GLOOMY Treasury predictions about the impact of Brexit were wrong to the tune of £100 billion, a report finds today.
The study by leading economist Timothy Congdon says the Treasury made a ‘giant error’ when it predicted Brexit would spark an immediate recession.
The withering report also accuses George Osborne of a ‘gross miscarriage of government’ for orchestrating the Government’s Project Fear campaign.
The then-Chancellor released a series of Doomsday predictions, backed by ‘Treasury analysis’ to make the case against Brexit. But Mr Congdon, founder of the City firm Lombard Street Research, and a member of the Economists for Free Trade group, said Mr Osborne’s predictions had proved woefully wrong.
‘Instead of employment falling by hundreds of thousands, it has risen by hundreds of thousands,’ he said. ‘Instead of house prices going down, they have gone up.
‘Instead of the public finances lurching more heavily into deficit, they have been better than at any time since the Great Recession. Above all, Osborne’s scary rhetoric about a return of the Great Recession now looks preposterous.’ The study, in today’s edition of Standpoint magazine, states that the cumulative gap in gross domestic product between the Treasury’s pre-referendum predictions and the economy’s actual performance now stands 4.6 per cent of GDP – equal to about £100billion.
Project Fear predictions suggested the economy would shrink by 1.2 per cent by the middle of this year if Britain voted to leave. But Mr Congdon said official figures now suggested it would instead grow by 3.4 per cent.
Mr Congdon said it was unclear why Mr Osborne had got it so wrong. He said one possibility was that the Chancellor had ‘abused the authority of the Treasury to give substance to lies’.
But he said it was also possible Mr Osborne listened only to Establishment economists who were ‘parroting each other’. He concluded there was ‘a mixture of malice and ignorance, of wicked politics and trashy economics and that it was more cock-up than conspiracy’.
Forecasters at the EY Item Club predict that GDP growth could be cut in half from 0.4 per cent in the fourth quarter to 0.2 per cent when the Office for National Statistics reveals data on Friday. The figures will reveal the cost of heavy snowfall that brought parts of the country to a standstill last month.
GDP is expected to bounce back to 0.5 per cent in the second quarter. However, for the year the Item Club expects GDP to grow by 1.6 per cent, down from an earlier forecast of 1.7 per cent.