TREASURY predictions during the Brexit campaign were wrong to the tune of £100billion, according to a report which accuses former Chancellor George Osborne of overseeing a “gross miscarriage of government”.
The author, Timothy Congdon, a world-leading monetary analyst, describes Mr Osborne’s doom-laden forecasts as “preposterous”, pointing out that they were incorrect by nearly five per cent of GDP.
Describing the consequences of this enormous error as “seismic”, Mr Congdon said: “Instead of employment falling by hundreds of thousands, it has risen by hundreds of thousands.
“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, Mr Osborne’s scary rhetoric about a return of the Great Recession now looks preposterous. Despite all his supposed capability, he could not have been more wrong.”
“The grotesque misjudgment was not about something distant from his department’s area of responsibility. This was a subject where he had direct ministerial accountability and which was perhaps the defining public policy issue of his career.”
The report, which will be published in the May edition of Standpoint magazine, calculates the difference between the Project Fear forecast and the reality was 4.6 per cent of GDP.
Taking the percentage changes in GDP per quarter since the second quarter of 2016, Mr Congdon has calculated that overall the expected growth in GDP in the two years to mid-2018 with no change in EU membership was 3.6 per cent compared with Project Fear’s forecast of minus 1.2 per cent.
The actual outturn, after the vote to leave, using official forecasts for the first and second quarters of this year is 3.4 per cent, showing that Project Fear miscalculated by 4.6 per cent of GDP, equating to £100billion.
In his article, Mr Congdon, a member of the pro-Brexit Economists For Free Trade group who founded the City firm Lombard Street Research, considers two theories behind the blunders of Project Fear.
The first is that Mr Osborne breached the conventions of our unwritten constitution and abused the authority of the Treasury to give substance to lies.
He suggests civil servants had operated so closely to politicians that they lost their objectivity and saw themselves as serving those politicians instead of the public.
The second theory is that the only advice Mr Osborne received came from official economists who had no idea what they were talking about.
So many were “parroting each other” that unanimity had to be taken at face value. If this were the case, Mr Congdon concludes, “Osborne may not be a Svengali who corrupted the civil servants around him, but the innocent dupe of utterly incompetent and useless advisers”.
He adds that perhaps there was “a mixture of malice and ignorance, of wicked politics and trashy economists and that – as usual with other policy blunders in recent decades – it was more cock-up than conspiracy”.
Mr Osborne, who is now editor of the London Evening Standard, initially laid out two post-Brexit Doomsday scenarios in a Treasury White Paper.
The first, so-called “cautious” scenario suggested that even with a trade agreement with the EU, GDP would drop by 3.6 per cent.
The second “severe shock” scenario, which would see Britain “crash out” of the EUwithout a deal and trade on WTO terms, predicted GDP would fall by six per cent. Mr Osborne also predicted job losses of 520,000 to 820,000. In fact Britain is currently enjoying its lowest unemployment rate since 1975.