Will there be a £50bn 'remain bonus' from revoking Brexit?

Claim

The Liberal Democrats claim there would be a £50bn “remain bonus” from revoking Brexit and Britain staying in the EU.

Background

A cornerstone of the Lib Dem election pitch, the claim is based on economic forecasts that the party says show staying in the EU would mean stronger GDP growth over five years, helping to boost tax receipts.

The party expects the economy to be about 1.9% larger in 2024-25 under remain, and that tax receipts will rise steadily as a consequence, increasing in each year to the point that they are worth £14.3bn extra by 2025 than under the government’s Brexit deal.

The Lib Dems have added together every year of higher tax receipts to reach a sum of £52.4bn, which they say is net of savings from not paying a Brexit divorce bill and not having to replace EU spending in the UK.

The Lib Dems have said they would use the remain bonus for investing in education and tackling inequality.

Reality

The Lib Dems say the forecasts are “very much in line with, if not more cautious than” estimates made by the Institute for Fiscal Studies in its Green Budget 2019, published last month.

But the thinktank’s forecast assumes that a Labour-led coalition government takes power, renegotiates a Brexit deal, holds a second referendum and that the country votes for remain.

Compiled for the IFS by the US investment bank Citi, the report states: “Revoking Brexit would lead to the best economic outcome. We assume this would require a Labour-led government.”

Despite this, the IFS said the £50bn forecast was “within the range of plausible estimates”, although there was a “lot of uncertainty over such an estimate”.

Garry Young, of the National Institute of Economic and Social Research, another thinktank, said he expected a boost worth about £30bn. “It’s uncertain. It’s difficult to be precise about it. But they seem to be in the right ballpark to me,” he said.

NIESR estimates that Boris Johnson’s Brexit deal would deliver an economy £70bn smaller after a decade, with negative consequences for the public finances. The UK economy is already estimated to be about 2.5% smaller than it would have been under remain.

Economists criticised the way the Lib Dems added up each year’s higher income to promote the remain bonus, saying it was potentially misleading.

The party has said it would “allocate £10bn of the £50bn remain bonus” to increase funding for schools. However, the £10bn relates to extra spending in just one year – 2024-25 – while the remain bonus refers to a five-year period. A better comparison would be to use the value of the remain bonus in 2024-25 of £14.3bn.

Alfie Stirling, the head of economics at the New Economics Foundation, said: “Politicians are not using consistent units of time, and it makes it incredibly difficult for people to interpret party claims.”

Verdict

The £50bn remain bonus appears to be a fair estimate, backed up by independent economic forecasters. However, it is highly dependent on assumptions and it risks misleading the public by adding together every year of higher tax receipts.