Daily Telegraph: Project Fear resurfaces in another misguided and ill-thought-out way

Project Fear all over again. I hadn’t intended to write again about Brexit this week, for fear that readers may be suffering from Brexit fatigue. But a story appeared last week that an as yet unpublished document authored by government economists suggests that, whatever sort of deal we get out of the EU, in 15 years’ time the UK is going to be considerably worse off.

It is time for 12 home truths.

1. The idea that the UK civil service or, for that matter, anybody else, can confidently opine about the economy in 15 years’ time is ludicrous.

2. This was amply borne out by the Project Fear exercise in 2016, of which this latest exercise appears to be a re-run. As I pointed out last week, in 2016, Treasury economists forecast that a vote to leave the EUwould send the UK into recession. By contrast, the economy has grown well.

3. Indeed, the economic establishment’s prognostications about the future have a poor record. It thought that leaving the ERM in 1992 would be a disaster. In practice, this delivered us from recession and laid the groundwork for a period of sustained and balanced growth. Later, it thought that if the UK stood aside from the euro this would cause major economic loss. In particular, it was widely alleged, including by City bigwigs, that staying out of the euro would undermine the prosperity of the City. In the event, since the euro was formed, its members have, on the whole, done relatively badly and the UK has done very well. As for the City, outside the euro it has thrived.

4. To peer into the future, government officials have reportedly employed an economic model. Yippee! I suppose we should all be impressed by the idea of umpteen equations and numbers whizzing and whirring in order to unveil the shape of our future. Yet such formal exercises are next to worthless compared to the judgments that underpin them. Whatever has spewed out of the model is the direct consequence of what has been fed into it. Different models, and/or different assumptions, would produce completely different results.

5. The notion of a foreseeable far future is particularly ludicrous when what transpires will depend to a great degree on what we actually do. In 1979, the year of Mrs Thatcher’s election, could a computer model say anything meaningful about UK economy in 1994 without taking account of what policies might or might not be adopted in the meantime?

6. It is widely believed that the EU has been a terrific economic success and that, accordingly, when we leave it, we will suffer. Yet over recent decades the EU has been a relatively slow growing economic area. At the moment, of course, eurozone countries are doing pretty well. But the fundamental flaws of the euro remain. And before the euro, under-performance was rooted in the EU‘s tendency towards excessive regulation and protection which still continues.

To read the remainder of Roger’s home truths for the Daily Telegraph, click here.

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