The British economy has survived so many crises that it can surely survive Brexit

William Keegan’s memoir describes with ebullient good humour how he covered half a century of bad news.

Nine Crises: Fifty Years of Covering the British Economy from Devaluation to Brexit by William Keegan

Bill Keegan thinks that of all the crises, dating back to devaluation in 1967, which he has covered as a journalist, “the prospect of Brexit is by far the greatest and most worrying”.

We shall see. I take a more complacent view. And some of the previous crises seemed pretty alarming at the time. Inflation peaked in August 1975 at 26.9 per cent.

But good journalists are not complacent. They communicate the drama of events. Keegan is very good at this. He shares his enjoyment and his insights, without pretending to omniscience.

He reminds us of the Queen’s great question about the crash of 2007-08, which had taken pretty much everyone by surprise: “Why did nobody notice it?”

Shortly afterwards, while presenting Keegan with the CBE, she asks him, “And what do you do?”

“‘I write about the economy for The Observer newspaper,’ I replied. There was a brief silence. Then I added, ‘I was one of the people who didn’t warn you.'”

In the hands of this ebullient and often self-mocking author, the dismal science ceases to be dismal. Here is an economist who does not suppose economics explains everything. His favourite subject is history, and in 1960 he went up to Trinity College, Cambridge, to read classics.

Keegan expresses his gratitude to the Jesuits at Wimbledon College who taught him Latin and Greek, but he opts to read economics instead, because he wants to understand more about what is going on, and reckons “I could study history for the rest of my life, whereas, if I did not have a go at economics, I probably never would”.

He discovers he prefers words to charts and diagrams:

“most economists…just loved charts. And economics was becoming increasingly mathematical. I was greatly relieved by the story told by a friend of mine, the late Sir Dennis Proctor, who had been a friend of Keynes. Proctor, a classicist, had asked Keynes, a mathematician, ‘Maynard, does one have to be a mathematician to understand economics?’

“‘No, Dennis,’ came the reply, ‘but one does need a sense of proportion.'”

What really interests Keegan is “political economy”, which he defines as “the relationship between economics and politics, and the discussions and battles that go on in public and private between economists and policymakers”.

On joining The Financial Times straight from Cambridge, he is initiated into an indispensable way of finding out about that world:

“It was drummed into me that lunch with politicians, officials, businessmen and City figures was an important part of the job. In effect, I was told to go out and spend the company’s money cultivating contacts.”

There are always people who are prepared to talk, if only they can find someone sympathetic to talk to. Enjoyment and the exchange of information go hand in hand, and the whole thing can when necessary be done discreetly.

After 1979, Keegan struck up a friendship with Ian Gilmour, one of the Tory wets who viewed with horror the economic policies pursued by Margaret Thatcher and Geoffrey Howe. He also plugged himself into the opposition within Whitehall:

“some of the officials who were having to carry out policies they did not believe in were happy to meet me, but only in secret. It was more than their professional lives were worth to be seen with ‘the enemy’ in public. There was one very important source for me who insisted on meeting in a curry house near Leicester Square where we were both quite certain that we would meet no one we knew.”

From 1964-67, the Labour Government of Harold Wilson made a “forlorn attempt to wish the obvious necessity of devaluation away”. Meanwhile the civil service secretly drew up a “devaluation war book”, detailing how the necessary currency adjustments were going to be made and the announcement handled.

This was stored in a safe with a combination lock. In November 1967, when devaluation took place, it turned out that nobody knew the code for the lock:

“The Treasury frantically telephoned Peter Jay, who had been private secretary to its top official at the time, and was now economics editor of The Times. Luckily for them, Jay remembered the code, which was the date of the 1949 devaluation, with the digits reversed.

“Jay did the honourable thing: he told the Treasury the code, but did not embarrass the government and his former colleagues by revealing what had happened, or taking journalistic advantage of it.”

There is a sort of generosity in Keegan’s account. Many of the people he meets are highly intelligent, and are trying to do the right thing, and even when, as often happens, they fail, he is disinclined to write them off as evil or malicious.

Episodes such at the three-day week of 1973 and the IMF crisis of 1976 are described without the sense of pessimism and almost unbearable national decline which they induced in some of us.

