cent lower than it would have been by 2018.
But former Tory leader and Brexit campaigner Iain Duncan Smith last night suggested the prediction was dishonest, describing the Treasury report as a ‘deeply biased view of the future [which] should not be believed by anyone’.
Today’s analysis goes much further than comments from Bank of England Governor Mark Carney, who sparked anger earlier this month when he said Brexit could cause a recession.
Treasury sources said all scenarios modelled by officials pointed to a ‘technical recession’ – defined as four consecutive quarters of falling GDP.
Figures from the Office for Budget Responsibility (OBR) predict that Britain’s GDP is currently set to grow by 4.2 per cent over the next two years.
In the Treasury’s ‘cautious’ scenario, Britain would negotiate a new trade deal with the EU, but Brexit would still cause an economic ‘shock’ resulting in GDP being 3.6 per cent lower than it would have been – equal to it rising by a modest 0.6 per cent over two years.
In a second ‘plausible’ scenario, there would be no trade deal with the EU and Brexit would spark a ‘severe shock’, leaving GDP 6 per cent lower than it would have been – equal to a 1.8 per cent fall by 2018.
Speaking ahead of the document’s publication, Mr Osborne said: ‘It’s only been eight years since Britain entered the deepest recession our country has seen since the Second World War.
‘The British people have worked so hard to get our country back on track. Do we want to throw it all away? With exactly one month to go to the referendum, the British people must ask themselves this question – can we knowingly vote for a recession?
‘Does Britain really want this DIY recession? Because that’s what the evidence shows we’ll get if we vote to leave the EU.’ Mr Osborne will launch the document at an event today with David Cameron, just 72 hours before the start of the ‘purdah’ period, during which ministers are banned from making announcements that could influence the way Britons vote in the referendum. The first postal ballots will be sent out on Friday.
Private polling for both camps suggests that previous Treasury warnings have had a marked, short-term impact on support for Britain’s membership.
Mr Duncan Smith hit back last night, pointing out the Treasury was stripped of its role in economic forecasting six years ago because its record was so poor.
The former work and pensions secretary, who quit the Cabinet in March, said: ‘As George Osborne has himself admitted, the reason he created the independent forecaster, the OBR, was because by 2010 the public simply did not believe the Government’s own economic forecasts. The Treasury has consistently got its predictions wrong in the past. This Treasury document is not an honest assessment but a deeply biased view of the future and it should not be believed by anyone.
‘It is a fact that we hand over £350million a week to the EU. If we vote to leave we can take back control of that money and use it to help people here in Britain. We will also take back control over our economy, creating hundreds of thousands of new jobs as we do trade deals with growing countries in the rest of the world.’
Treasury sources last night said the forecast was based on three factors that could suppress economic growth: a ‘transition effect’ as Britain becomes ‘less open to trade and investment’; an ‘uncertainty effect’, with businesses and families putting spending on hold until the dust settles; and a ‘financial conditions effect’, meaning turmoil in the financial markets.
Mr Osborne has previously claimed that Brexit would lead to families being £4,300 worse off than they would have been by 2030 and that house prices would be at least 10 per cent lower than they would have been by 2018.
Both claims have been widely criticised as ‘scaremongering’.
Meanwhile Boris Johnson and Employment Minister Priti Patel are among more than 20 Leavesupporting MPs who have written an open letter claiming the EU is preventing stronger ties with Commonwealth countries.
It states that Britain’s trade policy is ‘controlled by the EU’, hampering our ability to sign trade deals with non-EU countries, and adds: ‘As well as damaging our economy, membership of the EU has left Britain vulnerable to the pressures of mass uncontrolled levels of immigration from Europe.’