EU Referendum

Reality Check: A £36bn black hole?

George Osborne quote on £36bn hole in public finances

£36 billion is a pretty big hole to blow in the public finances, but the Treasury has picked it out as its mid-range figure for what might happen to tax receipts if the UK left the European Union.

It's fair to say that this figure relies on relevant, rigorous and detailed economic modelling on what would happen to national income if the UK left the EU, based on what the alternatives would be.

But ultimately that's a hard task given that no economy of the UK's size has ever left the EU before, so there must be uncertainty about the future. Indeed, economic modelling can be a perilous business.

This particular figure is underpinned by the assumption that the UK would negotiate a Canada-style trade deal in place of EU membership.

The Treasury's analysis is that this would mean slower growth compared to remaining in the EU - and that would mean less tax coming into the Treasury.

Brexiteers, of course, argue that the UK would secure its own unique and superior trade deal and that the analysis ignores potential trade deals that the UK outside of the EU might strike with China or India.

And it's important to note that this estimate is for the impact in 2030, not an immediate effect.

£36bn, as the Treasury document says, would be "equivalent" to raising the basic rate of income tax by around 8p from 20p to 28p.

Alternatively any government could cut spending instead, increase other taxes or choose to borrow more money.

Reality Check verdict: The £36bn lower tax receipts figure, like the rest of the Treasury document, is based on what looks like a reasonable modelling exercise but it's impossible to be certain about how the economy will develop in the future.


READ MORE: The facts behind claims in the EU debate


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