Brexit is all at sea, gripped by futile debate over the unpredictable
Forecasting is difficult, especially when it’s about the future. The origins of this famous quip are disputed; often it’s attributed to the American baseball player, Yogi Berra. Regardless of who said it first, it has come back into its own over the past week with the rebirth of what Brexiteers like to call “Project Fear” – the idea that Brexit is overwhelmingly likely to prove negative for the economy.
As the Government admitted in its “Exit Analysis Cross Whitehall Briefing”, originally published last January, no one can know this to be true until it has been tried. “There is no single model or analysis that can provide a definitive assessment of all potential outcomes,” officials acknowledged.
But they then went on to have a jolly good go at it, concluding, as most other such exercises have, that under all three scenarios examined, the effect would be negative, even factoring in likely positive inputs such as the opportunity to pursue alternative free-trade deals and to deregulate the economy.
The range is from a barely noticeable negative impact of just 0.6pc of GDP after 15 years under the Norwegian option to a rather more scary 8.9pc if exiting under a “no deal”, Wto-type scenario.
In other words, assuming growth would otherwise be 25pc after 15 years, it might instead be 24.4pc under the former, but 16.1pc under the latter outcome. It follows that the public finances would be £80bn worse off than otherwise after 15 years if we pursued the “no-deal” option.
You only need to think about these predictions for a few moments to realise they are almost completely meaningless, for they assume a largely static state universe in which policy and business fail to adapt to changed circumstance.
They also start by making a very big assumption about what growth would otherwise have been; since there is no way of proving the counterfactual, we will in reality never know whether growth has outperformed or underperformed.
As it is, recent improvements in the public finances give the Government more than adequate scope to engage in Trump-like tax cuts and infrastructure spending should the need arise.
If juiced in this manner, it is perfectly possible that growth could exceed 25pc, whatever the outcome of Brexit.
The significance of prediction lies not in its intrinsic value – the vast bulk of it becomes tomorrow’s fish and chip paper – but the political purposes to which it is put. It was hard to impossible to work out precisely what message Dominic Raab, the Brexit Secretary, intended to convey when publishing an array of technical notices on the consequences of a no-deal Brexit last week. I’m not sure he knew himself, judging by the perspiration on his brow. We apparently don’t have to worry about access to bacon, lettuce and tomato sandwiches, but we do need to worry about a shortage of sperm if the Danes are prevented from supplying it. You couldn’t make this stuff up.
The overarching idea, I suppose, was to imply that a no-deal Brexit would at least be manageable. But was this message intended as a sop to hard-line Brexiteers, or was the purpose to legitimise a no-deal outcome with some serious intent, since a worthwhile deal is proving so hard to achieve, of actually pursuing it? Or was it just a bluff?
There was, however, no doubting the message that Philip Hammond, the Chancellor, chose to draw from it. The timing of his letter to the Commons Treasury committee, only hours after Raab had delivered his assessment, was purely fortuitous, aides insisted.
Yeah, right. In any case, out was trotted the aforementioned January assessment. Forget the complacency of Raab’s overriding message – Hammond seemed to be saying – I’m the realist and pragmatist here, and this is what a no-deal Brexit will look like; it really isn’t an option.
David Davis and Boris Johnson may now be gone, but the Cabinet is still fighting like cats and dogs. I suppose this shouldn’t surprise. Ministers reflect the same angry divisions as we see in the country at large. According to the wisdom of Yogi Berra, when you reach a fork in the road, you should take it. This seems a perfect description of where we are. Clueless.
Anyone for Governor?
It’s less than a year now until Mark Carney, Governor of the Bank of England, hangs up his boots and returns to Canada, or wherever else his undoubted bankability takes him.
The Treasury will soon be advertising for a replacement. As when Mervyn King left five years ago, there is as yet no obvious successor, lest it be Andrew Bailey, chief executive of the Financial Conduct Authority. A former Bank lifer, Bailey is the bookies’ odds-on favourite.
That, however, is no guarantee of success. The fancied rider last time was also a lifer, Paul Tucker, but he was later to discover he was never in the race in the first place, shamefully shut out of the normal process for selection so as to make way for the head-hunted Carney. “The whole thing was a charade,” someone closely involved once told me.
But that was then. Looking at the likely choice this time, it is hard to see any obvious alternatives to Bailey.
It would be good to have a woman, but it is hard to see any of those sometimes cited as in with a chance.
Shriti Vadera, chair of Santander UK and as tough a cookie as they come, would be a brilliant choice, but her background as a minister under Gordon Brown almost certainly makes her unacceptable to a Tory administration. By a process of elimination, it therefore comes down to Bailey. This might all sound rather dull compared with the showbiz of Carney’s appointment, but Bailey is just what you need for times like these – an unshowy safe pair of hands, well respected both nationally and internationally, and wisely neutral when it comes to Brexit.
‘We need to worry about a shortage of sperm if the Danes are prevented from supplying it. You couldn’t make this stuff up’
Dominic Raab, the Brexit Secretary, sent out a confused message during his speech on a no-deal Brexit this week