Earlier this month, the government published a leaflet strongly urging us to vote “Remain” in the European Union – and sent it to all 27m UK households.
Not only did the multi-million pound cost of producing and distributing this leaflet undermine the carefully-negotiated spending rules relating to the referendum on 23rd June, designed to stop the campaign becoming a money-driven free-for-all. The text itself was blatant propaganda – full of statistical sleights of hand disguised as reasoned arguments, a master-class in passive aggressive manipulation.
It turns out, though, this tawdry leaflet was just the start when it comes to “Remain” using taxpayer cash and “the government machine” to bolster its cause. For last week, Chancellor George Osborne launched a thumping 200-page “Treasury study” into the long-term implications of leaving the EU, which “forecast a £4,300 fall in GDP per household” if we leave the EU. For many millions of voters, that’s a scary number – around a quarter of today’s average disposable income.
Once again, this huge Treasury document represents a clear breach of long-standing rules that Whitehall remains detached from political campaigning, rules of particular relevance during a knife-edge referendum contest. And, reading through it, one is constantly stuck by the grotesque extent to which, for all the scientific pretense, the “analysis” is deliberately skewed.
The sole purpose of this “sober and serious” text, there can be no doubt, was to produce one conclusion – an alarming headline “finding” which, however dubious, can be repeated again and again in the weeks to come, until it lodges in the public consciousness. Rather than Her Majesty’s Treasury, this document could have been produced by Orwell’s Ministry of Truth.
Unusually for a newspaper pundit, perhaps, I’m a trained economist. And in all my many years of studying official economic documents – budgets, comprehensive spending reviews and the like – through all that sifting and weighing of fine-print, I’ve never come across methodology and assumptions so blatantly rigged.
A few months ago, it seemed the government, and the broader Remain camp, would focus their campaign on public “security” concerns. Much was made of the role of the EU in keeping us safe from terrorists. There were frequent references to “a resurgent Russia” wanting Brexit.
Former M16 Boss Sir Richard Dearlove, and others, put paid to that. Our security and peace over the last half century has stemmed not from the EU, but from Nato. The UK is one of the “five eyes”, sharing serious intelligence only with the US, Australia, Canada and New Zealand. Senior security figures privately deride EU intelligence sharing as “limited”, given the inherent lack of trust. That’s why Sir Richard said the security costs of Brexit would be “low” and there could even be “positive benefits” – given enhanced border controls and extradition powers the UK could introduce outside the EU.
The government now seems determined to scare voters away from Brexit by posing threats to their economic security instead. Off the back of this dodgy Treasury dossier, Osborne repeatedly claimed as “fact” that we’d be “permanently poorer” if the good people of Britain exercised their democrat right to leave the EU.
The statistical tricks pulled to make the “£4,300 worse off a year by 2030” headline as scary as possible are truly astonishing. The UK economy will grow by 37pc between now and 2030, the Treasury estimates, compared to 29pc if we choose Brexit. Of course, one- and three-year growth forecasts by the Treasury and others are nearly always wrong, let alone GDP estimates going over a decade into the future.
Let’s put that to one side for now, though, and consider how and why those post-Brexit and no-Brexit figures were then converted into differences in “GDP per household”. For one thing, while GDP is obviously a widely-used concept, it’s far broader than disposable household income, given that it includes extensive corporate activity and tax. So, while today’s GDP per household is around £67,000, disposable income (what ordinary voters actually care about) is close to £45,000. So the Treasury has used the widest possible concept of income so the absolute difference generated by its 2030 growth forecast inside and outside of the EU is as large as possible.
Then, that GDP difference is divided not by the number of households in 2030, estimated at around 31m, but by today’s smaller number of 27m – so further boosting that headline difference in GDP per household. This is not only incredibly dishonest, but plain wrong. So the extent to which we are “poorer”, a “fact” wielded many times by the Chancellor and to be used many times again, is a bogus calculation of what is anyway a bogus concept. And, on top of that, it is driven by differing GDP projections that are, in themselves, deeply dishonest.
It is just about credible, whatever the difficulties, to have a stab at a long-term GDP projection – as long as it’s not presented as “fact” of course. What is utterly inexcusable is to make a string of ridiculous assumptions in order to drag down the post-Brexit GDP projection as much as possible, while pumping up the benefits of saying in. Yet that is what the Treasury has done.
Firstly, it is blithely assumed the EU will agree to complete the single market in services – something that would hugely benefit Britain, of course. Given the Prime Minister’s inability to secure any meaningful concessions from Brussels during his recent “renegotiation”, and how weakened our position will be once any chance of Brexit had passed, such an assumption is very naïve.
Far worse, though, the mandarins have included only their assessment of the “costs” of Brexit in their calculations, and none of the significant potential gains. The headline estimates assume a Brexited Britain signs a trade deal with the EU (on exactly the same terms as Canada). Yet we could surely do much better – given the £60bn annual surplus of goods the EU sells us over what we sell them.
Then, any enhancement to UK productivity and growth from the removal of EU-imposed regulation is completely ignored. Despite being free to strike independent trade agreement with fast-growing nations beyond the EU, where we often have deep historic links, the Treasury assumes we sign none. It is a travesty to present such chicanery as “analysis”.
Why should we respect any Treasury recommendation or forecast? The Treasury backed UK entry into the disastrous exchange rate mechanism in 1990, which led to “Black Wednesday”. The Treasury urged us to sell half our gold reserves for under $300 an ounce, after which gold rose more than six-fold.
In 2003, the Treasury “forecast” UK trade could expand by 50pc over the subsequent three decades if we joined the euro – a forecast which, given subsequent European stagnation and the cataclysmic failure that is the single currency, today looks ridiculous. And now, the same Treasury, led by senior mandarins keen to secure a gong, or a cushy number in Brussels, have produced yet another deeply-politicized document.
Intelligent people can be on opposite sides of this referendum. Those of us backing Brexit aren’t “economically illiterate”, Mr Osborne. This Treasury document, though, including no possible Brexit benefits, and entirely ignoring the growing prospect of another systemic Eurozone crisis, is deeply disingenuous – doing a disservice to our democracy.
“It was a bright cold day in April, and the clocks were striking thirteen”. That’s how George Orwell opened his dystopian masterpiece 1984, calling into question his entire faith in government. That’s how I felt reading through this disgraceful Treasury document.