Rachel - Black hole - Reeves seems unaware of the advice, "When you are in a hole, stop digging".
First it was an inherited hole that she had fixed. Now the hole she fixed is bigger. A new culprit must be found. What better than Brexit, that hated dash for freedom that Hillary Benn, Keir Starmer and most of the Labour party tried to stop. Seeking to overthrow democracy is serious and to justify it serious threats had to be concocted. A future of low growth and poor economic performance was the obvious excuse. An excuse ably supported by left-wing economists and the OBR, who cheerfully admit that they are useless at predicting anything.
It is worth shedding light on the OBR. In a 2012 interview with the Guardian, Robert Chote, director of the OBR said his organisation had predicted growth six times stronger between 2010 and 2012 than latest official figures suggest was the case. Adding, "It would be lovely if we made perfect forecasts – but they are our best judgement". In October 2023 the Telegraph reported that the OBR admitted 'genuine' mistakes. It significantly underestimated the strength and persistence of inflation, and overestimated the level of economic activity. That led to 'ramifications' for its predictions of tax revenues, spending and interest rates.
The reason for Brexit was the return of Sovereignty. For EU acolytes the rejection of the 'New Country' vision was a rebellion by the ignorant masses. The mass disobedience was almost unbearable for the EU elite. A real Brexit has never been delivered and EU loyalists on both sides of the channel dream of putting down the rebellion.
There is a problem. The Labour government has been boasting that the UK is growing fastest in the G7. How can it be that we are growing faster than the EU (according to the government) but not growing as fast as we would have had Brexit not happened? Perhaps this oddly strangulated thought process demonstrates the real reason for our current malaise. In simple terms, they really don't know what they are doing.
Adding to the confusion is Starmer's justification for his air miles campaign. It's about trade deals, he proudly explains as he jets off to another photo op. Of course, if he had succeeded in overthrowing democracy there'd be no air miles. UK Trade deals are the direct result of Brexit. No EU province (Sorry I meant Country) can make a separate agreement.
The 4% myth is a lie. It's a lie that Starmer used to justify his anti democratic actions. The extent to which he and other Labour ministers are wedded to the EU is blindingly obvious when viewed through the prism of these latest contortions.
Sir Walter Scott, wrote these words in 1808. They are this government's early epitaph.
"Oh what a tangled web we weave.
When first we practice to deceive".
Below Catherine McBride and Sir John Redwood untangle the web.
Catherine McBride OBE is an economist. She worked in financial services for 20 years, trading and advising clients on international equity and commodity markets.
Brexit has led to our GDP growing 4% to 8% less than it would have between 2016 and 2024.'
This Brexit myth just will not go away, and has grown from 4% to 4% to 8%, and it has morphed from an average of possible outcomes predicted by ten economic groups years before Brexit to a definite outcome with verbs such as, 'has led to', 'will be' or 'is' used alternately in the claim above by various MPs. They don't understand if it has happened, is happening now or will happen in the future, but apart from the timing, they are all sure that it is real.
However, the OBR's guesstimate of a potential 4% reduction in relative productivity over the long term was just the average of 13 econometric projections, made by 10 different economists, using different econometric models and assumptions. All of the projections were made before the UK and EU had agreed the TCA, and so the OBR should have asked the economists to re-run their calculations in 2020. But for some reason, they didn't and have continued to refer to the average reduction in relative productivity of 4% in their Economic and Fiscal Outlook publications.
The original OBR report identified which of the 13 projections assumed a correlation between trade intensity and productivity because not all economists believe that this is true, especially for developed nations that have large internal markets and are less reliant on trade. If we go back to the 13 estimates and only average those that did not use this assumption, the average GDP reduction is only 2%, which is close to the margin of error. Margin of error is another thing that most people forget to mention when they repeat the average guesstimate. But I won't go into that now.
Econometric projections are not reality. They are educated guesses. The projections about Brexit's effect on UK GDP ranged from -1.8% to -10%, which should tell you that this was dartboard stuff and should not be taken too seriously. Projections vary greatly by changing the assumption or the model. For example, the OBR's average included two projections by the IMF using the same model but different assumptions, the results varied by 65%. Another think tank produced two projections using different models and different assumptions; one result was 2.56 times larger than the other. Econometrics is not an exact science. Averaging these projections doesn't make them any more likely to occur.
We are now halfway through the OBR's long term, generally considered to be 15 years. World Bank data for GDP, in PPP (current international $), demonstrates that the UK and France have had virtually identical GDPs. France overtook the UK in 2019, but the UK overtook France in 2022. In 2023, the two nations were back to identical GDPs. If Brexit was the cause of lower GDP in the UK, why is the UK and French GDP still in lockstep, just as they were before 2016? France is still in the EU. Why does anyone believe that UK GDP would have miraculously outperformed France if the UK had stayed in the EU? It is time for the OBR and the MPs, still promoting this myth, to admit that the projected average relative productivity reduction of 4% is unlikely to materialise.
'Our trade volume is 15% lower and long-term productivity is 4% lower'
This is another variation on the myth covered above. This also comes from the OBR Economic and Fiscal Outlook report, where they tried to justify the average projection of 4% lower productivity by claiming that it would be caused by 15% lower trade. The actual OBR quote is:
'both exports and imports will be around 15 per cent lower in the long run than if the UK had remained in the EU. The size of this adjustment is calibrated to match the average estimate of a number of external studies that considered the impact of leaving the EU on the volume of UK-EU trade.'
Again, the OBR mentions that this is the 'average estimate from a number of external studies' but the MPs in Westminster Hall don't seem to have read the full publication. So far, the trade data doesn't support this estimate. From 2016 to 2024, UK total goods trade (imports plus exports) to the EU is up 28%, whether you include or exclude precious metals, and UK total service trade is up 72%, making total UK trade with the EU up 43%.
Sir John Redwood is a former MP and government minister. He worked as an investment analyst, manager and director for Robert Fleming and for NM Rothschild in the 1970s and 1980s. He is currently Chief Global Strategist at Charles Stanley & Co Ltd
The Remain campaign latched on to a flimsy fifteen year forecast put out by the OBR of the possible impact of Brexit. They said our trade with the EU would contract, so our productivity would decline by 0.25% a year for 15 years because of this. It would mean a lower overall increase in productivity of 4% fifteen years out, as productivity overall would continue to increase.
This has now become the simple lie, retailed by Ministers of the government and Remain/Rejoin commentators that we have lost 4% of GDP from Brexit! There is of course no sign of our GDP falling 4% from leaving the EU and that is not what the forecast said.
Forecasting for fifteen years is a bizarre over reach, given the OBR's usual inability even to forecast current year revenues and the deficit accurately. I would not try to offer a single figure forecast for GDP 15 years hence.
We do now know the results of the Brexit vote over nearly nine years. Far from our trade contracting, it has boomed. Our. exports of services, the largest part of our total exports have boomed. Exports overall are well up in real terms . There is no sign of the export hit the OBR forecast.
It is true the weakest part of our growing exports is goods to the EU. That is because the big items included oil, gas, refined oil products and petrol and diesel cars. All of these are being deliberately cut back by bans and high energy costs and taxes as part of the net zero policy.
Meanwhile the OBR in its review of its productivity forecast has confessed service exports have done so much better than they assumed without formally revising the forecast. Why?
The truth is the UK has a productivity problem with its collapse in the public sector after covid which results from bad management. The government is busily forcing closure of some of our most productive capital intensive activities in its drive to stop fossil use.
These have nothing to do with Brexit, so stop the lie about a 4% Brexit hit to GDP which never happened.