Keegan had a brief spell at the Bank of England, but the greater part of his career has been spent at The Observer, where Alan Watkins, whose greatness he recognises, was the political columnist.

There were some wonderful journalists at work in this period, a number of them (though none on the economic side of things) portrayed in Watkins’ book Brief Lives, published in 1982In the introduction he wrote for the new edition of that work in 2004, Watkins remarks:

“The representative figures of the age of Wilson and of Macmillan’s England who are depicted here possessed, with some exceptions, a rationality, an optimism and a capacity for the enjoyment of life which their successors do not always, or even usually, exhibit today.”

With rare exceptions, Keegan is generous about the politicians and officials he get to know during this half century. They include Nigel Lawson, a distinguished journalist before becoming Chancellor of the Exchequer.

Keegan is highly critical of Lawson as Chancellor. “Still writing the same old rubbish,” Lawson delights in saying whenever they meet, to which Keegan replies, “Still pursuing the same old policies.”

But when the owners of The Observer want to sack Keegan for being so hostile to the Thatcher government, Lawson, as Chancellor, confounds them by saying, when lunching at the paper: “I read William’s column. I don’t always agree with it. But I wouldn’t be without it.”

The only Chancellor Keegan cannot stand is George Osborne:

“there was something about the cynical way that Osborne introduced his austerity programme which, frankly, got beneath my skin…It mattered not that in opposition Cameron and Osborne had supported Labour’s public spending programme. With blatant disingenuousness, the new Chancellor and his colleagues now blamed the crisis on Labour’s ‘excessive’ public spending.”

In Keegan’s view, Osborne’s misplaced policy of austerity was not just the wrong way to promote economic recovery, flying as it did in the face of Keynes’s insight that the only way to emerge from recession is to spend your way out.

The policy of austerity also helped cause the No vote in the EU Referendum: a disaster in Keegan’s opinion, though he still hopes “this movement to what I regard as a cliff-edge can be stopped”.

Yet the overall effect of his book is cheering. The British economy has survived and prospered after so many crises it can surely survive Brexit.

WATCH: Hammond – Knife crime important “but there are many other demands” on limited funds

“My job is to make sure that in dealing with an issue like this we use public resources in the most effective way.”

EU economic policy has held the UK back and cost us £82 billion over two decades

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how. Almost every aspect of […]

The post EU economic policy has held the UK back and cost us £82 billion over two decades appeared first on BrexitCentral.

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how.

Almost every aspect of the EU’s economic performance – not least UK trade with it – has been dismal, underperforming regularly against every corner of the globe – be it advanced or developing nations – for a very long period of time.

For many countries across the European continent, EU-induced policy – primarily designed to hold the euro together – has directly led to economic hardship, socially damaging levels of unemployment and a questioning of the very fabric of their societies. The result has been a rise in more radical politics and people leaving their countries of birth to seek better economic opportunity elsewhere. This is the antithesis of what the EU was founded to achieve.

The failure of EU economic policy has not only impacted EU nations but also cost the UK £82bn over the twenty years to 2017 due to lost economic opportunity, as weak demand has impacted negatively on UK exports to the Eurozone.

To understand the failure of the Eurozone, we need to go back to a time when it did not yet exist. In 1994 the economies of the US and the future Eurozone were of broadly similar size – worth 24.9% and 24.5% of global GDP respectively. Today the US economy is 30% larger than the Eurozone. Simply put, had the Eurozone grown at the same rate as the US, the UK could have expected to have sold £82bn more in exports due to greater economic demand. The unfortunate truth is that EU economic performance has been the global laggard over the short and long term.

By comparison, since the financial crisis, the UK economy has outperformed all the major EU economies including Germany. Overall it has grown 19% over that period compared with a 13% rise in the Eurozone. That 6% differential is worth £120bn, or to illustrate what that sum represents, just less than the entire NHS budget.

For the British people, the beneficial result of the country’s performance has been more jobs. The UK has materially outperformed the EU in both job creation and reduction of unemployment. UK unemployment is at its lowest level since 1974. French unemployment is 2.5 times the UK level, Spain 4 times and Greece 5 times higher. Since the EU referendum, 750,000 more people are in work in the UK. This contrasts with HM Treasury forecast of 500,000 job losses following a Leave vote – meaning its prediction was an embarrassing 1.2 million out.

