The government's secret Brexit impact analysis shows that the cost to the British economy of cutting migration from the EU would be significantly greater than the benefits brought by a US trade deal.
BuzzFeed News revealed on Monday that the assessment, compiled by officials across Whitehall for the Department for Exiting the European Union (DExEU), said UK economic growth would be lower under all three main Brexit scenarios that were modelled.
The analysis also includes several potential immigration policies to illustrate the impact falling EU migration after Brexit would have on the economy.
It shows that the negative impact of a stricter immigration policy – replacing free movement with arrangements in line with those for non-EU citizens – would be far bigger than the 0.2% boost to economic growth that a US trade deal is calculated to bring.
Even a more flexible immigration policy, which would lead to a smaller drop in migration from the EU, would still be enough by itself to cancel out the benefits of a US deal, the document shows.
The findings starkly illustrate the difficulties Theresa May faces as she attempts to shape a Brexit deal that minimises the long-term hit on the economy while satisfying the demands of Leave voters.
Immigration was front and centre of the Vote Leave campaign in 2016’s referendum, and was one of the key issues driving the Brexit vote, according to data from the British Election Study.
Freedom of movement will continue in effect for the two-year transition period that is currently being negotiated with the EU. The UK will then introduce a new immigration regime, though the government has yet to spell out what this would look like.
The document seen by BuzzFeed News, titled “EU Exit Analysis – Cross Whitehall Briefing” and dated January 2018, shows that in addition to the hit from lower immigration, the main damage to the British economy will come from what officials call “non-tariff barriers” to trade, such as loss of market access in certain sectors and new customs and border checks and practices.
The analysis says that while some of these barriers can be minimised if Britain were to remain in the single market via the European Economic Area (EEA), the losses cannot be eliminated altogether once the UK is outside the customs union under any of the scenarios modelled so far.
As a result of the combined effect of these non-tariff and customs barriers, along with the cost of lower immigration, the document says, UK borrowing could be tens of billions of pounds higher in 2033-34 than under the status quo – even when a US trade deal and savings from no longer having to pay money to Brussels are taken into account.
Since Monday, Brexit minister Steve Baker and other leading Leave-supporting MPs rubbished the findings as incomplete and unreliable, rejecting calls for the document to be published.
Faced with a Labour move in the House of Commons on Wednesday to force its release, the government folded and announced it would publish the analysis.
But this does not mean it will be released to the public. Another Brexit minister, Robin Walker, told the Commons that the assessment would be provided only on a “strictly confidential basis” to MPs and peers.
This means that a hard copy will be given to the chair of the Exiting the EU select committee, Hilary Benn, while other members and peers will be able to view the analysis in a secure reading room.
When the government released Brexit “sectoral analyses” last year under the same terms, MPs were not allowed to take phones or recording devices into the room, and officials watched while they read.
On Monday, BuzzFeed News reported that a DExEU source had said the government did not want the analysis to be publicly released because it was “embarrassing”.
As with all longer-term analysis, the document makes clear that the calculations are based on assumptions and prone to uncertainty, and that the results are provisional. But it also states that officials believe the methodology is better than that used for similar exercises before the referendum because it can assess the impact of bespoke scenarios, trade deals, as well as calculate sectoral estimates.
In the Commons on Wednesday, Steve Baker told MPs: "This draft document is not an impact assessment nor is it a statement of government policy. It is a very preliminary draft only seen by DExEu ministers this week and which does not constitute meaningful commentary on the expected outcome of the negotiations."
Baker said the document was only circulated to "test ideas", adding: "This work is constantly evolving. It does not consider our desired outcome."
BuzzFeed News asked DExEU for comment on the immigration calculations, but did not receive a response by the time of publication.
Shortly after publication, however, a government spokesperson told BuzzFeed News: "The UK will remain an open and tolerant country; one that recognises the valuable contribution those with skills and expertise make to society while also ensuring there is control of the overall numbers of migrants that come to the UK.
"As we leave the EU, we will forge new and ambitious trade deals around the world, with trading partners old and new."