Brexit could have as big an impact on the British economy as the 2008 credit crunch, David Davis warned today.
He made the extraordinary comment as he was called before the Brexit select committee where he admitted no Brexit impact assessments have been carried out by Whitehall.
He said an assessment of the potential impact of Brexit on different sectors of the UK economy would not necessarily be ‘informative’ as economic models ‘have all proven wrong’ in the past.
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.
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The Brexit Secretary David Davis, pictured today, said quitting the Brussels club will amount to a ‘paradigm change’ on a level with the biggest financial slum since the Depression of the 1930s
David Davis made the extraordinary comment as he was called before the Brexit select committee to explain why no impact assessments on leaving the EU have been carried out by Whitehall
‘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.
RUTH DAVIDSON SAYS SPECIAL NORTHERN IRELAND BREXIT DEAL COULD BREAK UP UK
Ruth Davidson said the set-up could have unravelled the whole UK (file pic)
A Brexit deal giving special status to Northern Ireland could have put the future of the UK in jeopardy, Ruth Davidson today said.
The Scottish Tory leader said such a set-up could have ‘unravelled the entire United Kingdom’.
And she revealed she told Theresa May telling the 13 Scottish Tory MPs at Westminster would not be able to support it – meaning the PM would not have had a majority if it came to a Commons vote.
It comes after the DUP pulled the plug on a deal to move on to the second stage of Brexit talks.
They were angry at an agreement to keep ‘regulatory alignment’ with the Republic of Ireland fearing it would push the customs border back to the border with the British mainland.
Ms Davidson wrote in the Scotsman: ‘A markedly separate deal for Northern Ireland – perhaps with membership of the single market – could have unravelled the entire United Kingdom.
‘That is why I made clear to the Prime Minister yesterday that neither I nor the 13 Scottish Conservative MPs at Westminster could support such an arrangement.’
She added: ‘My view is therefore that, whatever happens with Brexit, we should do nothing that damages the integrity of the one union that really does keep Scotland in business.
‘Protecting our border-free access with our biggest market – the rest of the UK – is a fairly significant one. We should do nothing to imperil that.’
‘Similarly, what we are dealing with here in every outcome – whether it is a free trade agreement, whether it is a WTO (World Trade Organisation) 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.’
The shock admission comes in a crunch week for Brexit as Theresa May faces a frantic scramble to rescue her attempt to get the talks to move on to trade by the New Year.
DUP leader Arlene Foster and Mrs May finally spoke by phone today about the impasse, at the same time as Mr Davis was updating the Commons about the economic impact Brexit is likely to have.
The DUP – who are propping the PM up in No10 – on Monday pulled the plug on a deal to move the talks on amid fears it could tear the UK apart.
Britain, the EU and the Republic of Ireland had all signed up to a draft which would promise to keep regulatory alignment between Northern Ireland and the Republic.
But the DUP refused to sign up to the plan and today said there will be no deal this week – throwing the PM’s hopes a deal can be finalised at a crunch EU summit on December 14 into fresh doubt.
Mr Davis last December told MPs the government was in the midst of carrying out ‘about 57 sets of analyses, each of which has implications for individual parts of 85 per cent of the economy’.
But today he confirmed there are no such separate reports , sparking accusation he had ‘misled Parliament’.
Instead ministers have produced a general report which does touch upon the impact our departure may have on trade and the British economy.
Mr Davis said officials will ‘at some stage’ during Brexit trade talks conduct work to quantify the effects of different possible outcomes on the UK economy.
But the chairman of Brexit select committee, Labour MP Hilary Benn, attacked the decision not to bother drawing up the separate Brexit reports.
He said it was a ‘rather strange’ decision when ministers are frantically battling start trade negotiations with Brussels within weeks.
He said: ‘You have said there are no impact assessments.
‘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?
2008 CREDIT CRUNCH COST BRITAIN TRILLIONS OF POUNDS
The 2008 credit crunch cost the British economy up to £7.4trillion and ushered in a decade of austerity.
A long-term boom in credit suddenly collapsed causing the biggest economic downturn in 80 years.
The global recession saw banks fail, markets tumble and a frantic efforts by governments around the world to stave off a full-blown depression.
Britain had the first run on a bank since 1866, and saw many workers in the lucrative City laid off as firms collapsed like dominoes.
Gordon Brown’s Labour government printed hundreds of billions of cash to prop up the economy, but it saddled Britain with sky-high debt which we are still paying off.
‘Are you actually telling us that the Government hadn’t at that point – and still hasn’t – undertaken the assessment?’
