18 April 2016

Osborne is dealing in judgements, not facts


George Osborne is today pushing his Treasury analysis suggesting each UK household would be £4,300 worse off by 2020 if we left the EU. As I write this, he’s not yet let us see the actual (apparently rather long) document. But we do know certain things about it. First, the £4,300 loss scenario assumes that after the UK leaves the EU it does a deal with the EU exactly like Canada’s, and in particular faces tariffs on services exports to the EU. Second, it assumes that we make no better trade deals with the rest of the world (with non-EU countries) by being outside. Third, it assumes that the population rises as implied by ONS immigration forecasts. On Radio 4 George Osborne stated that although there may be some debate to be had about specific scenarios, it is a “fact” that if the UK left the EU we would be “permanently poorer”.

Well, in my view the EU would function better without the UK or other non-euro members – I believe Brexit would quickly trigger all remaining members to either join the euro or leave the EU – and that if the EU and Eurozone were the same thing, that would solve most of the Eurozone’s governance problems, allowing the currency to work better and stimulate faster growth in the Eurozone. Faster Eurozone growth would be good for UK trade. George Osborne might well disagree with my view that the EU will function better without the UK, but that is his judgement, not a fact.

In my view the UK would make more, faster, and more frequently updated trade deals with non-EU countries post-Brexit. George Osborne might disagree, but that’s his judgement, not a fact.

In my view the EU is very unlikely to want to risk cutting itself off from UK services by imposing tariffs on them. Osborne might disagree, but that’s his judgement, not a fact.

I think that outside the EU the UK would be better placed to reverse any policy mistakes we make in future. Osborne might feel he knows a thing or two about the value of being able to reverse policy mistakes quickly. He might believe that outside the EU we would not reverse mistakes quicker or that being able to do so would not add to GDP. If so, that’s his judgement, not a fact.

Some folk have criticised the attempt to forecast GDP impacts in 2030. I don’t. Osborne’s entitled to say he’s analysing impacts versus a counterfactual. But to construct a counterfactual for 2030, he needs some opinions about how the EU itself will evolve between now and then. So, since he’s keen to talk about 2030:
– how many non-euro members of the EU does he expect there to be by 2030 if the UK remains?

– can he tell us if the Eurozone will have its own Treasury, taxes, debts, parliament & president by 2030?

– can he tell us what percentage of UK trade will be with the EU by then?

– can he tell us how regularly UK will be overruled in EU decision-making by then?

– can he tell us what further powers & competences the UK will have passed to the EU by then?

I do impact assessments all the time for the government, the EU, and others. Indeed, I’ve trained many of them in how to do them and helped devise guidelines. An impact assessment of this sort is not a “fact” about the future. It is a way of expressing and informing the policy-maker’s own judgements about scenarios, risks and trade-offs. There’s nothing wrong with spelling out what you believe and what the reasoning is behind it. It’s good that Osborne has done that. What he cannot do though is to deny that others, that do not share his judgements, might reasonably take a different view.

Andrew Lilico is Chairman of Economists for Britain