Osborne's damaged reputation encourages doubt in Treasury Brexit forecast - yet findings match those of other studies saying Brexit will be a blow to UK economy

The biggest issues, like accountability, have become international matters that require a multi-national response. In Europe, this international approach has encouraged not only prosperity, but shared prosperity.

The Chancellor has taken the opportunity presented by a UK Treasury department report released today, an intervention by the government likely to once again anger those in the Vote Leave camp, to stress how an exit would negatively affect the economy (BBC, 2016).

The Treasury decided to put front and centre its middle of three case studies, based on a Canada-EU style agreement, that suggested that a 6% hit to the economy would the result from an exit (Ahmed, 2016). For its 'best case' study, which involves following Norway and joining the European Economic Area, the treasury's numbers where closer to forecasts by other bodies (Chu, 2016) - which suggested smaller losses of 2-4%.

Those in Vote Leave have been quick to dismiss the forecasts on the simple grounds that Chancellor George Osborne and the Treasury have been so far from the mark, for so long on the economy (ITV, 2016) - a perfect demonstration of why reputation and the appearance of competence matter so much.

Even after years of missed targets, Osborne had managed to maintain the impression with the public that he, and his party, where the safest hands for the economy. Yet that image was massively weakened by the Budget 2016 debacle, when Iain Duncan Smith resigned and the Chancellor faced heavy criticism for high end tax cuts being laid out alongside cuts to disability welfare support (BBC, 2016{2}).

So with the Chancellor tarnished, where can we turn to verify the Treasury's findings?

Well, first of all, the Treasury's figures certainly concur with the other independent studies, despite variations, in saying that an exit from the European Union will be bad for the economy. That opinion is also shared by organisations ranging from the IMF, the overseers and facilitators of the global economy the International Monetary Fund, to the IFS, the independent Institute for Fiscal Studies (Allen & Asthana, 2016; BBC, 2016{3}).

Secondly, the idea of an EU exit having - at least in the short term - a negative impact on the economy has even been admitted by Boris Johnson, the most high profile supporter of the exit campaign (Stewart & Watt, 2016). At the core of why those in favour of exit say that this initial impact is worth experiencing, is to pursue a believed greater long term potential outside of the EU. Yet the exit campaign's own pretty extravagant claims must be treated with caution (Full Fact, 2016).

Even if post-exit economic prosperity - outmatching what might be expected in the EU - could be achieved, there are no guarantees that prosperity would be shared. The immediate benefit of any new investment would likely go straight into the hands of the rich and, as Ed Miliband stressed at the weekend, wealth in the hands of the rich doesn't trickle down but is instead stashed (Cadwalladr, 2016).

Reinforcing that point is the long standing aim of those on the 'pro-business' Right to 'repatriate powers' from EU regarding employment laws. The stated aim is to cut regulations pertaining to labour protections so as to make labour more flexible for businesses, cutting their costs. But that also means weakening the rights of workers (Farhat, 2014), and increasing the already precarious situation for people in work.

In contrast, the EU has built, gradually, an expanding market area, with free trade within and protection at the edge; with the free trade area being covered by rules and regulations that ensure protections for workers from unfairly low pay and poor treatment - on the basis of decisions made at the European level on the grounds that they affect everyone in Europe.

By building regulations into its system, the EU offers an alternative to the long standing debate between free trade and protection - lower prices and greater efficiency at the cost of precarity and low wages, versus the potential for higher wages and sheltered domestic production that comes with the risk of much higher prices and damage being done to international trade relationships through trade barriers.

In essence, the EU has built a pioneering model for the advancement, not just of free trade, but also of fair trade, where workers are protected and their contributions justly rewarded. Where the rights of workers, subject to multi-national corporations, are protected by corresponding multi-national agreements and cooperation (Stewart, 2016).

The world has gone global and multi-national. Corporations and wealthy individuals avoid tax across borders, globally and multi-nationally. If we want to work for the common good, if we want accountability, our horizons also have to broaden. The European Union undoubtedly needs reform to better live up to them. But achieving them is now a project that has to be completed internationally and the EU, warts and all, is the best medium we have in place at the moment.

References

'George Osborne: UK would be 'permanently poorer' outside EU'; on the BBC; 18 April 2016.

Kamal Ahmed's 'EU exit will hit trade and living standards, Treasury says'; on the BBC; 17 April 2016.

Ben Chu's 'Just how credible is the Treasury's Brexit forecast? The answer in two charts: Other forecasters have projected a considerably smaller negative economic impact from Britain leaving the European Union'; in The Independent; 18 April 2016.

Chris Ship's 'Chancellor's predictions for Brexit: A price worth paying to quit EU?'; on ITV News; 18 April 2016.

'Iain Duncan Smith quits over planned disability benefit changes'; on the BBC; 19 March 2016{2}.

Katie Allen & Anushka Asthana's 'IMF says Britain leaving the EU is a significant risk: Exit from EU ‘could do severe regional and global damage’ by disrupting trade relationships, says International Monetary Fund'; in The Guardian; 12 April 2016.

'Watch: IFS's Paul Johnson and Conservative MP John Redwood on Treasury report'; on the BBC; 18 April 2016{3}.

Heather Stewart & Nicholas Watt's 'David Cameron: economic shock of EU exit 'not a price worth paying' - PM to counter argument by pro-Brexit Boris Johnson that initial uncertainty would be followed by rapid improvement'; in The Guardian; 10 March 2016.

'EU facts behind the claims: Economic costs and benefits'; from UK in a Changing Europe Fellows, on Full Fact; 13 April 2016.

Carole Cadwalladr's 'Ed Miliband: Panama Papers show that wealth doesn’t trickle down. It gets stashed - As former Labour leader Ed Miliband offers his support to a new documentary, The Divide, he is as committed as ever to campaigning on inequality'; in The Guardian; 17 April 2016.

Beth Farhat's 'We need remuneration not repatriation'; from the TUC - Trades Union Congress; 19 May 2014.

Heather Stewart's 'EU gives 'only hope' for fairer trade and climate action, MPs' letter says: Labour MPs and peers who signed the letter say staying in the union is the best way to pursue social democratic aims'; in The Guardian; 17 April 2016.