Hard Brexit will cost Treasury up to £66bn a year, ministers are told

Leaked papers suggest leaving EU single market will cause between 5.4% and 9.5% slump in GDP, with massive loss of tax revenue.

Treasury coffers may take a £66bn annual hit if Britain goes for a hard Brexit, cabinet ministers have been warned.

Leaked government papers suggest that leaving the single market and switching to World Trade Organisation (WTO) rules would cause GDP to fall by up to 9.5% compared with staying in the EU.

The draft cabinet committee paper seen by the Times is based on forecasts from the controversial study into the predicted impact of quitting the EU published by George Osborne in April during the referendum campaign. Although the then chancellor faced widespread criticism over the report, the Treasury stands by its calculations, according to the Times.

The documents says: "The Treasury estimates that UK GDP would be between 5.4% and 9.5% of GDP lower after 15 years if we left the EU with no successor arrangement, with a central estimate of 7.5%.

"The net impact on public sector receipts - assuming no contributions to the EU and current receipts from the EU are replicated in full - would be a loss of between £38bn and £66bn per year after 15 years, driven by the smaller size of the economy."

Brexit backers who have seen the documents told the newspaper the figures were unrealistic and claimed there was a push to "make leaving the single market look bad".

But prominent remain campaigners pushing for a soft Brexit that would keep Britain in the single market said the documents showed the "horrific damage" of leaving the trading bloc.

The former Conservative minister Anna Soubry MP, a supporter of the Open Britain campaign, said: "The horrific damage of a hard Brexit is clear. Less tax revenue means less to invest in schools and hospitals, lower trade and investment means businesses and jobs at risk.

"This danger is precisely why parliament must be involved in the principles to guide the Brexit negotiations. Britain will leave the EU, but we must do so in a way the protects our prosperity and reduces risk. The government should now make clear the 'WTO option' isn't on the table."

The prime minister, Theresa May, is facing growing pressure to allow MPs a vote on Brexit and the government is also fighting a legal challenge over the use of royal prerogative to invoke article 50, which triggers the process of leaving the EU.

The Brexit secretary, David Davis, told MPs the government would "observe the constitutional and legal precedents" on giving MPs a vote on any treaty setting out Britain's new relationship with the EU.

The Liberal Democrat leader, Tim Farron, said the leaked documents showed quitting the single market would wreck the economy.

"This is yet more proof that hard Brexit would be an act of sheer economic vandalism," he said. The Liberal Democrats will stand up for Britain's membership of the single market. We cannot stand by while this reckless, divisive and uncaring Conservative government wrecks the UK economy."

A government spokesman said: "We want the best outcome for Britain. That means pursuing a bespoke arrangement which gives British companies the maximum freedom to trade with and operate in the single market, and enables us to decide for ourselves how we control immigration."