Brexit Secretary David Davis has been accused of misleading Parliament after admitting the Government has made no formal assessment of the likely impact of EU withdrawal on different sectors of the UK economy.
Mr Davis told the House of Commons Exiting the EU Committee that the usefulness of an assessment of this kind would be “near zero” because of the scale of change which Brexit is likely to cause.
Leaving the EU will provoke a “paradigm change” in the UK economy on a similar order of magnitude to the financial crash of 2008, making economic forecast models unlikely to be “informative”, he told MPs.
Mr Davis was appearing before the committee to defend his failure to deliver the 58 impact assessments demanded by a parliamentary motion last month, handing over instead 850 pages of heavily-edited “sectoral analyses” setting out detail about the current position of different parts of the economy.
The Brexit Secretary told MPs as early as last December that his department was “in the midst of carrying out about 57 sets of analyses” on different parts of the economy. And in October, he told the Brexit committee that Prime Minister Theresa May had read “summary outcomes” of impact assessments, which he said went into “excruciating detail”.
But on Wednesday he told the committee that “no systematic impact assessments” had in fact been carried out.
Pressed by committee chairman Hilary Benn whether any impact assessment had been conducted of the implications of Brexit for the automotive, aerospace or financial services sectors, Mr Davis said “No” to each before cutting the Labour MP short, saying: “I think the answer will be No to all of them.”
David Davis gives evidence (PA)
“It will have an effect, the assessment of that effect is not as straightforward as people imagine.
“I’m not a fan of economic models because they have all proven wrong. When you have a paradigm change – as happened in 2008 with the financial crisis – all the models were wrong. The Queen famously asked why did we not know.
“Similarly, what we are dealing with here in every outcome – whether it is a free trade agreement, whether it is a WTO outcome or whether it is something between that on the spectrum – it is a paradigm change.
“We know not the size, but the order of magnitude of the impact.”
Mr Benn asked him: “Doesn’t it strike you as rather strange that the Government undertakes impact assessments of all sorts of things all the time, but on the most fundamental change that we are facing as a country, you’ve just told us that the Government hasn’t undertaken any impact assessments at all on the implications for various parts of the economy?”
Mr Davis last week gave the committee 850 pages of what he terms “sectoral analyses”, looking at the condition of various parts of the UK economy and their current involvement in the EU market but making no forecasts on the likely impact of Brexit.
MPs complained that the material had been heavily edited by officials before being released to them, with some suggesting the Brexit Secretary could be in contempt of Parliament for failing to respond adequately to its demand.
Mr Davis’s admission that no sectoral impact assessments have been made by the Government provoked outrage among opposition MPs.
A Labour member of the Brexit committee, Seema Malhotra, described the failure to make assessments as “a dereliction of duty”.
David Davis before the committee (PA)
Instead, he said, officials will “at some stage” during the forthcoming second phase of Brexit negotiations, dealing with trade, conduct work to quantify the effects of different possible outcomes, such as a free trade agreement with the EU or moving to World Trade Organisation rules.
And he told Mr Benn there was no “formal quantitative” assessment undertaken of the likely impact of leaving the customs union before the Government committed itself to the step.
“There was a judgment made on qualitative things, not a quantitative one,” he said.
Mr Benn described the decision not to conduct impact assessment as “rather strange” when ministers were hoping within weeks to enter into a fundamental renegotiation of Britain’s trade relations with the rest of Europe.
And he said it was “quite extraordinary” that no assessment was made of the impact of leaving the customs union “given the momentous nature of that decision”.
“You have said there are no impact assessments,” said Mr Benn.
“You were hoping that, at the October (European) Council, the door would be open to phase two of the negotiations, where the question would be asked ‘What does the UK Government want?’ Are you actually telling us that the Government hadn’t at that point – and still hasn’t – undertaken the assessment?”
Mr Davis told the committee: “You don’t need to do a formal impact assessment to understand that, if there is a regulatory hurdle between your producers and a market, there will be an impact. It will have an effect, the assessment of that effect is not as straightforward as people imagine.”