LORD LAMONT

Many other economists estimate a ‘no deal’ (or rather, a WTO deal) would make us billions better off

As a former chancellor, I am no stranger to Treasury forecasts. My most famous (or infamous) prediction came in the autumn of 1991 with the economy in the grip of a recession. Despite the metaphorical frost on the ground, I detected the “green shoots of recovery”.

I was much maligned at the time, but within a year sustained growth had resumed and by 1997 we were able to bequeath to Tony Blair a golden inheritance of growth and sound public finances.

Today’s Treasury has little time for green shoots – in assessing the impact of the biggest shift in UK policy for decades, it sees a blackened wasteland.

During the referendum campaign of 2016, highlights (or lowlights) of the Treasury crystal ball, all supposed to follow immediately after a vote to Leave, included: the average household would be £4,300 a year worse off; a year-long recession with an immediate drop of 3-6 per cent of national output; a punishment Budget featuring tax rises and spending cuts to fill a black hole in public finances.

Scary stuff, but 17.4 million people ignored the prophets of doom and voted to take back control of the nation’s destiny. Fast-forward to today, and I suspect we are heading for a replay of what we have come to know as Project Fear.

First, it is worth pointing out that none of the Treasury forecasts came anywhere near the truth. Since those forecasts, the average family has remained just as well off and the UK economy has grown 3.9 per cent. There has been no recession, taxes have been cut and spending increased.

The Prime Minister is in the process of trying to sell her negotiated deal to her party. It deserves to get a fair hearing and I will study it carefully. But I can almost hear the knives being sharpened for Project Fear 2.0 – a spine-chilling vision of what will befall poor old Blighty if Parliament decides it does not like the deal and thus is pointing towards a no-deal exit next spring.

Already, we have had a taste of things to come if we leave the EU without a deal. Stories of lorries backed up all the way from Dover to London; food and medicine shortages; planes grounded; and trade with the Continent all but snuffed out.

No doubt ministers and their officials will serve up plenty more of the same. Foreign holidays rationed, visas for visiting France, ex-pats being sent packing, labour shortages in our hospital wards and clinics. No more Polish plumbers or Swedish au pairs.

The actual economics won’t bear thinking about, as Britain “crashes out” of the EU and tumbles over a “cliff edge” – two BBC favourites, those. We know this because, earlier this year, the Treasury partially leaked its “Cross-whitehall Brexit Analysis”. It predicted a huge 7.7 per cent of GDP hit to the economy in the event of an exit on World Trade Organisation terms (so-called no deal, which I think is more accurately described as a WTO, or World Trade, deal). As for an exit with a Canada-plus deal, that would still impose pain, to the tune of a 4.8 per cent hit.

Needless to say, the Treasury has refused to publish and debate details of its economic model or the assumptions it contains.

My advice is to keep calm and carry on. The Treasury and its acolytes were laughably wrong last time. They have cried wolf too often to be believed – either by Tory MPS or the public.

And, of course, the Treasury does not have a monopoly on forecasting. Economists for Free Trade have also done modelling and come up with very different outcomes, envisaging that the public finances would be £80 billion a year stronger over 15 years if we embraced a WTO deal. Other independent bodies have not corroborated the Treasury gloom.

So don’t fall for any new salvo of official propaganda about the impact of an exit under WTO rules, the no-deal scenario. We have to consider with an open mind the PM’S proposals, but if they cannot get through Parliament then we cannot rule out a WTO deal.

It has never been my first choice, but with proper preparation there is no need for panic. Our economic future lies in our hands and depends on the policies we choose to follow – much more so than in any trade deal.

Lord Lamont of Lerwick was chancellor of the Exchequer 1990-93