The tawdry nihilism of some in the “Leave” camp must be resistedby Paul Wallace / February 2, 2018 / Leave a comment
When a recently leaked government document revealed estimates of the harm to the economy under three plausible scenarios of Britain’s future outside the European Union, Brexit minister Steve Baker made an extraordinary response attacking civil-service forecasts as “always wrong.” Such politicisation and vilification of economic forecasting is one of the many pernicious effects of Brexit.
This tawdry nihilism should be resisted. The economists inside government who are asked to make the forecasts deserve support from ministers rather than abuse for their efforts. And since most forecasters inside or outside government are only too aware of the fallibility of their predictive powers they also deserve a fairer hearing.
It is of course easy to take aim at them when, as so often, their forecasts turn out to be wrong. Exhibit number one for Brexiters is the Treasury’s prediction of a recession following a vote to “Leave” in the referendum. Instead the economy kept on growing. Yet immediately after the vote the collapse in both consumer and business confidence was such that a recession did appear quite likely. Mark Rutte, the Dutch Prime Minister, captured the dark mood when he said that Britain had “collapsed—politically, monetarily, constitutionally and economically.” What saved the day was the restoration of political authority as Theresa May took over from David Cameron as PM without a lengthy and bruising contest to become the new leader of the Conservative Party. The Bank of England also acted promptly to bolster the economy by cutting interest rates, supporting bank lending and starting a further bout of quantitative easing.
Even if Britain was spared a swift recession the self-harm from Brexit is already apparent. Growth in 2017 was the lowest since 2012. Yet the international environment was far more favourable last year as the 19-strong euro area which buys almost two-fifths of British exports put on a burst of speed whereas in 2012 the currency union was on its knees. Mark Carney, Governor of the Bank of England, said in late January that the outcome of the referendum had already cost one percentage point of growth and that the loss in output would rise to probably two percentage points by the end of this year.
As well as preparing its short-term forecast in 2016 the Treasury conducted a much more substantial analysis of the longer-term effects of Brexit under…