Predictions of recession if UK leaves EU based on 'bizarre assumptions'

EXIT

Economists campaigning for Britain to leave the European Union have accused the Treasury and international institutions of “groupthink” in a report that says growth would be boosted if all trade barriers were removed after a leave vote in this month’s referendum.

The group Economists for Brexit (EfB) said consumers and businesses would benefit from lower prices once EU-imposed tariffs were removed and dismissed predictions that the UK would be plunged into immediate recession if the remain campaign lost on 23 June.

“Groupthink, political collusion and bizarre assumptions have combined to see the economic models of the Treasury and international institutions provide dangerously inaccurate results to the public,” the group said.

ProfPatrick Minford said all the studies showing that leaving the EU would have detrimental consequences for the economy were based on the “same flawed model” and the “same damaging assumptions”.

Minford said that instead of trying to negotiate access to the Euroepan single market, a post-Brexit Britain should opt to remove all barriers to imports.

The move, Minford added, would lead to cheaper food, less expensive manufactured goods and stronger growth, but his admission that UK firms would have to pay tariffs on exports to the single market brought criticism from the former chancellor Alistair Darling, who is campaigning for a remain vote.

“In recent weeks, there has been a relentless stream of output from modelling groups on the topic of Brexit – all of it negative. This has included long-term and short-term reports from not merely the Treasury but also the Centre for Economic Performance at the LSE, PWC, Oxford Economics, the National Institute for Economic and Social Research, the OECD and the IMF,” Minford said.

“The common element in the consensus outside Economists for Brexit is that after Brexit, under the World Trade Organisation option, the UK continues to maintain protectionist tariffs and other trade barriers against the rest of the world, including the EU. By contrast, EfB assumes unilateral free trade after leaving the EU.

“What has emerged from considering all these approaches used by different modelling groups is that they all assume post-Brexit, the pursuit of protectionist policies on imports by the UK. This reduction of the scope of free trade predictably would damage UK output and productivity whatever methodology is used.”

Christine Lagarde, the managing director of the International Monetary Fund, said last month that a vote leave the EU would have “pretty bad to very, very bad” consequences for the UK, but Minford said the IMF and other forecasting bodies would get a completely different response if they put in different assumptions.

“The key difference in EfB is the use of the unilateral free trade assumption under which Brexit is a move towards free trade,” Minford said.

Such a move would provide a growth boost of 4% of GDP within five years and help the UK emerge unscathed from the immediate post-referendum period. “It also enables the UK to be strong in negotiations and take control of its own policy environment, independently of any actions by our EU neighbours. This in turn closes down short-term policy uncertainty, avoiding the ad hoc rises in credit and other financial costs.”

Minford took issue with the chancellor, George Osborne, for dubbing those campaigning to leave the EU as economically illiterate. “Osborne is the one who is economically illiterate here,” Minford said.

Responding to Minford’s comments, Darling said: “The leave campaign have today admitted leaving would mean higher prices and devastation for UK industries.

“After weeks of expert warnings, the truth has now been exposed. Families’ incomes, British businesses and our financial stability would all be hit if Britain leaves the EU’s single market. Leaving would be a leap in to the dark that Britain cannot afford to make.”

Powered by Guardian.co.ukThis article was written by Larry Elliott, for The Guardian on Thursday 2nd June 2016 18.54 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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