Brexit is all at sea, gripped by fu­tile de­bate over the un­pre­dictable

The Sunday Telegraph - Money & Business - - Business - JEREMY WARNER

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

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