Brexit is costing the UK up to £90bn a year in lost tax revenues, a new analysis shows just days before Rachel Reeves prepares to hike levies in her make-or-break Budget.
The average Briton is also thousands of pounds worse off, leading to calls for ministers to “fix our broken relationship with Europe”.
As Ms Reeves sets out her Budget on Wednesday, the government’s official watchdog is also expected to confirm that leaving the European Union has been even more disastrous than previously thought.
Last month Ms Reeves said the Office for Budget Responsibility (OBR) would be “pretty frank” that Brexit had had “a bigger impact on our economy than even was projected”.
A new study this month from the highly respected US think tank the National Bureau of Economic Research found that the economic damage since the 2016 Leave vote had resulted in the UK’s GDP being between 6 per cent and 8 per cent smaller than it could have been.
New analysis by the House of Commons library estimates that Brexit is costing the Treasury up to £90bn a year in lost tax revenue, and the average Briton has seen a hit to GDP per head between £2,700 and £3,700.
Lib Dem leader Sir Ed Davey, whose party commissioned the analysis, said: “That is why we have the highest taxes ever, that is why we have sky-high bills, that is why we have a cost of living crisis.”
He called on Labour to drop its red lines and negotiate a new customs union with the EU, to “fix our broken relationship with Europe”.
Sir Nick Harvey, chief executive of European Movement UK, said: “Rachel Reeves would be facing very different choices this week if the UK hadn’t mangled its ties to its biggest trading partner. The red tape and uncertainty of the past nine years have hit every single one of us in the pocket.
“This new analysis from the House of Commons Library shows just how much economic harm leaving the EU has wreaked on us both nationally and individually. Billions lost in tax every year, and all of us several thousand pounds poorer.
“Public opinion is now clear – Brexit has been an unmitigated disaster for the UK’s economy. This week’s Budget will likely mean many of us paying even more to fill the gaping hole in the country’s finances. It’s time for the government to fully acknowledge the ongoing harm leaving the EU has done, and to revisit its ‘red lines’, to start to breathe some life back into the UK’s finances.”
The National Bureau of Economic Research said previous forecasts had been accurate over a five-year time frame, “but they underestimated the impact over a decade”.
Earlier forecasts had predicted an average hit of around 4 per cent to GDP, they said, close to the 4 to 6 per cent impact they estimated by 2021, five years after the 2016 vote. They added: “However, we note that our longer-run estimate of the impact of Brexit on GDP is more negative at 6 per cent to 8 per cent.”
The Treasury declined to comment.
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