According to the respectable folks at Bloomberg Economics, Brexit has already cost the UK £130bn and that figure will rise by the end of this year. That might be true, of course, or it might be that we’re being assailed by a kind of statistical propaganda. The fact the likes of Will Hutton are lauding the figure suggests the latter.
As ever with these kind of scary figures, it’s worth interrogating how the researchers did their calculations. In this case the ‘cost’ is the loss in economic activity – GDP – resulting from our decision to leave the EU.
There is, of course, a principled argument that GDP is not the be all and end all of political life. Things like democracy, and freedom also matter. Being the master of one’s own fate has real value, as all those countries not signed up to a deeply integrated political union have realised.
On the other hand GDP does have some importance: all else being equal, a large economy is better than a small one. To use a Blair-ish phrase, the higher our GDP, the more the country can do with the proceeds of growth – and the more we can argue about what it is we should be doing.
Now, to return to this £130bn figure from Bloomberg Economics. The method used to calculate this loss is to compare the UK’s GDP growth with that of the G7 average. At first glance this seems fair enough, measure the performance of a rich country against other rich countries.
But who are those other six countries, and how useful is the comparison? The US, Canada, Japan, Germany, France, Italy. Merely to list them is to see the interesting point there. Japan’s a special case given its falling population and we are talking here about overall GDP, not GDP per capita.
The thing about averages is, of course, that they are made up of the individual performances of the components. When we go and look at those countries, we find that the worst performances are among the EU countries (Italy, and latterly Germany), France does better, but – and here’s the key point – it’s the US and Canada driving the average up.
In fact, the UK is very middle-of-the-road once we dismantle the average. Given the insipid performance of our continental neighbours, the idea that leaving the EU is going to depress growth becomes a little harder to support.
The much more interesting point here though is how these sorts of statistics work. You can torture the data to prove pretty much anything and although first time round people generally do note the caveats and explain the methods, it only takes a bit of Chinese Whispers for things to get utterly distorted. A figure with huge uncertainty then becomes expressed as gospel when it’s anything but. This is how we get to the likes of Will Hutton presenting Bloomberg’s findings as an actual cost rather than a dodgy guess at what might have been.
Politics is festooned with such manipulations. Poverty is some ghastly number, except we measure it as less than some percentage of median income. That’s not poverty, that’s inequality.
The housing charity Shelter says there are 300,000 homeless people in Britain, when the number sleeping rough – what many people would think of as homelessness – is more like 5,000. They reach that higher figure by counting as homeless all those being aided by the welfare state into having a roof over their heads. Then there’s the oft-cited figure of 120,000 people who apparently lost their lives due to austerity – a claim taken apart by Guy Dampier on these pages last year.
My latest favourite is the claim that converting offices into housing means the loss of affordable housing. This rests on the argument that conversion without the requirement for planning permissions means the local council can’t take its cut from the project to build housing priced below market rates. It’s a very odd claim, especially given that the best way to increase the affordability of housing is to increase supply, not for the government to cross-subsidise a certain portion of our stock.
Of course, we can all see the value of this panoply of misleading figures to certain political groups. It’s much more difficult to see why the rest of them should take them at all seriously.
All of which is a reminder of the wisdom of Sir John Cowperthwaite, the Financial Secretary of Hong Kong from 1961 to 1971. He forbade anyone collecting GDP figures for the then British territory – on the very sensible grounds that if they existed, then some damned fool would only try to do something with them.
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