Despite misplaced criticisms, job growth has been across the board and not just in the ‘gig economy’. More people work in manufacturing, construction, utilities, IT, health, education and the arts sectors than before the referendum. UK wage growth has started to pick up too and is growing in real terms, while the UK’s minimum wage is the second most generous in the EU.

The underperformance of the Eurozone can be laid firmly at the EU’s own door. Fundamentally, the Eurozone is not an optimal currency area; it lacks fiscal transfers and is weakly controlled with no central Treasury. The structural weakness and disequilibrium of the euro has led to sub-optimal firefighting policy choices to prop the currency up. The lack of political will and democratic accountability make it near impossible to rectify its flaws. These are structural issues that will not be easily rectified, leading to continuing divergent performance, socially damaging unemployment levels in the south and a loss of competitiveness. The problem is the euro’s construction and there is no easy fix. Underperformance is baked in.

Imbalances are growing, not reducing, be they employment levels, migration trends, fiscal strength, competitiveness and Target2 liabilities (intra-country balances).

The big myth remains that the Single Market is central to UK prosperity. It is not. Over the last 20 years, UK trade has grown 12 times with China, 3.1 times with the rest of the world ex-EU, 2.6 times with the US and just 2 times with the EU. Moreover, the UK trades with a modest surplus with the world ex-EU but has a £96bn deficit with the EU. Does it not strike you odd that UK trade not only is growing faster where it trades generally under WTO rules rather than within the EU Single Market – and is in surplus, not enduring a huge deficit?

EU citizens are voting with their feet. An estimated 3.5 million have moved to the UK over the last 20 years. Economic failure has directly led to widespread migration away from Italy, Spain, Portugal and most of Eastern Europe. People follow the opportunity and it has generally not been in the Eurozone. Again, despite claims, net EU migration has remained positive to the UK since the EU referendum.

The EU’s problems are structural and not cyclical. They are largely self-inflicted. The euro’s structure is the root cause of the problem, together with increasingly costly one-size-fits-all regulation that simply does not work for such a disparate Union. The price of preserving the euro is likely to continue to lead to low growth and poor employment prospects. Italy, as an example, has a smaller economy than 15 years ago. Such dreadful performance is fuelling economic and political dissatisfaction in Italy itself and across the EU.

The question should be: why can our policy makers not see that while we must remain friends with our European neighbours, the EU project has failed Europe? The answer is for Britain is to re-emerge as a true global trading nation.

The post EU economic policy has held the UK back and cost us £82 billion over two decades appeared first on BrexitCentral.

EU economic policy has held the UK back and cost us £82 million over two decades

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how. Almost every aspect of […]

The post EU economic policy has held the UK back and cost us £82 million over two decades appeared first on BrexitCentral.

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how.

Almost every aspect of the EU’s economic performance – not least UK trade with it – has been dismal, underperforming regularly against every corner of the globe – be it advanced or developing nations – for a very long period of time.

For many countries across the European continent, EU-induced policy – primarily designed to hold the euro together – has directly led to economic hardship, socially damaging levels of unemployment and a questioning of the very fabric of their societies. The result has been a rise in more radical politics and people leaving their countries of birth to seek better economic opportunity elsewhere. This is the antithesis of what the EU was founded to achieve.

The failure of EU economic policy has not only impacted EU nations but also cost the UK £82bn over the twenty years to 2017 due to lost economic opportunity, as weak demand has impacted negatively on UK exports to the Eurozone.

To understand the failure of the Eurozone, we need to go back to a time when it did not yet exist. In 1994 the economies of the US and the future Eurozone were of broadly similar size – worth 24.9% and 24.5% of global GDP respectively. Today the US economy is 30% larger than the Eurozone. Simply put, had the Eurozone grown at the same rate as the US, the UK could have expected to have sold £82bn more in exports due to greater economic demand. The unfortunate truth is that EU economic performance has been the global laggard over the short and long term.

By comparison, since the financial crisis, the UK economy has outperformed all the major EU economies including Germany. Overall it has grown 19% over that period compared with a 13% rise in the Eurozone. That 6% differential is worth £120bn, or to illustrate what that sum represents, just less than the entire NHS budget.

