Brexit: Economic Impact

Lord Hannay of Chiswick Excerpts

Tuesday 18th October 2016 Lords Chamber

Asked by

[Lord Hannay of Chiswick]

To ask Her Majesty’s Government whether they stand behind the forecasts for the shortfall in the United Kingdom’s economic growth as a result of Brexit set out in HM Treasury Analysis: The long-term economic impact of EU membership and the alternatives, published in April.

[Lord Young of Cookham (Con)]

My Lords, as the Chancellor has said, there will be some adjustment and uncertainty in the economy from the referendum decision. The progress and outcome of the negotiations will determine its nature, but we shall be pushing for the best possible deal for the United Kingdom. We are well placed to take advantage of the opportunities from Brexit and, as the Prime Minister has said, there is optimism about the future.

[Lord Hannay of Chiswick (CB)]

My Lords, I thank the noble Lord for that reply, which I categorise as somewhere between equivocal and evasive. I asked him whether the Treasury stood by certain figures. Will he recognise that these figures showed a loss of GDP of 3.8% in the event of our leaving the European Union and having a single market outcome; of 6.2% if we merely had a free trade agreement; and of 7.5% if we fell back on the default option of WTO membership? Those are significant figures with significant gaps between them. Is it not about time that the Government told us a bit more about them and identified the impact on individual sectors of the economy, some of which, allowing for the nature of all averages, will be hurt much more by these changes than others?

[Lord Young of Cookham]

I thank the noble Lord for prefacing his remarks with his customary diplomacy. It is important to recall exactly what the Treasury analysis did. It took as a baseline continued membership of the EU, and then tried to predict the impact on GDP of three scenarios: first, the Norway solution or EEA; secondly, the Canada option; and thirdly, the WTO option. The Government have subsequently made it clear that they are going not for any of those three options but for a bespoke option which will not necessarily parallel any of those. For that reason, there is no particular advantage in updating the analysis that the noble Lord referred to. As for what he said about sectors, that is an important issue, and work is going on in government departments on the impact of Brexit on particular sectors of the economy.