A detailed investigation by Economists for Free Trade has shown that when Government policy on Brexit and its key objectives are used then the British economy will in fact grow by between two and four per cent better than if the UK had stayed in the EU.
The Alternative Brexit Impact Assessment has now been passed on to Cabinet ministers to inform the crucial discussion of the Brexit sub-committee on Thursday.
It also reveals that a “no deal” scenario gives Britain a £651 billion boost while the EU would lose £507 billion.
The discredited Government impact study was branded “Project Fear 2” after it was leaked to a pro-Remain website earlier this month and described as “flawed” by Brexit minister Steve Baker.
It led to claims that Treasury civil servants are deliberately trying to force ministers to accept staying under Brussels rule in the EU’s customs union.
The leak appeared to be timed to coincide with a push by EU chief negotiator Michel Barnier and his Remainer allies in Parliament to pressurise Britain to stay under Brussels rule in the single market and customs union giving up the right to control immigration and trade.
Former Conservative leader and prominent Brexiteer Iain Duncan Smith said: “This new study by some of our most respected economists, who have been right in the past on key issues such as the euro and the immediate effects of Brexit, deserves to be taken very seriously.
“It suggests that we should all be highly sceptical of Project Fear Mark 2 – the Treasury-led operation by Whitehall officials to discredit Brexit and browbeat ministers into the softest of departures from the EU.
“It shows that far from depressing UK economic growth in the years to come, escaping from the EU will boost domestic economic growth and raise living standards right across the country, particularly for the poorest.”
The study of the Treasury’s original assessment has been carried out by Margaret Thatcher’s former advisor Professor Patrick Minford; Boris Johnson’s former economic advisor Dr Gerard Lyons; Julian Jessop, Chief Economist at the Institute of Economic Affairs; and Roger Bootle, the founder and chairman of Capital Economics, one of the largest macro-economic consultancies in the world.
The leaked Government document claimed that growth would be eight per cent lower as a result of leaving the EU without a deal, with staying in the customs union and single market “a best case scenario” but still below expected growth rates.
This led to a claim that each British household would be £930 worse off as a result of Brexit.
The Economists for Free Trade report notes: “It has become evident that officials in all departments relevant to Brexit have been tasked by officials at No 10 to brief their ministers with PowerPoint presentations on the dire implications of this report.”
They also pointed out that during the referendum the Treasury claimed that Britain’s economic growth would be 7.5 per cent lower as a result of Brexit in what was then dubbed “Project Fear.”
The authors have said that the leaked draft by civil servants cannot be trusted.
They said: “We believe there is a strong economic argument on which to challenge this Whitehall narrative about the economy’s future under Brexit.
“We also believe the future under Brexit holds substantial potential gains for the UK.”
They pointed out that after their original economic modelling known as the “gravity approach” was exposed as being inaccurate the Treasury have adopted a new system to measure trade called Global Trade Analysis Project (GTAP) but came up with a similar result of growth being hurt by Brexit.
They said that the projections on a future relationship fed into the model are “unrealistically pessimistic”.
Economists for Free Trade said that civil servants “assume scenarios that are not consistent with announced Government policy and make policy assumptions that no sensible government would implement.”
The officials also appear to have ignored the positive impact of trade barriers coming down with the rest of the world.
Economists for Free Trade said: “To put this into a nutshell, officials have made their Whitehall analysis case by assuming absurdly that lowering enormous trade barriers against the rest of the world will have virtually no effect, while maintaining existing barrier-free trade with the EU under a Canada+ trade agreement will create huge costs in lost trade with the EU.”
Once UK Government policy of getting an improved version of the EU’s trade deal with Canada is factored into the model growth improves by between two and four per cent on what was expected.
The authors also noted that a breakdown in talks with the EU would be a massive boost for Britain contrary to the claims by civil servants in their impact study.
The Alternative Impact Assessment notes: “It appears that the breakdown of talks would be positive overall for the UK to the tune of a one-off gain of £38 billion on the EU budget, plus £180 billion from bringing forward the non-budgetary Brexit gains, plus £433 billion from EU tariff revenue, some £651 billion in all.
“For the EU it would mean a one-off loss of £38 billion in financial settlement, plus another one-off loss of £36 billion in terms of trade gain, plus the permanent loss due to paying UK tariff revenue of £433 billion.”