Government’s EU Exit Analysis

Alison McGovern Excerpts

Wednesday 31st January 2018 Commons Chamber

[Keir Starmer]

I will give way to my hon. Friend the Member for Wirral South (Alison McGovern) and then to the hon. Member for Chelmsford (Vicky Ford).

[Alison McGovern (Wirral South) (Lab)]

My right hon. and learned Friend makes the good point that, yesterday, we saw a pretty grim approach to economic forecasting, which was full of jokes and did not address the seriousness of the situation. Does he agree that an opportunity presents itself? The Conservative Government created the Office for Budget Responsibility—independent forecasters who could do the job of providing the public with the facts if only the Government would tell them what their policy is.

[Keir Starmer]

I do agree, and that is a very important point. Essentially, the OBR is saying that it cannot do its job because it does not have the information to do it. That is why it is far better to proceed on the basis of assessments of risk and impact, and to allow the OBR to do its job.

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[Mr Walker]

I will give way to my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) in a little while. I just want to finish my point about the nature of the analysis and the caveats that are contained in the document, as Members will see when they view it. Economies of all sorts face an uncertain future in the face of new technologies and the next phase of globalisation, which presents both challenges and opportunities.

[Alison McGovern]

Will the Minister give way?

[Mr Walker]

Not right now.

Of course, there is a specific role for this sort of modelling, but it must be deployed carefully and appropriately alongside a full range of policy work in our EU exit plans. On its own, no model or analysis will be sufficient to provide us with the full picture of the various benefits and costs of different versions of Britain’s future relationship with the EU. Such models cannot predict the future. It is the Government’s job to use these sorts of models appropriately and to develop them as best they can. Despite this—and, in many cases, because of it—the analysis remains extremely sensitive.

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[Mr Walker]

I am grateful to my right hon. Friend, as always, for her kind praise, but I think I have already answered the challenge she sets as to the reasons why some of the information in the report should be kept confidential. That is something on which the two Front-Bench teams clearly agree, because it is in the Opposition motion. I also just want to emphasise that the misrepresentation in some of the press reporting of this leak makes this an exceptional request that the Government agree to on an exceptional basis. They do not accept a precedent for future action.

Finally, it is also for those reasons that I believe that forcing the release of partial and preliminary analysis risks undermining the functioning of Government at a vital moment.

[Alison McGovern]

Will the Minister give way?

[Geraint Davies (Swansea West) (Lab/Co-op)]

Will the Minister give way?

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[Anna Soubry]

I agree with the hon. Gentleman—I nearly called him my Friend, although on this he is, because he is absolutely right. The agreement made in December between the European Union and ourselves is such a fudge that it is impossible to put it into a text that could become a treaty. It is a superb fudge, and it has delivered the political outcome, but the reality, which has been accepted by this Government, is that in order to solve the problem in Ireland we are staying in the—not “a”, but “the”—customs union and single market. That is what the Government basically agreed to do in December.

[Alison McGovern]

The right hon. Lady has hit on the heart of the problem, which is that the Government will not say what they want. However, turning to this issue, does she agree that the reason why the public are in the dark is that we have excellent independent economic forecasters in the Office for Budget Responsibility who say that they simply cannot do their job because we are all in the dark about what the Government actually want? Ought they not to rectify that?

[Anna Soubry]

The hon. Lady is quite right—she can be my Friend in this debate, because she makes an important point. What responsible Governments do, quite properly, is to say to impartial, objective officials, “Right, these are the options. Cost them out, or assess them, and so on and so forth,” and yet bizarrely the Government did not put forward their own preferred option. What on earth does that say about our Government’s position? What further evidence does anybody want that they have not worked out their position? They have got to do that, because at the end of March the European Union will publish what its position is going to be, and there is every chance that our Government will still be messing about, fighting off hard Brexiteers and not grasping the nettle and doing their duty by the country.

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[Mr Kenneth Clarke (Rushcliffe) (Con)]

The Speaker got an ambiguous reply from me, and I will explain why in a moment, but first may I add my sympathies to those already expressed in the House, Mr Deputy Speaker, and say how delighted I am to see you back in the Chair?

I will explain why I hesitated when the Speaker asked me if I wanted to speak. First, I think—I will have to check—I agreed with every word that the right hon. Member for Leeds Central (Hilary Benn) just said. I was also hugely impressed by the speech made by my right hon. Friend the Member for Broxtowe (Anna Soubry). I was not at all sure, therefore, if I would try to catch your eye, Mr Deputy Speaker, because I did not wish to detain the House by simply repeating the arguments they gave, as other people want to speak. By my standards, therefore, I hope I shall make what might be described as a long intervention—I usually intervene for longer than other people anyway.

I want to comment on the status of these economic analyses and how one should use economic analyses, and what has been presented here. Brexiteers make a great deal in their arguments, when they try to dismiss the documents we are all going to see, of the inaccuracy of some of the documents put out at the time of the referendum. There is no doubt that the authorities then put out forecasts, in good faith, in which they overestimated the short-term consequences of the vote. It has to be said that some of those campaigning on the remain side—David Cameron and George Osborne, I am afraid, who are both friends of mine—grossly exaggerated the material they had, such that the arguments on the remain side in the national media, at times, were almost as silly as those on the leave side—on the question of money for the health service or Turks coming to this country. It was a wholly unsatisfactory campaign.