For the British people, the beneficial result of the country’s performance has been more jobs. The UK has materially outperformed the EU in both job creation and reduction of unemployment. UK unemployment is at its lowest level since 1974. French unemployment is 2.5 times the UK level, Spain 4 times and Greece 5 times higher. Since the EU referendum, 750,000 more people are in work in the UK. This contrasts with HM Treasury forecast of 500,000 job losses following a Leave vote – meaning its prediction was an embarrassing 1.2 million out.

Despite misplaced criticisms, job growth has been across the board and not just in the ‘gig economy’. More people work in manufacturing, construction, utilities, IT, health, education and the arts sectors than before the referendum. UK wage growth has started to pick up too and is growing in real terms, while the UK’s minimum wage is the second most generous in the EU.

The underperformance of the Eurozone can be laid firmly at the EU’s own door. Fundamentally, the Eurozone is not an optimal currency area; it lacks fiscal transfers and is weakly controlled with no central Treasury. The structural weakness and disequilibrium of the euro has led to sub-optimal firefighting policy choices to prop the currency up. The lack of political will and democratic accountability make it near impossible to rectify its flaws. These are structural issues that will not be easily rectified, leading to continuing divergent performance, socially damaging unemployment levels in the south and a loss of competitiveness. The problem is the euro’s construction and there is no easy fix. Underperformance is baked in.

Imbalances are growing, not reducing, be they employment levels, migration trends, fiscal strength, competitiveness and Target2 liabilities (intra-country balances).

The big myth remains that the Single Market is central to UK prosperity. It is not. Over the last 20 years, UK trade has grown 12 times with China, 3.1 times with the rest of the world ex-EU, 2.6 times with the US and just 2 times with the EU. Moreover, the UK trades with a modest surplus with the world ex-EU but has a £96bn deficit with the EU. Does it not strike you odd that UK trade not only is growing faster where it trades generally under WTO rules rather than within the EU Single Market – and is in surplus, not enduring a huge deficit?

EU citizens are voting with their feet. An estimated 3.5 million have moved to the UK over the last 20 years. Economic failure has directly led to widespread migration away from Italy, Spain, Portugal and most of Eastern Europe. People follow the opportunity and it has generally not been in the Eurozone. Again, despite claims, net EU migration has remained positive to the UK since the EU referendum.

The EU’s problems are structural and not cyclical. They are largely self-inflicted. The euro’s structure is the root cause of the problem, together with increasingly costly one-size-fits-all regulation that simply does not work for such a disparate Union. The price of preserving the euro is likely to continue to lead to low growth and poor employment prospects. Italy, as an example, has a smaller economy than 15 years ago. Such dreadful performance is fuelling economic and political dissatisfaction in Italy itself and across the EU.

The question should be: why can our policy makers not see that while we must remain friends with our European neighbours, the EU project has failed Europe? The answer is for Britain is to re-emerge as a true global trading nation.

The post EU economic policy has held the UK back and cost us £82 million over two decades appeared first on BrexitCentral.

Nick Hargrave: A memo to the next Tory leader. How you govern will be no less important than why.

The cohort of future Conservative leadership candidates would do well to start thinking about the structure of the Number 10 they want to build.

Nick Hargrave is a former Downing Street special adviser, where he worked under both David Cameron and Theresa May. He now works at Portland, the communications consultancy.

Should Theresa May get the Withdrawal Agreement over the line in the next few weeks – and the balance of probability still suggests she will – attention in Westminster will gradually begin to focus on the next Conservative leadership election.

Millions of words will be written about the contest that ensues and the path to become Prime Minister. About the runners and riders. About the politicking with MPs in the precincts of SW1. About pacts and alliances between different slates and candidates. About who is best placed to win a vote amongst Conservative members. About where people stand on future relationship negotiations with the EU. About an agenda for the country beyond Brexit.

Far less will be written about the process of exercising power once the winning candidate crosses the threshold into 10 Downing Street.

This is understandable. The emotional and physical energy needed to fight a leadership election – or indeed a general election – is such that politicians rarely give much advance thought on how to make the office of Number 10 work for them. This is supplemented by the fact that politicians, and the special adviser apparatchiks who serve them, are rarely good at process or people management; these skills are unfortunately not rewarded on Westminster’s greasy pole.

