The Prime Minister chose a branch of B&Q as the venue for a speech warning that Britain is heading for another recession if we vote Leave on 23 June.
This would be a “DIY” downturn, David Cameron said, because it would be of our own making.
The speech came with a new Treasury analysis promising negative growth, unemployment, price rises in the shops and lower property prices if Britain votes for Brexit.
Here’s what you need to know.
Hang on – haven’t they already done this?
This is the second of two Treasury Brexit reports. The first one was about the potential long-term impact of pulling out of the EU.
The government economists said that 15 years after leaving the EU, Britain could be worse off by between 3.4 per cent and 9.5 per cent of GDP a year, depending on what kind of trade relationship we negotiated.
Here’s what we said about the first report when it was published.
Today’s paper is all about what happens in the first two years after a Leave vote.
The analysts look at two different scenarios: “shock” and “severe shock”. That is, bad and really bad.
They think 520,000 to 820,000 jobs will be lost, wages and growth will fall and the deficit will be higher.
So will there definitely be a recession?
This is the font the Treasury are using on their website, in case you didn’t realise that recession was A Bad Thing:
Here’s how David Cameron put it: “As the Bank of England has said, and the IMF has underlined, and the Treasury has now confirmed, the shock to our economy after leaving Europe would tip the country into recession.”
That’s overcooking it slightly. Bank of England governor Mark Carney actually said: “Of course there’s a range of possible scenarios around those directions, which could possibly include a technical recession.”
The head of the IMF, Christine Lagarde, also used the word “could” not “would”. Obviously we are talking about predicting the future here and there’s no way the Treasury or anyone else can “confirm” that something will or won’t happen.
Remember, a recession is two quarters of negative economic growth.
Interestingly, under the “shock” scenario (bad), the Treasury thinks the economy will contract for four quarters, but only by a tiny amount: just 0.1 per cent per quarter.
If it’s a “severe shock” (really bad), a year of deeper negative growth is forecast.
Treasury officials have admitted that their modelling doesn’t include measures that the government and the Bank of England would take to try to mitigate some of the harm, which makes it less realistic.
Will prices in the shops go up?
Several variations of the claim that Brexit will increase the cost of goods in your shopping basket have been circulating for some time. Some of them have been very dubious.
This time, the idea is that the value of the pound will fall by about 12 per cent following a Leave vote.
This is because a weaker pound would increase the price of imported goods, which would be passed on to the consumer.
It’s slightly surprising that a fall in the value of sterling should be greeted with so much pessimism. In theory, it should make exports more competitive, cutting the trade deficit and boosting growth.
But the Treasury economists say other weaknesses would more than cancel out this effect, pointing out that when sterling depreciated in 2008 and 2009, there wasn’t much improvement in the balance of payments.
House prices are predicted to be 10 per cent lower than they would otherwise have been after two years, or 18 per cent in the “severe shock” scenario.
As Brexiteers have pointed out today, property prices are predicted to rise by about 10 per cent over the next two years, so they would effectively be flat.
George Osborne has not made this very clear in recent days, saying: “There would be a hit to the value of people’s homes by at least 10 per cent and up to 18 per cent.”
This sounds to us like a warning of people being plunged into negative equity. But that’s not what the Treasury analysis shows.
Of course, if you are an aspiring homeowner, you might welcome the prospect of house prices flat-lining or falling. But there is plenty more pessimism for younger people in today’s paper, including a warning over higher youth unemployment.
Has the economy been damaged already?
There have been signs in recent months that uncertainty may already be affecting some sectors of the economy, but it’s hard to say how much of this is due to the looming referendum.
The Bank of England has said that about half the decline of sterling since last autumn reflects concern about Brexit.
Markets have been volatile, growth has been weaker than expected and the Purchasing Managers’ Indices for the services and manufacturing sectors were disappointing.
The Treasury doesn’t put a figure on how much this may have cost the country already, although we do know that the administrative cost of the referendum alone is £142m, and those controversial government leaflets added £9m to the bill for the taxpayer.
Critics say that this begs an obvious question. If Brexit will be so catastrophic – and if the prospect of a referendum has already hurt the economy – why did the government agree to hold the vote in the first place?
Today’s report does contain a kind of answer, claiming the effects of the uncertainty will “unwind” if voters choose to Remain, with growth bouncing back to normal.