By Tom McTague – politico.eu
David Cameron’s battle to keep Britain in the European Union rests on convincing voters that the risks to the economy from leaving far outweigh any benefits to public services that could be won by reducing immigration from the Continent.
That, at any rate, is the view of the prime minister’s plain-speaking election guru Lynton Crosby. It’s a straight choice, Crosby claims, between risking your pay packet or your child’s school place.
Which is more important?
Every British family would be up to £4,300 worse off and the economy would shrink by 6 percent by 2030 if voters chose to leave the European Union.
Chancellor of the Exchequer George Osborne told BBC radio’s Today program that the Treasury study into the impact of Brexit was a “sober and serious assessment” of the risks.
He also attacked as “economically illiterate” claims from Conservative backbench MPs that the U.K. could walk away from Brussels without any costs.
The chancellor also used a 1,500-word article in the Times to explain why the referendum will have “profound consequences for our economy, for the living standards of every family, and for Britain’s role in the world.”
Osborne’s intervention, ahead of the publication of the 200-page report, is the most important moment of the campaign so far and risks sparking further infighting within the Conservative Party.
Osborne was immediately savaged by the Leave campaign, who dismissed the Treasury report as “just the latest erroneous pro-EU economic assessment published by the government over the last 40 years.”
Conservative MP John Redwood said it was “an absurd claim from the Treasury.”
But the Chancellor said the leave campaign was being “dishonest” about the risks of leaving.
Speaking to the BBC he said: “These people are going around saying we could have all the benefits without any of the obligations. That is economically illiterate.
“France and Germany would only give us free access to the single market if we pay into the European Union budget and accept free movement of people. We have to be realistic about this. Yes, of course we can be outside the European Union. But we are not going to get all the benefits of EU membership. If we are not going to get the benefits of EU membership that means there will be less trade, less investment.
“What is not honest and what is economic illiterate is to say we can have all the benefits of staying in the European Union without any of the obligations. That is having your cake and eating it.”
He added: “Where is a single ally or trading partner or credible international organization that thinks it’s a good idea for Britain to leave the EU?
“We would not all be in this together if we left the European Union. The rich would carry on being rich. It would be the poor who would be hit.
“Look at the evidence, look at what the rest of the world is telling Britain, they are very very clear. We would be permanently poorer.”
Chancellor of the Exchequer George Osborne says every family in Britain will be up to £5,200 a year worse off by leaving the EU. He also warns that Brexit would cost the government anywhere between £20 billion and £45 billion a year in tax, depriving schools and hospitals of much-needed cash.
The report spells it out for those who aren’t quite getting the message. The lost tax revenue, it claims, “would be equivalent to more than a third of the NHS England budget, or to raising the basic rate of income tax by around 8p from 20p to 28p.”
Such figures should give even the most hardened Euroskeptic pause for thought — or so the Treasury hopes.
But will Osborne’s intervention have any impact?
Here are 11 things you need to know:
1. Money in your pocket
The Treasury report claims British families will be between £2,600 and £5,200 a year poorer by 2030 if the country votes for Brexit on June 23.
It examines three separate scenarios for U.K. post-Brexit trade with Europe – the Norwegian, Canadian and Russian models.
Norway, the report says, is in the European Economic Area and has access to most of the single market. But for that access it has to contribute to the EU budget and accept all Brussels regulations.
If the U.K. was to follow suit the EU would be less “open” and therefore Britain’s economy would shrink by up to 4.3 percent, the Treasury claims. This would cost the average household £2,600 a year compared to what they can expect to earn inside the EU.
Trying to strike a bilateral free trade deal like Switzerland or Canada — with less access to the single market — would hit family finances by £4,300. Trading with the EU on World Trade Organisation rules, meanwhile, “like Russia or Brazil,” would set the U.K. economy back up to 7.8 percent, costing families £5,200 a year.
2. Tax rises
U.K. government tax receipts, according to the report, would fall by £20-45 billion in the event of a vote to leave.
This is equivalent of an 8p increase in the basic rate of income tax, potentially adding thousands to workers’ tax bills.
Crucially, Osborne claims, this extra tax burden far outweighs the cost of EU membership, which he calculates at “a little over 1p for every £1 of tax paid once the U.K.’s rebates and receipts are taken into account.”
3. Job security
The report says 3.3 million jobs are linked to exports from the U.K. to other EU countries.
Expect furious counter claims on this point — Leave campaigners have already gone to war with former deputy prime minister Nick Clegg for using a similar figure.
4. Immigration is… good
The economic forecasts used to model the scenarios outlined in the report rely on continuing levels of immigration which are far higher than the government’s own target to reduce the net flow to below 100,000 a year.
The report assumes total net international migration to the U.K. will fall from 329,000 a year in 2014 “towards 185,000 per year from 2021 onwards.”
If the government achieved its lower immigration target, economic growth would fall, thereby reducing the supposed gains of being in the EU.
In a passage that will be highly controversial to many Conservative MPs, the report says: “Higher levels of net migration will, all else being equal, increase the growth rate of the potential labour supply and therefore the rate of growth of overall GDP.”
It adds, for good measure, that immigration is also good for public services like health and education: “While in aggregate EU migration is likely to make a positive contribution to the U.K.’s public finances, and so to the funding of public services.”
5. Britain can’t be Canada, Boris
London’s Mayor Boris Johnson has called for the U.K. to adopt a “Canada model” with the European Union by striking a free trade deal but retaining full control over immigration.
Osborne attempts to debunk this option as thoroughly as possible. He says the U.K. would be “between 4.6 percent and 7.8 percent of GDP better off inside the EU than with a negotiated bilateral agreement like Canada, Turkey or Switzerland.”