Nonetheless, the cohort of future Conservative leadership candidates would do well to start thinking privately about the structure of the Number 10 they want to build. It is an investment that will pay dividends. Otherwise the new Prime Minister will find that once his or her customary honeymoon period is over, he will have little ballast against events, the ferocious news cycle, Cabinet egos, civil service intransigence, the lack of a parliamentary majority – and the million other obstacles that sit in your path.

A former Prime Minister once said that you enter office at your most popular and least capable – while leaving at your most capable but least popular. Here are some practical suggestions for how you can reduce the capability gap when walking up Downing Street for the first time:

  • Make sure you choose your Chief of Staff and Deputy Chief of Staff carefully– these are two of the most important decisions you will ever make. These should be ‘grown ups’ that have heritage in your party, knowledge of policy, an understanding of Parliament and the UK’s history of governance and – critically – experience of running a significant organisation. They are unlikely to be drawn from your previous political advisers, no matter what loyalty you feel to them. They need to be capable of articulating your strategic priorities – primarily policy and secondarily the political communication of policy – to the people who will translate the words into action: Cabinet ministers, the senior civil service, party headquarters and your MPs. They should have the gravitas to credibly challenge Cabinet ministers who are blown off course by events – as well as the ability to win polite arguments with mandarins who will claim superior knowledge. They cannot be thugs; you rarely get the best out of people by telling them they are idiots. They must be able to delegate but not abdicate. These jobs are among the hardest in the world and you need to recruit and pay accordingly.
  • Decide what your priorities are and then stick to them. In the current dynamic, you must have an honest and tangible vision of the end state of our future relationship with the EU – and perhaps 3 or 4 ambitious domestic priorities that form a coherent governing philosophy. These are to be achieved at all costs. Leave the rest to your Cabinet ministers.
  • Accept that strong Cabinet ministers are generally an asset to the Government. If you prevent them from speaking or doing things under their own steam then you will get stasis. The Number 10 Policy Unit should return to its original form as a cerebral brains trust working on long-term policy ideas for the next manifesto rather than the day-to-day marking of homework for departments.
  • That said, break up the Treasury within your first 24 hours and transfer the function of setting and monitoring public spending to the Cabinet Office. You cannot really exercise oversight of policy unless you keep finance within your remit.
  • Be clear on how the Civil Service really works and use the process to drive your policy objectives rather than letting your political staff complain about wily officials. The key to this is the Cabinet Office. Make sure your senior political advisers get to grips early with the little known and understood Economic &Domestic Affairs Secretariat (EDS). It is the conduit through which you will be able to retain reasonable control and hold departments to account.
  • Retain a Director of Strategy to support you, your Chief and Deputy in refining how you communicate your priorities to the public. They must have the freedom to think away from the bubble and would ideally spend part of their week living in a marginal seat away from London.
  • Appoint a Director of Communications who understands analytics and data. The Number 10 press operation will always involve an element of satiating the daily thirst of the pack. But the primary role of the Communications Director is to ensure the Government’s policy priorities are registering with the public – and in a way that delivers you political reward. To do that you need to be tracking what works and what doesn’t through evidence.
  • Never forget that you are the Leader of the Conservative Party as well as the Prime Minister. Running the country will take up most of your time. But you should spend at least a couple of hours in your week with the leadership of CCHQ to discuss high level political strategy. Day to day political tactics are beneath you but setting a direction on how to win the next election is not. You lose political definition for your project at your peril.
  • Take responsibility for setting the culture of your organisation yourself. Even though you are Prime Minister you should address all the circa 200-250 Downing Street staff – political and civil service- every Monday morning so you can acknowledge high performance and reinforce core delivery priorities. Many Chief Executives of comparably sized organisations do this and so should you.
  • Keep Number 10 as the Prime Minister’s ceremonial residence but move the rest of the staff (including the Prime Minister’s working office) to a large open-plan space nearby. The current setup of a pokey Georgian townhouse encourages silos and the shielding of information.

None of the above are magic bullets and will amount to little if there is a lousy occupant in Number 10. But equally a leader with promise can only become great if they are supported by the right process. It may not be as exciting or immediately rewarding as plotting your Westminster climb. But it will have a more material impact on how history views your tenure behind the big black door.

