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Wednesday, May 23, 2018

Brexit is costing householders £900 a year

I have noticed that whenever a neutral observer or expert produces a verifiable bad news fact about the impact of Brexit the anti-Europeans jump in and try to claim bias or attribute political motives to the source. It is almost as if the Brexiteers themselves are models of sound commonsense, good judgement, integrity and have no record at all of manipulating or inventing data for their own political purposes.

Sure enough, the moment the Governor of the Bank of England puts his head above the parapet to do his job and pass on economic news the Brexiteers are on their high horse again. In this case, it is, as the Times reports, Mark Carney's assertion that households are at least £900 a year worse off and the economy as much as £40 billion smaller as a result of the Brexit vote. His expert view is that the economy is performing worse than its pre-referendum forecasts in May 2016:

Philip Hammond, the chancellor, who voted to remain in the European Union and favours a soft Brexit, did not contest the forecast in the Commons.

“Real incomes are about £900 per household lower than we forecast in May 2016, which is a lot of money,” Mr Carney told MPs on the Treasury select committee. “That’s just relative to what we were forecasting in May 2016, not adjusting up, as one might expect given the strength of the global economy, to where the economy might have been.”

On the state of the broader economy, he said: “GDP is more than 1 per cent below that [May 2016] forecast despite a very large stimulus provided by the Bank of England, a fiscal easing by the government, and global and European economies that are much stronger than they were expected to be. So if you adjust for those factors, the economy is up to 2 per cent lower than it would have been. That’s a reasonable difference.” Two percentage points of GDP is equivalent to £40 billion.

Mr Carney, who is due to step down in June next year, said that the economy had been damaged by uncertainty, which had deterred business investment, and inflation, which squeezed real household incomes. His comments came after the Bank downgraded its growth forecast for this year to 1.4 per cent, from 1.8 per cent predicted in February, although forecasts for next year and 2020 remained unchanged at 1.7 per cent.

Mr Carney has compared lost national output to “Brexit buses” in reference to the claim made on Leave campaign buses that exiting the EU would secure £350 million a week for the NHS. His claim that the economy was £40 billion smaller equates to lost tax revenues of about £15 billion, or £300 million a week.

Although Carney is technically independent of government, surely it is unprecedented for a serving Foreign Secretary to directly contradict the Governor of the Bank of England, least of all when speaking from another country. Nevertheless that is what Boris Johnson did. Maybe Theresa May should have a word when Boris returns.
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