This is why it matters that ministers are still not being honest about the impact of Brexit

Upbeat messages about the opportunities Brexit will provide are not the way to persuade companies that they needed to invest significant time and effort in preparing for the new paperwork and bureaucracy that awaits them - and this lack of honesty from ministers risks doing real economic damage

The road haulage sector has repeatedly warned of the potential for major delays and disruption - but the government has appeared to be more interested in lecturing the private sector. (PA)

“I just used the language that I thought is honest with the British people about the situation that we’re in and the outlook we face," observed the chancellor, Rishi Sunak, about his statement on the Spending Review last week. But, as with governments since the referendum, honesty did not extent to Brexit.  

The chancellor’s omission of any reference to the most important structural change to face the British economy in four decades was particularly striking given the stark message from the independent Office of Budget Responsibility (OBR). 

While the Covid-19 pandemic and the hoped-for recovery dominated the Chancellor’s analysis, the OBR made it clear that the long-term impacts of Brexit are likely to be significantly more important.  

They estimate that, even in the event of a last-minute trade deal with the EU, the long-run hit to GDP will be 4 per cent. No deal would increase that to 6 per cent, double their central estimate of the impact of the pandemic  

In the short run, no deal would aggravate the impact of Covid-19. And even in the short run, this matters. Unemployment, claimed Mr Sunak, is “the thing that weighs most heavily on my shoulders”. Yet, the OBR forecast that a no deal Brexit would push the peak unemployment rate in July-September next year up by 300,000.  

It’s easy enough to understand the chancellor’s reticence. Brexit is a fait accompli, and the Conservative Party is united behind the Prime Minister’s approach. Highlighting the negatives – and from an economic point of view, as the OBR and almost all independent economists have made clear, the balance is very clearly negative – is not a good career move for an ambitious minister.  

But Mr Sunak is not the first minister to be economical with the truth about the economic consequences of Brexit, which has been politically incorrect within the government for some time. George Osborne’s pre-referendum scaremongering enabled the Leave campaign, even after they took over the Conservative Party and the government, to tarnish all forecasts as “Project Fear” – even those that proved far more accurate than the ones produced by the fringe of Brexit supporting-economists. This even led Brexit minister Steve Baker to rubbish the forecasts produced by his own civil servants.  

And this attitude to inconvenient truths – and civil service advice – doesn’t stop at economics. Boris Johnson’s claim that the deal he signed with the European Union would not entail the need for any checks on trade between Great Britain and Northern Ireland has been repeatedly contradicted, not just by the EU side and independent experts, but his own government’s published policy documents.  

Academics complaining that politicians are economical with the truth? Why don’t you do something more original and constructive, like complain about the British weather, you might well ask. Our point here is that, when it comes to Brexit, attempts by ministers to obfuscate and mislead risk doing real economic damage.

It’s hardly surprising, after four years of “no deal is better than a bad deal”, the promise of “frictionless trade” after Brexit, and finally Boris Johnson’s claim that his “oven-ready” Brexit would unleash a surge of confidence and hundreds of billions of pounds of pent-up investment, that businesses and households are unprepared for the rather more mundane  - and significantly less inspiring -  realities of the end of the transition period.  

In part, the results are farcical. It would take a heart of stone not to laugh at the Daily Telegraph and the Daily Mail’s complaints that the EU will impose “new rules” limiting British second home owners’ access to their properties on the continent. Of course, there are no “new rules” – it is simply that Brexit means that UK nationals will now be subject to the long-established ones applying to visitors from outside the EU.  

But the consequence for business and the economy are much more serious. Upbeat messages about the opportunities Brexit will provide were not the way to persuade companies that they needed to invest significant time and effort in preparing for the new paperwork and bureaucracy that awaits them.

When it comes to Northern Ireland, the situation is still more stark. Why should businesses worry about new border checks when the Prime Minister himself says there won’t be any?  

And more broadly, failing to be honest about, let along prepare for, what will undoubtedly be the significant disruption caused by making trade with our nearest and largest trading partner more difficult is reckless in the extreme.  

Accepting this and preparing for it might limit that impact. We know, for example, that, even with a deal, manufacturing firms will face significant additional costs because of customs declarations, the need to seek certification of their products in both the UK and the EU and so on. Professional services will face new barriers to doing business in the EU. The road haulage sector has repeatedly warned of the potential for major delays and disruption.  

We should all want Brexit to be a success. But simply closing our eyes and sticking fingers in our ears isn’t the way to do it

But instead of preparing, providing and planning – and remember we have had more than four years – the government has appeared to be more interested in lecturing the private sector. The chancellor rightly acted quickly to cushion the economic impacts of the pandemic, but we see very little evidence of that when it comes to Brexit.  

We should all want Brexit to be a success. But simply closing our eyes and sticking fingers in our ears isn’t the way to do it. And indeed, looking through any short-term disruption, as companies feel the impact of the increased cost of doing business with the EU, those impacts are liable to get more, rather than less, evident over time.  

Planning for this, telling the public what it means, and putting measures in place to address these issues might ultimately help the government claim that Brexit has been a success. But to do this they’d have to recognise that it will bring challenges before it brings opportunities. Perhaps honesty would be the best policy after all.  

Professor Anand Menon is director of UK in a Changing Europe and Professor Jonathan Portes is a senior fellow at UK in a Changing Europe