As the government plays down the impact on its Brexit strategy, we examine the key points
Why are the latest leaked forecasts so damaging?
They spell out that all varieties of Brexit on offer would make Britain poorer, significantly so in the case of anything other than staying very closely linked to the EU through single market membership. While some ministers maintain they can still flout EU wishes and achieve this without full membership, it is telling that this option is not even among those presented to ministers in the “cross-Whitehall exit analysis” obtained by Buzzfeed. The economic modelling used also punctures the still popular claim among Brexiters that new trade deals overseas would more than compensate for lost EU trade.
But the Brexit secretary told us there were no impact assessments?
The leaked documents may attempt to assess the impact of of leaving the EU, but once again the government is trying to play down their damaging impact on its Brexit strategy by denying they meet exacting empirical standards. Last time around, David Davis was forced to backtrack when his bluff was called by parliament. He admitted to MPs that the sector-by-sector preparatory work he had previously boasted of did not contain quantitative forecasts and therefore did not technically qualify as the sort of impact study typically carried out before new legislation is brought in. This time, the new briefing papers prepared for ministers do spell out the likely cost of leaving, though they appear to be less comprehensive than the more anodyne sectoral reports Davis was eventually forced to publish. Put the two bodies of work together, however, and you have a damning assessment of what various Brexit scenarios will do to the economy, whatever you call it.
Were ministers warned before?
This latest exit analysis appears to draw heavily on earlier work carried out over a year ago by the Treasury, which first tried to quantify the relative benefits of new overseas trade deals and compared it unfavourably with lost EU access. The overwhelming importance of our near neighbours and relative lack of benefit from incremental new deals with the US and others is said to have been the motivating factor behind the chancellor’s longstanding opposition to hard Brexit. When Philip Hammond mentioned this work in a recent select committee, the Treasury faced calls to release the original study; but instead it seems to have surfaced in a disguised form through the exit analysis prepared by Davis’s department for ministers before a meeting to determine Britain’s phase two demands. Same message, different authors, much wider circulation.
Why is the timing so bad now?
Downing Street has long tried to avoid making the hard choices spelled out in the exit analysis, but if it is to have a meaningful conversation among ministers about where to go next it needed to start bringing the party up to speed. Other leaks of conversations among leading Brexiters such as Nadine Dorries have shown that many still have a very shaky grasp of what is at stake and the limited nature of Britain’s options. The leak may have been intended to support the orthodox Treasury line that a softer Brexit is preferable but it may just as easily have the effect of blowing apart the delicate compromise that May has attempted to maintain just at the moment that she needs to start making strategy clearer in Brussels.
Why should we believe any forecasts?
Davis has long argued that economic forecasting is a bogus science, particularly as Treasury estimates of the impact of the Brexit referendum proved, at best, premature, and at worst, wildly over-pessimistic. Iain Duncan Smith took to the airwaves on Tuesday morning to continue in a similar vein, claiming the latest leak was “highly suspicious” and should be “taken with a pinch of salt”. The trouble is that the whole Brexit project is based on an even shakier forecast, which is that the benefits of future trade deals will outweigh any short-term EU impact. Davis even cited forecasts that new trade deals with countries such as the US, could lift trade by 40%, a far cry from the 0.2% benefit to GDP seen now by officials. The difference is that the sceptics have tables, charts and spreadsheets; the Brexiters have only their own faith to propel them forward.