Brexit: Economic Impact

Lord Lawson of Blaby Excerpts

Tuesday 18th October 2016 Lords Chamber

[Lord Young of Cookham]

I thank the noble Lord for prefacing his remarks with his customary diplomacy. It is important to recall exactly what the Treasury analysis did. It took as a baseline continued membership of the EU, and then tried to predict the impact on GDP of three scenarios: first, the Norway solution or EEA; secondly, the Canada option; and thirdly, the WTO option. The Government have subsequently made it clear that they are going not for any of those three options but for a bespoke option which will not necessarily parallel any of those. For that reason, there is no particular advantage in updating the analysis that the noble Lord referred to. As for what he said about sectors, that is an important issue, and work is going on in government departments on the impact of Brexit on particular sectors of the economy.

[Lord Lawson of Blaby (Con)]

My Lords, I commend my noble friend for dismissing this earlier projection or model. Is he aware that it is regarded as completely useless for two reasons? One is that it takes no account of the other economic dimensions besides trade—there are many—and the other is that it is a so-called gravity model, designed for geographers. All reputable economists regard it as completely useless because it contains, among other things, no prices.

[Lord Young of Cookham]

I am grateful to my noble friend for his support to the extent that he suggests there would be no great advantage in redoing this exercise. One of the things this exercise did not do was take into account any intervention by the Bank of England or Government after the decision. Since then we have seen monetary initiatives by the Bank of England, and the Chancellor has made it clear that in his Autumn Statement he is minded to take measures to protect the economy. For those reasons, there is no particular advantage in updating the forecast—which was not out of line with other forecasts made at the time.