Projecting how any Brexit deal will affect the UK economy is not an exact science, nor is the economic impact the only factor that determines the merits of deal, no deal or no Brexit. But the economic impact is one of the things that voters care about, and is where economists can provide some insight.
We set out nine tests that the Government needed to address to ensure that MPs and other interested parties were able to scrutinise their economic modelling and interpret it appropriately. These include making clear what their assumptions were in areas like trade barriers, productivity and migration, and showing the sensitivity of their results to alternative assumptions.
It is welcome that the published report passes these tests, allowing observers to understand exactly how the Government has reached its conclusions.
The Government’s analysis of the possible long-term economic impact was always going to be an important contribution to the debate but also one that would be subject to criticism. But the broad picture is clear and is consistent with the conclusion reached by the vast majority of economic analyses of the impact of Brexit: leaving the EU will raise trade barriers between the UK and the bloc, putting a drag on UK economic growth.
MPs should not simply dismiss the analysis out of hand or try to mislead the public about what it shows.
Theresa May should lead the way, but her appearance at Prime Minister’s Questions today did not set a good example. In telling the House that the analysis “does not show that we will be poorer [under the proposed Brexit deal] than the status quo today”, she did not quite lie – but she certainly added to the confusion.
Even the most optimistic scenario presented in the Government’s report – Theresa May’s White Paper aspiration for a future relationship with the EU, coupled with no changes to migration policy – would leave UK GDP 0.6% smaller in 15 years’ time than if the ‘status quo’ continued. The Government’s report defines the status quo as ‘today's institutional arrangements with the EU’.
A more realistic assessment of the likely outcome, based on the Withdrawal Agreement and Political Declaration – suggests future economic output would be reduced by 3.9%.
Exactly how large the effect is depends on the precise assumptions that the Government has made. Because the Government has been transparent about those assumptions, others can challenge them. This is a debate that should be had if people disagree on points of substance. There is also an important debate to be had about how any economic costs should be weighed against other perceived benefits of leaving the EU.
But for that to happen MPs – including the PM – need to start discussing the findings seriously rather than trying to brush them aside.