How the Treasury, Bank of England and Civil Service have let us down over Brexit

Soon after graduate school I joined the Treasury as an economic adviser and worked alongside economists from the Bank of England and the rest of the Civil Service. We were proud to be bringing economics into the public service. Many years later in 1992 I served on the Treasury’s Panel of Outside Forecasters (‘The 6 […]

The post How the Treasury, Bank of England and Civil Service have let us down over Brexit appeared first on BrexitCentral.

Soon after graduate school I joined the Treasury as an economic adviser and worked alongside economists from the Bank of England and the rest of the Civil Service. We were proud to be bringing economics into the public service. Many years later in 1992 I served on the Treasury’s Panel of Outside Forecasters (‘The 6 Wise Men’) to help guide monetary policy in the aftermath of ‘Black Wednesday’ when we were driven out of the EU Exchange Rate Mechanism. The Treasury chief economist then was Alan, now Sir Alan, Budd, and the Bank’s was Mervyn, now Lord, King.

I am appalled that our equivalents today in the government have spent their time issuing antiBrexit propaganda – still hoping to reverse the referendum decision – instead of dutifully planning post-Brexit policy, so necessary with Brexit only weeks away.

THE WHITEHALL PROPAGANDA WAR AGAINST BREXIT

A few weeks ago, we had the latest Treasury and ‘Cross-Whitehall’ report, arguing that any Brexit at all, including the government’s proposed deal, would be worse than Remaining. Then the Bank weighed in with a ‘Brexit crisis scenario’, an implied forecast of how bad No Deal would be, concealed as a ‘stress test’ of whether the economy could survive it – it could! Latterly, the Bank has reiterated its forecast that No Deal would be bad, causing a likely recession, and using it as an excuse for delaying raising interest rates.

These interventions are designed to undermine our efforts to persuade the EU to modify the Government’s proposed deal by strengthening popular and MP concerns over No Deal. They aim also to persuade Parliament to back amendments delaying Article 50 and seeking another referendum. The sought-for prize in both cases is the status quo, ultimately Remain. It should be unthinkable for our Civil Service to play politics and conspire against the people’s 2016 decision so nakedly, as demonstrated in Brussels last week by the Civil Service’s chief negotiator.

This deceitfulness is bad enough but worse is that their propaganda efforts would lead to terrible economics. My message to Brits is: unlike these self-styled experts, you got this issue right. Yes, you were right to ask for your democracy back, and yes, this is also good for the British economy, contrary to all that Project Fear.

Let us remind ourselves about what Brexit means for economic policy:

  • Free trade with the non-EU world, bringing down prices, boosting competition, and increasing productivity
  • Setting our own regulations across the economy, to ensure the best approach to new technology, energy, and financial services – all areas central to our future growth prospects. This is in contrast to the EU’s highly interventionist, bureaucratic, protectionist approach
  • Ensuring that unskilled immigration is no longer subsidised by the taxpayer at great cost to lower-income communities (£3,500 per annum for each unskilled worker) and that it stops depressing wages to the detriment of UK unskilled workers, whom businesses then have no incentive to train
  • Ending paying large amounts into the EU budget

Taken together, we calculate these policies will add about 0.5% a year to our growth rate over the next decade and a half, cumulatively adding 7% to GDP by 2035.

As part of the EU, we have been unable to adopt these policies because we have lost democratic control. Reasserting it through Brexit means we can move into a post-Brexit world of better policies that will promote UK prosperity.

THE TREASURY’s ABSURD ANTI-BREXIT ASSUMPTIONS

How has the Treasury managed to argue precisely the opposite; that post-Brexit our economy will decline by 7% or more of GDP? Answer: by making absurd assumptions.

No Gains from Free Trade with the Non-EU World

First, the Treasury alleges that free trade with non-EU countries brings in trivial gains because we would reduce our own trade barriers by only a little and other countries similarly would do little to reduce theirs.

Aside from this refuting the most widely agreed principle in economics, we have practical evidence from Australia to disprove this claim. Australia too had high protection against the rest of the world but thirty years ago they did remove it and did strike free trade deals with all and sundry. Their government now estimates that free trade boosted Australian GDP by over 5%. If Australia can do it, so can we.