We should not exaggerate how wrong those forecasts were. The vote to leave has already made this country poorer than it would have been. The living standards of many people in this country are lower now than they would have been had we voted to remain. The vote produced an unfortunate devaluation in the pound and a surge in inflation at a time when very many people’s wages could not follow it, and that has had consequences. On the lack of any policy, I would defend my Government’s not having a policy yet on what they are trying to negotiate by pointing out that the Opposition party does not either. The right hon. and learned Member for Holborn and St Pancras (Keir Starmer) wisely declined to answer the question of whether the Labour party was in favour of staying in the customs union because he has not a clue what the Labour party’s view will be once it has settled its internal arguments—but that is a diversion.

The fact remains that we have already damaged ourselves. We are experiencing some economic growth, although it is not benefiting every section of the population, but that is because the global economy is, to everybody’s surprise, doing rather better than was expected six months ago. There is global growth. No one is quite certain why. I am certainly not, but it is beginning to look quite strong—it is strong in the United States and the European Union, and it is not too bad out in China—and as always we are benefiting from that. It was unforeseeable when the forecasts were made last summer, but now we have this strong surge, and we do not know how sustained it will be. It all looks a little fragile—there are one or two uncertainties about—but it is lifting the British economy a little, and I am glad that it is. But, because of the impact of the referendum, growth in this country is pretty feeble compared with the rest. We are the laggard in the G7. We are the laggard among the European economies against which we normally match our performance. That is the damaging consequence of the vote cast in the referendum in 2016.

[Alison McGovern]

Does the Father of the House agree that the extraordinary actions taken by the Governor of the Bank of England in response to the vote are very poorly understood, which creates an even worse impression of the forecasts made beforehand?

[Mr Deputy Speaker]

Order. I must inform the House that there will be a six-minute limit after the current speech, and if people intervene I will have to bring it down further. I do not want to stop debate; I just want to warn everybody.

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[Alison McGovern (Wirral South) (Lab)]

It is a pleasure to be in this debate under your chairship, Madam Deputy Speaker. I normally find it a pleasure to debate the hon. Member for Dover (Charlie Elphicke), but being referred to as an “elite” by a representative of the Conservative party sticks in my craw. Coming from an ordinary background and having fought to get here to speak on the behalf of my constituents, who take all kinds of views on the economy, it pains me to be attacked and accused of being part of some kind of elite that is unconnected from my constituents. That is a disgraceful way to conduct this debate.

I want to make two simple points. The idea that all forecasts are wrong and that everything will be all right in the end is a myth. It is the easiest thing in the world to stand up here and say, “Blame the economists. Blame the forecasters. This is all crystal ball stuff,” and the Under-Secretary of State for Exiting the European Union, the hon. Member for Wycombe (Mr Baker), gave us an excellent example of that kind of nonsense yesterday. An economic forecast is a set of assumptions and a set of data for the current state of the world and then a long sum that allows us to make some conclusions about what particular circumstances might mean for GDP, employment and a range of other economic variables. It is just maths.

[Andrew Bridgen]

Has the hon. Lady ever heard the phrase “garbage in, garbage out”? If we use garbage figures and make garbage assumptions, we will get garbage out of the other end.

[Alison McGovern]

The hon. Gentleman just made my point for me. It is just maths. It is clear and transparent. There is a set of assumptions, a set of data and a set of conclusions. If he thinks that some of those assumptions or some of the data are garbage, it is up to him and those who agree with him to show their working. All that they have to do is do the maths better than the forecasters. We do not have to have a stupid row about whether forecasters get everything wrong all the time, with people saying that we should not believe them anyway. We just have to be transparent and show our working and then we can disagree honourably and openly, rather than making constant ad hominem attacks against people who are not here to defend themselves.

To be frank, I have criticised how economics has been conducted in the past, and I agree with some criticisms of the traditional assumptions made in economics, but this debate is not about that. This is about whether we ought to know about the economic consequences of the various options before the Government, and it is certain that we need Government economists to model various outcomes. The last person to have a massive pop at economic forecasting was our friend George Osborne. I remember well that he loved to tear a strip off the former Prime Minister Gordon Brown’s economic forecasts, thinking that it was a great old argument to accuse the then Labour Government of fiddling the figures. What did George Osborne do? He set up the Office for Budget Responsibility so that we would have independent forecasts, and I will return to that when I conclude my remarks.

I caution Members against making the kind of remarks that we heard earlier in this debate—that things will somehow be okay in the long run, and that short-term forecasts and estimates of the fall in GDP do not really matter because things will all work out in the end. All that will obviously be true if we wait long enough, but how long will we have to wait? I urge Government Members to consider not just the “it will be all right in the end” point of view, but the damage done in the meantime. The past shows us that we cannot just wait forever. If a regional economy is de-industrialised and damaged, we know how long it takes to recover. Economists call it hysteresis—the act of scarring. If a factory in a town is shut down, that town may never recover economically. That is why this is not just about the long term. Brexit has the capacity to exacerbate inequality severely and significantly, so we cannot accept that things will be all right in the end.

We need proper modelling of not just the global effect on GDP or the effect on employment, but of the effect of the Brexit proposals on each and every town in our country. The OBR has asked the Government on numerous occasions for a statement of policy so that it can make a forecast and model it. The spring statement is coming up, so I say to the Minister, as I said yesterday, that he should do the decent thing—do what George Osborne would have wanted—and give the OBR a statement of policy and let it be modelled. Then we can all see what the Government’s Brexit has in store for our country.