He added: ‘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’.
This looks 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.
But MPs complained the material had been heavily edited by officials before being released to them.
And some suggested the Brexit Secretary should be thrown into the Tower of London for being in contempt of Parliament for failing to respond adequately to its demand for the full report.
Lib Dem leader Sir Vince Cable described the decision to commit the UK to leaving the customs union without a formal assessment of its impact as ‘gross negligence’.
Labour MP David Lammy said: ‘It is time to put David Davis in the Tower of London for contempt of Parliament. I will meet him outside this hearing and walk him down the Embankment myself.’
He has contacted Commons Speaker John Bercow to seek advice on beginning contempt proceedings against Mr Davis who he believes have misled Parliament.
Green Party co-leader Caroline Lucas said: ‘This is beyond farcical. Davis is either grossly incompetent, or someone who struggles with the truth and treats MPs with contempt.
‘Either way, he should be out of his job.’
David Davis, pictured leaving Whitehall this morning, is facing a race against time to get the DUP signed up to a deal to move talks on to trade by Christmas
The minister was appearing before the Brexit select committee in parliament where he admitted Brexit impact assessments have not been carried out
‘We WON’T pay this price:’ May faces revolt from Boris and Gove over bid to ‘bounce’ Cabinet into bowing to EU rules – as Foreign Secretary insists BRUSSELS should give in and get on with trade talks
Theresa May is facing a revolt from Boris Johnson and Michael Gove today over claims she tried to ‘bounce’ Cabinet into accepting EU rules after Brexit.
The Prime Minister has been rebuked for playing a ‘risky game’ by keeping her top team and the DUP in the dark over plans for a ‘soft Brexit’ deal with Brussels.
The agreement was humiliatingly torpedoed by the Northern Ireland party, which is propping Mrs May up in power, at the last minute on Monday amid fears it would tear the UK apart.
The premier is now scrambling to get the painstakingly assembled proposals back on track ahead of a crunch EU summit next week.
The Prime Minister had planned to return to Brussels today to try to complete a divorce deal with the EU, but this has been cancelled
But there is growing alarm on the Tory benches after David Davis confirmed some sectors of the UK economy could have to align with the EU after Brexit to resolve the Irish border issue.
Former leader Iain Duncan Smith – who has acted as a bridge between No 10 and Eurosceptic MPs until now – described the proposal as ‘intolerable’ and suggested it was time to walk away from the talks.
He said: ‘We are beginning to stare at the edge of what is a price that we simply cannot afford to pay.’
Mr Johnson tried to ease the tensions today by pointing out the EU is being unreasonable in expecting the UK to make commitments without knowing what the ‘end state’ of trade arrangements will be.
Speaking to journalists as he arrived at a NATO meeting in Brussels today, Mr Johnson said the government ‘would find a solution’.
He said: ‘We are going to take back control of our borders and our cash contributions.
‘But that solution can only be discovered in the context of discussions on the end state of the UK’s relations with the rest of the EU.’
Boris Johnson is said to have confronted Mrs May over the compromises at Cabinet yesterday. He is pictured right at a NATO meeting in Brussels today
Michael Gove, pictured left arriving for Cabinet with Jeremy Hunt yesterday, is said to be part of a revolt of Brexiteers who have a ‘genuine fear’ Mrs May wants to push through a soft option
But behind the scenes Eurosceptic Cabinet ministers have complained they were being kept in the dark about the extent of the compromises, both on the Irish border and the European Court of Justice.
One Cabinet source told the Telegraph: ‘It seems that either Northern Ireland is splitting from the rest of the UK or we are headed for high alignment with the EU, which certainly hasn’t been agreed by Cabinet. The Prime Minister is playing a risky game.’
Foreign Secretary Mr Johnson and Environment Secretary Mr Gove – who have restored their alliance after dramatically falling out during the Tory leadership campaign last year – are said to be leading a revolt of Brexiteers who have a ‘genuine fear’ that Mrs May is going to push through a ‘soft Brexit’.
The Foreign Secretary reportedly confronted the Prime Minister in a dramatic clash during Cabinet yesterday over her negotiating strategy.
A senior insider told The Sun: ‘Cabinet is in the dark about what the PM is doing, which is a very strange state of affairs to be in.’
Tory grandee Bernard Jenkin said on Twitter: ‘EU is using NI border issue as a proxy for the trade negotiations which have not started.
‘EU cannot abide the idea that UK leaving sets a precedent for invisible external frontiers elsewhere, though we cd all agree: Ireland case is completely exceptional.’