What were they thinking? It is extraordinary to read a succession of official reports arguing, rightly, that a vote to leave the EU would impose long-term damage and a short-term shock. What sort of government would run such a risk, particularly when the economy has barely recovered from the financial crisis of less than a decade ago? The answer is one that has put the needs of short-term party management above its responsibility for the country’s welfare. David Cameron, prime minister, might soon be known as the man who left the UK in far-from-splendid isolation.
The Treasury has already argued that leaving the EU might lower real gross domestic product by between 3.4 and 9.5 per cent in the long term. This is broadly in line with estimates from other reputable forecasters. Patrick Minford of Cardiff University, a proponent of leaving, argues that the UK would enjoy a jump of 4 per cent in aggregate economic welfare after leaving the EU and adopting free trade (an unlikely choice). But this result is an outlier. It rests on implausible assumptions, not least on the impact of EU non-tariff barriers on domestic prices.
The Treasury has now followed up with a report on the short-term consequences of a vote to leave. In summarising the results, George Osborne, the chancellor of the exchequer, has stated that the UK would suffer a “do-it-yourself” recession if it decided to leave. One might better call it a “do-it-himself” recession. For it was the government’s decision to take this risk.