UK would be 'permanently poorer' outside EU - Osborne

The UK would be "permanently poorer" outside the European Union, Chancellor George Osborne has warned ahead of the in-out vote on membership on 23 June.

A Treasury analysis suggests an EU exit could see the UK economy 6% smaller than it would otherwise be by 2030.

Mr Osborne said the smaller size of the economy projected in the report was the equivalent of £4,300 per household.

Leave campaigners called the claims "absurd" and "worthless" given the Treasury's past forecasting record.

Conservative MP John Redwood, who is campaigning for an Out vote, said: "This is a Treasury which failed to forecast the huge damage membership of the European Exchange Rate Mechanism inflicted on us and they were always very keen to join us and it gave us a huge recession. They failed to forecast the damage to the UK of the Eurozone crisis of 2011."

But Mr Osborne defended the report's findings on BBC Radio 4's Today programme, saying: "The conclusions could not be clearer. Britain would be permanently poorer if we left the EU to the tune of £4,300 for every household in the country. That's a fact everyone should think about "

The chancellor said "it would be the poorest" who would be most affected by an EU exit, citing people whose jobs "depend" on the car plants and steel making factories.

"They are the people whose incomes would go down, whose house prices would fall, whose job prospects would weaken, they are the people who always suffer when the country takes an economic wrong turn," he said.

He added: "If you look at the evidence and what the rest of the world is telling Britain and they are very, very clear: we would be permanently poorer outside the EU, let alone the short-term economic shock."

The 200-page report, written by government economists, looks at three scenarios in the event of a vote to leave the EU on 23 June, according to BBC business editor Kamal Ahmed.

• First, the UK gains a "Norway-style" deal and joins the European Economic Area (EEA)
• Second, the UK executes a bilateral deal with the EU similar to the one being agreed with Canada - a trade deal that has taken seven years to negotiate
• Third, the UK has a trade relationship with the EU under World Trade Organization (WTO) rules, similar to the relationship between the EU and countries like Russia and Brazil

Each scenario had a strong negative impact on the economy, according to the report, sources have said - but the forecasted 6% shock to national income is based on the Canadian trade model with the EU.

BBC assistant political editor Norman Smith said Mr Osborne was expected to warn that public services would be £36bn worse off by 2030 outside the EU.

Leave campaigners, including London mayor Boris Johnson, have said there would be no downsides to leaving, and suggested the UK could ape Canada's trade arrangement with the EU.

But Mr Osborne said it was "economically illiterate" to say the UK could retain "all the benefits" of EU membership and "none of the obligations or costs".

Any trade arrangement would lead to less access to the EU single market unless Britain was prepared to pay into the EU budget and accept the free movement of people, he said.

In his Daily Telegraph column, Mr Johnson said the referendum was on a "knife edge" and accused the "usual suspects" of trying to convince Britons to accept "the accelerating loss of democratic self-government as the price of economic prosperity".

Source: BBC