'Hard Brexit' could cost Treasury £66bn a year in lost revenue

A ‘hard Brexit’ could cost the Treasury up to £66bn a year in revenue from tax, according to leaked documents.

The Times newspaper reported that leaked government papers suggested that a ‘hard Brexit’ - leaving the EU single market and moving to World Trade Organisation rules - would cause GDP to fall by about 9.5%, compared to if the country stayed in the EU.

The sharp fall in revenue would force ministers to either cut spending or raise taxes.

According to the draft committee paper, which was based on forecasts from a study on the impact of leaving the EU published by previous Chancellor George Osborne in April, the country would incur a loss between £38bn and £66bn per year after 15 years due to a smaller economy.

Remain campaigners have urged for a ‘soft Brexit’ by maintaining access to the single market, which could protect passporting rights which allows financial institutions to conduct business across the EU through a single licence rather than many.

Tim Farron, leader of the Liberal Democrats, said the leaked documents showed quitting the single market would be an “act of sheer economic vandalism”.

“The Liberal Democrats will stand up for Britain’s membership of the single market. We cannot stand by while this reckless, divisive and uncaring Conservative government wrecks the UK economy.”

Prime Minister Theresa May is facing pressure to allow MPs a vote on the terms of Brexit, but ruled out a second vote by Parliament and said she would trigger Article 50 to start formal negotiations with the EU by the end of March, indicating that the country could leave the trading block by summer 2019

May said she would not provide a "running commentary" on Brexit negotiations, but Labour leader Jeremy Corbyn and shadow Brexit secretary Keir Starmer called for a debate to be held on Wednesday to demand proper parliamentary scrutiny of the process.

Meanwhile Neil Wilson, markets analyst at ETX Capital, said the continuing weak pound on Tuesday was underpinned by the uncertainty around a ‘hard Brexit’ specifically on news of the potential £66bn Treasury black hole.

Sterling is currently hovering at its lowest level against the dollar for over 30 years.

Connor Campbell, financial analyst at Spreadex, said: “News that a hard Brexit could cost the Treasury £66bn has only thrown more fuel on the fearful fire this morning, leaving the markets to deal with another day of sterling dread.

“With that in mind the pound, of course, has woken up wheezing and spluttering, continuing to shed an amount of blood that is apt for a month ending with Halloween. Against the dollar it lost half a percent, taking it below the 1.23 mark to hit yet another 31 year low – it’s almost as if cable is committed to recreating the flash crash in slow motion. Sterling fared no better against the euro, losing 0.3% to duck under 1.105.”