The Treasury’s forecast came out this morning, causing a media storm over its predictions that Brexit will leave the UK worse off. However, speaking at an Economists for Free Trade this morning, David Davis stated “ forecasts aren’t facts, just predictions and political projections”.
In the wake of the Prime Minister’s announcement of her deal, and the upcoming vote, predicting the it’s outcome is difficult. The government doesn’t have an assured win as opposition from Labour, Lib Dem and SNP MPs is very likely. Additionally, in her own party, 90 MPs already declaring that they will vote the deal down in Parliament. However, it is known that parliamentary uprisings have a tendency of melting away with time, therefore no side is sure of what the turnout of the vote will be.
It is clear that the Economy will be a primary battle ground. It is no secret that the civil service is overwhelmingly supportive of remaining in the EU, and the institutional bias against Brexit may be at the heart of the Treasury’s report. It’s worth mentioning that the treasury rarely reveals the assumptions and models that help them get their predictions, which prevents outside sources from testing them to make sure they are correct. The Treasury’s reports do also tend to be very off of reality or even plainly incorrect. For example, the Treasury’s prediction that if the country voted for Brexit, the GDP would decrease, families would lose money and there would be a large increase in unemployment has been proved wrong.
It is the common belief among economists that free trade is good for a country’s economy, but Whitehall seems to believe that free trade with emerging markets and the US would not benefit the UK. Perhaps it is their belief that free trade is only good if it is with the EU. The fear of high border costs is also unfounded as it fails to take into account that computerised border procedures tend to cost under 1% of the value of the goods. Furthermore, the benefit of the single market has been constantly overestimated. In fact, it favours big corporations, suppresses growth and competition, as well as entrepreneurship, progress and advancement.
There is no doubt that there will be short term bumps if the UK leaves the EU on WTO rules. Davis admitted this in his speech but added that the UK would also have 39 billion pounds more in the bank.
It is vital that we therefore take these grim predictions from the Treasury with a grain of salt.