His report adds: “A negotiated bilateral agreement provides less access to the single market than the European Economic Area alternative, in particular in relation to services, which are of critical importance to the U.K. — 80 per cent of the British workforce are employed in the services sector, and the U.K. has the largest share of services exports of any major advanced economy.”
6. Finally, things are getting serious
The Treasury’s stark Brexit analysis is designed to cut through the background noise of the campaign in a bid to finally grab people’s attention. Campaigners on both sides of the argument privately admit that despite the headlines and backbench bickering very few people are taking notice.
Osborne took to the airways Monday, before the Treasury report was even out, to ramp up the rhetoric even further in a bid to get noticed. The Leave campaign are being “dishonest” about the risks of leaving, he said. They are “economically illiterate” and “totally misunderstand” how a post-Brexit world would work.
Strong stuff about your colleagues from a chancellor whose authority was left in tatters after a disastrous budget statement just a month ago.
7. Is that the smell of panic?
The polls are too close for the government’s liking — even David Cameron has privately admitted as much.
But government insiders believe this could actually help in the long run. “If the polls stay close it will certainly concentrate people’s minds,” one senior government source told POLITICO. “The last thing we need is a low turnout because everyone thinks the result is in the bag.”
But things can’t be going too well if narrowing polls are seen as a good thing.
Osborne’s intervention is designed to catch the attention of the undecided — the “soft remainers” who hold the key to Britain’s future.
A poll by ComRes published Monday in the Sun put the remain campaign in the lead by 45 percent to 38 percent, but with almost four in 10 now unsure about which way to go, leaving some 17 million voters up for grabs.
8. Treasury games
Osborne is said to privately detest being likened to that other divisive titan of the Treasury, Gordon Brown. But like the former chancellor, who went on to have an unhappy stint in Number 10, Osborne is fond of headline-grabbing moves, some of which disintegrate on closer inspection. He will be desperately hoping Monday’s media blitz will not be another such occasion.
The chancellor was interviewed on the BBC’s flagship morning show “Today” about the Treasury’s Brexit report, before the document was published and journalists could study it. He had already written an article for the Times and briefed the main figures in the report for the paper’s front-page splash story.
While this undoubtedly achieved its desired results, unimpressed hacks from rival publications may now have extra motivation to pick holes in the report — and give the Chancellor a good kicking to boot — in Tuesday’s newspapers. Watch this space.
9. Osborne will not be forgiven by Euroskeptics
The Chancellor wants to succeed David Cameron as prime minister. But to do so he needs to become Conservative leader with nominations of Tory MPs and votes of party members.
It is a risky strategy, to say the least, to launch such a full-frontal attack on the Leave campaign as he did in Monday’s morning media round.
While Tory MPs are split down the middle on Britain’s place in Europe, the party membership is overwhelmingly Euroskeptic. If they blame Osborne, along with the departing Cameron, for stifling their dreams of independence, could they really back him for the leadership?
Asked on the BBC this morning if he was sacrificing his career to stay in the EU, Osborne insisted: “This is not about any one person. It’s not about my job or my career — it’s not even about any one political party. It’s not even about the kind of issues discussed in a general election.
“This is a massive decision for our generation — as big as anything we’ve ever been asked to address for those of us since the war.”
He said in the end he believed it was “absolutely clear” that Britain had to stay in the EU both for the economy and the country’s standing in the world.
“The Britain we are part of is a Britain that looks out to the world, that engages with the world, that doesn’t pull up the drawbridge. That is the Britain I want us to be a part of: a great Britain. We are not a people who turn our back on the world — we engage in the world and make it stronger, safer, more prosperous.”
Expect this sentiment to be echoed by the U.S. President Barack Obama later this week.
10. Will it change anything?
Ultimately, it has to. The Treasury calculation that British families will be more than £4,000 a year poorer outside the EU will be repeated ad nauseum from now until polling day.
It will be picked apart and dismissed as “Project Fear” by the Leave campaign. Boris Johnson is likely to describe it colourfully provocative language and, no doubt, some economic experts will come out against it and contest the analysis.
But one of the lessons from Scotland’s 2014 independence referendum is that negative tactics can and do work, even if pundits criticize the campaign for failing to offer a “positive” vision.
The key, Vote Leave strategists believe, is to undermine the warning as much as possible and paint the dangers of remaining in even starker light. Expect figures on how many extra school places and doctors surgeries will be needed to cope with the flow of migrant workers from the continent.
11. Everyone for cake!
A peculiar feature of the referendum campaign is that both sides are keen to stress that only by voting for them will nothing change. Usually in elections political leaders vie to be the “change” candidate – taking what’s bad and promising to make it better. But in the increasingly fractious debate over Brexit it is the unknown which carries the most potency.
A leading proponent of the leave campaign, the Conservative MP John Redwood, told the BBC Monday morning: “I see no reason to change most of the arrangements currently in place. Unless and until the two sides negotiate change things will carry on much as they do at the moment.”
He said it was “completely idiotic” to claim the U.K. would not go on trading with the EU freely.
But Osborne furiously attempted to debunk this claim. He told the BBC that this “totally misunderstands the nature of the relationship Britain might be able to strike outside the EU.”
“These people are going around saying we could have all the benefits without any of the obligations. That is economically illiterate.” He added, for effect: “You can’t have your cake and eat it.”
This little aside has been widely seen as a dig at Johnson, the London mayor, who famously described himself as being pro cake and pro eating it.
Cameron and Osborne, of course, claim that because of their EU renegotiation voters get the “best of both worlds” — in Europe but with a “special status” to avoid some of the costs. Which, in the Chancellor’s words, is a bit like having “the benefits without the obligations.” Or having cake and eating it.