With Labour apparently having been scrabbling around somewhat desperately to try to meet its self-imposed fiscal rules in today’s Budget, it is truly incredible Sir Keir Starmer’s administration continues to shun a huge and obvious solution.

Recent weeks have been dominated by speculation about which particular unpalatable measures the UK Government might choose in its attempt to meet fiscal rules which are dispiritingly close to those of the Conservatives previously.

Some Cabinet ministers have seemed a bit less scared about highlighting Brexit as something which has been detrimental to the UK economy. However, the Labour Government refuses to do anything to address this damage – which is for the avoidance of doubt enormous – in a meaningful way.

A new working paper on the impact of Brexit published by the National Bureau of Economic Research (NBER), which is based in the US at Cambridge in Massachusetts, puts the spotlight on the scale of the damage to the UK economy.

The authors of the working paper are Nicholas Bloom of Stanford University, Philip Bunn of the Bank of England, Paul Mizen of King’s College London, Pawel Smietanka of the Deutsche Bundesbank, and Gregory Thwaites of the University of Nottingham.

The NBER is a “private, non-profit, non-partisan organisation”.

The abstract for the working paper, The Economic Impact of Brexit, states: “This paper examines the impact of the UK’s decision to leave the European Union (Brexit) in 2016. Using almost a decade of data since the referendum, we combine simulations based on macro data with estimates derived from micro data collected through our Decision Maker Panel survey. These estimates suggest that by 2025, Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time.”

This is clearly a huge percentage reduction in UK gross domestic product.

The abstract continues: “We estimate that investment was reduced by between 12% and 18%, employment by 3% to 4% and productivity by 3% to 4%. These large negative impacts reflect a combination of elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process. Comparing these with contemporary forecasts – providing a rare macro example to complement the burgeoning microliterature of social science predictions – shows that these forecasts were accurate over a five-year horizon, but they underestimated the impact over a decade.”

Labour’s top brass might want to reflect on the conclusions of the research.

That said, it is not as if UK Government ministers could possibly be unaware that Brexit has caused colossal damage, whatever the exact percentage hit to GDP.

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Office for Budget Responsibility chairman Richard Hughes said in spring 2023 of Brexit’s effect: “We think that in the long run it reduces our overall output by around 4% compared with had we remained in the EU.”

That is a very big percentage from the OBR, the UK’s official independent economic and fiscal forecaster. The calculation in the working paper published by the NBER of the percentage hit to GDP is obviously even greater.

However, Labour would, it seems, rather trumpet an India trade deal which delivers tiny benefits relative to what has been lost with the UK’s hard exit from the European Union than contemplate rejoining the EU, the single market or even the customs union.

The UK Government estimates that annual UK GDP will by 2040 be 0.1% higher than it would have been without the India trade deal.

There has been much hand-wringing over today’s Budget from Chancellor Rachel Reeves, not surprisingly given the weakness of UK growth and Labour’s fiscal rules.

Boris Johnson delivered the UK’s hard Brexit. (Image: Oli Scarff/ PA)

We should of course recognise that Labour was left an incredible economic mess by the Conservatives, after their 14 years in power.

As well as the Brexit disaster, we had the Tories’ savage and ill-judged austerity.

However, it is difficult to feel too much sympathy for the Labour Government on this front when it refuses to revisit its own “red lines” on Brexit.

The European Movement UK campaign group was right on the money on Monday.

Sir Nick Harvey, chief executive of European Movement UK, said: “We already know that leaving the European Union has severely damaged the UK economy. The Government’s own watchdog, the OBR, has repeatedly said that it’s already wiped billions off GDP.

“Rachel Reeves would be facing very different choices this week if the UK hadn’t cut ties to its nearest and biggest trading partner. The red tape and uncertainty of the past nine years have hit every single one of us in the pocket.”

He added: “Some estimates go further – a report this month from the National Bureau of Economic Research put the figure far higher, suggesting Brexit may have wiped as much as £240 billion off our GDP.”

Sir Nick is absolutely right – Ms Reeves would be “facing very different choices” were it not for Brexit.

Obviously it was the Conservatives who delivered the UK’s hard Brexit at the end of 2020, following the referendum in June 2016, and we should not forget that.

However, the Labour Government seems content to let the vast bulk of the Brexit damage – to the economy and standards of living – continue. Its red lines mean there will be no restoration of frictionless trade with our European neighbours or of hugely valuable free movement of people between the UK and European Economic Area.

It has looked as if Labour has been terrified to upset the Brexiters, and notably those red-wall voters who swept Boris Johnson to power in the December 2019 general election and ushered in the UK’s hard Brexit.

In this regard, it was interesting to see European Movement UK, a cross-party organisation campaigning on the benefits of close ties between the UK and EU, highlight new polling ahead of the Budget and its view that the UK Government is behind the curve on Brexit policymaking.

A poll conducted between November 13 and 17 by Opinium on behalf of European Movement UK, of 2,060 adults, found that, of those who think leaving the EU has damaged the UK economy, 76% favour the country joining the single market and customs union as a way to lower taxes. On the same basis, 77% would support joining the single market and customs union as a way to generate more money for public services.

European Movement UK, formed in 1949 by Sir Winston Churchill to prevent further conflict between European countries, said: “Public opinion is now clear – our polling shows that the UK public know how to start repairing our economy, even if the Government hasn’t caught up yet.

“Joining the single market and customs union would instantly boost our economic performance. Our challenge to the Chancellor is clear: you have admitted leaving the EU has been an economic disaster – so what tangible actions are you going to do to fix it?”

The answer, for now, appears to be nothing particularly significant.

That is a great pity, especially given the difficult economic picture and very real effect of Brexit on people’s lives.