|
|
Against a backdrop of coronavirus and slowing global growth, the Office for Budget Responsibility modelled for a 5.2 per cent loss of potential GDP over 15 years if a “typical” free trade agreement was struck.
The watchdog said that Britain had already lost 2 per cent of potential output since the 2016 Leave vote with a further 3.2 per cent to come, blaming rising trade friction, restrictions on migration and red tape.
The warning came as Michael Gove, cabinet office minister, revealed that the government would not publish its own economic impact assessment of the Canada-style trade deal that Britain hopes to strike with the EU.
The report also warned that Prime Minister Boris Johnson’s new migration regime, which aims to halt the inflow of low-skilled EU labour, would force up Britain’s borrowing costs by £1bn a year in 2024.
It assumed that by that year tax receipts to the exchequer from EU workers would fall by £1.5bn, while welfare spending would decline by only £500m; immigrant workers tend to be younger and make fewer demands on the state.
Meanwhile the OBR, the independent forecaster for the Treasury, said higher trade barriers would cause imports and exports to be about 15 per cent lower after 10 years. Overall productivity, a big problem in the UK, would also be lower.
The UK Treasury pointed out that the OBR had not modelled for the possible economic gains of Britain using its new-found regulatory autonomy to create a more dynamic economy. “You have to look at both sides of the equation,” a spokesman said. [...]
Full article on Financial Times (subscription required)