Government’s EU Exit Analysis

Andrew Bridgen Excerpts

Wednesday 31st January 2018 Commons Chamber

[Charlie Elphicke (Dover) (Ind)]

Thank you for calling me to speak, Mr Deputy Speaker. May I also welcome you back to your place? You are much loved in this Chamber, and you have been deeply missed.

The best thing to do with these forecasts is not to hand them to the Brexit Committee but to put them in the nearest waste bin. I will explain why. I backed remain in the referendum, partly on account of the Treasury’s forecasts in April 2016 setting out what it thought would happen in the case of a vote to leave the European Union. It provided two scenarios: “shock” and “severe shock”. There were no categories entitled “success” or “continued economic brilliance for our country”. The “shock” scenario predicted recession and a sharp rise in unemployment. It also predicted that GDP would be 3.6% lower and that unemployment would be 500,000 higher, with 74,000 jobs being lost in the south-east alone. It wanted to ensure that everyone understood how badly every single region of the country would fare.

[Andrew Bridgen (North West Leicestershire) (Con)]

My hon. Friend is making a great point. We all remember “Project Fear”. Will he confirm beyond doubt that those Treasury predictions related not to effects that would happen after Brexit but to what would happen immediately after we voted to leave the European Union?

[Charlie Elphicke]

My hon. Friend is absolutely right. I am looking at the forecast of 500,000 more unemployed, and it relates to the beginning of 2018. The Treasury produced a little chart showing just how bad it would be, how joblessness would rise and how if people did not vote the right way they would lose their jobs and be visited by recession.

Under the second category—“severe shock”—it was forecast that GDP would be 6% lower and that unemployment would increase by 800,000. Those forecasts made me think that there was a big risk involved, and that we ought to back remain. I advised my constituents to back remain, but they advised me that they did not agree and that they wanted to leave, by a margin of about two thirds. So I thought, “Well, we will make do, and try to secure the economy as best we can, because things are obviously going to be really dreadful and I am really worried about the employment situation.” But what has actually happened? I have not seen a recession. In fact, growth has continued in this country. There are 32.2 million people in employment, and 1.4 million unemployed. That is an unemployment rate of 4.3%, and unemployment is at a 42-year low. Rather than going up by 500,000 or 800,000, it has in fact fallen by 250,000.

We do not hear about that from Opposition Members, do we? We do not hear them saying, “Well, wasn’t that Treasury forecast completely and utterly wrong?” All we hear them saying is, “Don’t be mean to civil servants who come up with forecasts that are hopelessly wrong.” We do not hear them asking why those forecasts were wrong. There has been no recession, and GDP and employment have continued to grow. It is hard to think of any part of that dossier that was correct. Indeed, it is now notorious as the “Project Fear” dossier.

I have asked questions about this in the Treasury Committee, of which I am a member, and every time I ask a Bank of England official or a Treasury official about it, they shuffle nervously and sometimes give a little cough. Sometimes they say, “The reason we did not have a massive rise in unemployment and a recession was that the Bank of England cut interest rates by 0.25%.” Interest rate cuts can be assimilative, but I am not sure that a 0.25% cut really made that much difference to 500,000 jobs. I think that the Treasury’s predictions in April 2016 were wrong, and if they were wrong before, the chances are that they could well be wrong again.

[Andrew Bridgen]

I, too, was worried about “Project Fear”, and I wrote to the Treasury after the referendum asking it to name and shame the 80% of economists who had claimed that there would be absolute meltdown if we voted to leave the European Union. The Treasury refused to name and shame them. I wanted their names because I wanted to ensure that they never got a job anywhere near government because their predictions were so bad, but the reason that the Treasury would not name and shame them was that they were already working there. They are the architects of this latest report.

[Charlie Elphicke]

Again, my hon. Friend makes a forceful point, and these people are not just in the Treasury.

The shadow Secretary of State—a knight of the realm, I should add—was kind enough to come down from St Pancras to see us in Dover recently. Grandly, he came down to tell the people of Dover that we ought to retain the benefits of the single market and the customs union. Everyone understood what he meant. He meant that we should stay in the single market and the customs union, that we should continue to have a trade policy made in Brussels rather than in Britain, and that we should continue to have uncontrolled EU immigration into this country with completely open borders. My constituents are very clear on one thing: they do not want uncontrolled immigration into this country. It has not helped them or their families, and they do not feel that it is helped their prosperity. They do not want trade policy to be made in Brussels. They want it to be made in Britain. That is why this Government are right to be leaving the single market and the customs union.

This is not a question of forecasting; it is a question of a mandate. That mandate was handed to us by our electors when they voted to leave the European Union. I understand that there are those on the other side who wanted to remain and who still want that. I respect that. I do not really respect their constantly re-fighting the referendum, but I respect the fact that they feel passionately that we should be back in Europe. However, that is not my mandate from my constituents, and it is not the mandate given to a lot of Opposition Members who represent constituencies in Wales and in the north of this country, who ought to spend a bit more time talking to their electors on the doorstep and a bit less time at grand dinner parties enjoying elite establishment-type conversation about how terrible it is all going to be.

Let me move on from Hampstead to the speech made by my hon. Friend the Member for Redditch (Rachel Maclean). She was absolutely right that we cannot predict the future, so why is it that the EU-funded CBI so passionately wants Britain to stay within the single market and within the customs union and says that businesses do, too? The answer is that it loves the regulation produced by Brussels, which helps to keep things in their place, but we need to become more competitive as a country. If we become more competitive, we will grow more quickly.

--- Later in debate ---

[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.