IEA Brexit Unit responds to the Whitehall Economic Impact Analysis
- The Whitehall Briefing (leaked in January but only officially released this month) is not the last word on the potential long-term economic impact of Brexit, despite claims from others that it ‘proves’ GDP will be lower in ‘all’ scenarios.
- As the report itself says, it is only ‘draft analytical thinking with preliminary results’, with many gaps and uncertainties.
- In particular, officials had not yet attempted to quantify the outcome that the government is actually seeking to achieve, including a new and comprehensive free trade deal with the EU that minimises both tariff and non-tariff barriers.
- Instead, the Briefing only looks at three alternative trade scenarios based on existing precedents. It does suggest that the UK might land somewhere in between. But the outcome will depend on talks with the EU that have not yet even begun, as well as future policy choices to be made by HMG alone.
- For example, the Briefing recognises that the impact of leaving the Customs Union on customs barriers between the UK and EU could be anywhere between ‘high’ and ‘none’, depending on what new arrangements are agreed.
- Here, some have argued it is wrong to model something that the EU may not be willing to accept. But the purpose of scenario analysis is to look at a range of possible outcomes, not to close options down.
- Elsewhere, the Briefing includes only skimpy assessments of the scope for new trade deals with the rest of the world and for regulatory optimisation, and is too quick to dismiss the budget savings on payments to the EU.
- Overall, the ‘Cross Whitehall Briefing’ is an honest attempt to improve on the analysis published by the Treasury in 2016. But it is far from conclusive, and anyone claiming otherwise should read it again.