In fact, if we assume we get rid of the current EU protection of about 20% on both food and manufactures, the gain to UK GDP is 4%. – calculated by using the same World Trade Model now used by the Treasury. Moreover, we have further calculated that virtually all this gain could be obtained by agreeing just one key free trade agreement – i.e. with the US. This is because the huge US economy can supply virtually all of our current imports and almost all at the lowest world price.

‘War at the Border’ with the EU

Second, the Treasury assumes that we would become engaged in a sort of ‘border war’ with the EU. The Treasury alleges the EU would increase inspections and slow traffic down, that they would query whether our exports comply with their standards. And, vice versa, we would do the same to them. The Treasury assumes that such actions would be the equivalent of imposing 25% tariffs each way.

This is fantasy. Besides being against our own and their own interests, these actions are illegal under WTO Rules. This does not just mean that there could be legal action in WTO Appellate Bodies. More to the point, injured businesses in the thousands would take the offending port authorities to EU and UK courts that enforce acceptable and legal commercial practice – as defined by WTO law.

Practically speaking, such actions would represent economic suicide to European port operators. Not surprisingly these authorities, including Calais, have declared roundly they will not take any such illegal actions and inspection regimes will remain the same as they are today. And HMRC has declared a policy of prioritising flow over checks – i.e. waving through imports and worrying about any customs aspects subsequently.

No Gains from Post-Brexit Tariffs

Under No Deal initially there probably would be tariffs both ways. Until a free trade deal is agreed, each side would be forced by WTO rules either to impose tariffs on all countries, or to abolish them entirely for all. For political reasons, the UK is not likely to abolish tariffs universally in the short term.

Importantly, the Treasury has failed to acknowledge that tariffs would favour the UK – we would receive £13 billion in tariff revenue from EU exporters versus the EU Commission receiving £5 billion from EU importers (thus, a net loss to the EU).

As soon as we have agreed trade deals with non-EU countries – especially soon with the US – our home market would be dominated by lower world prices. EU exporters would not be able to ‘pass on’ the increased costs of any UK import tariffs because UK consumers would not pay the higher EU price. Similarly, EU importers could not ‘pass back’ to our exporters the EU tariffs they are paying, as UK producers would switch to selling at home. In practice, our export sales to the EU would not suffer because EU prices are raised by EU protection to the same levels as UK export prices plus these tariffs.

This means that, under No Deal, we gain at the EU’s expense. This should encourage the EU to do a free trade deal with us after Brexit – which we of course would welcome.

So in short the Treasury has it all wrong on trade.

No Gains from UK-Based Regulations

The Treasury attributes virtually no gains to us retrieving control of our economic regulations, contrary to all the evidence of damage from EU regulations. How ridiculous is that? Our own UK government saying it could not do a better job of regulation than a foreign power with an expressed aim of reducing our competitiveness!

A Mad Immigration Policy, Keeping Out Skilled Workers

To cap it all, the Treasury assumes we will pursue a self-harming immigration policy of stopping skilled immigration, which all agree we need. Again, a bad own goal.

To sum up, our own Treasury and civil service see no benefits from free trade with the rest of the world while lamenting the loss of free trade with the EU, imagines standard trade procedures as practiced all over the world will be impossible with our EU neighbours, believes we are incapable of implementing better home regulation, and thinks we will adopt an irrational immigration policy. If this is truly what they believe, we will need another civil service post-Brexit.

THE BANK’s TALK OF RECESSION FROM NO DEAL

Turn now from these crazy long term Treasury estimates to the short term threats of recession made by the Bank, backed by regular remarks from the Chancellor Philip Hammond.

As we saw during the referendum campaign, the Bank has form in predicting ‘Brexarmageddon’. Then, the short term forecast was that the uncertainty triggered by only a Leave vote would destroy consumer and investor confidence and so kill off spending, creating a recession.

Instead we have seen the UK economy continue growing fairly steadily, reaching extreme lows in unemployment and record employment. Wages are now growing faster than prices. Also the economy has absorbed a large devaluation that has had a tonic effect in improving our balance of payments. It did this with a minimal effect on inflation. Nothing here to worry about at all.

For their latest scary Brexit No Deal scenario, the Bank has again invoked a crisis based on uncertainty and plunging confidence – heavily focused on what happens with the Dover-Calais ferry route.

But No Deal – as we have explained – will not disturb the border, as that would be illegal and there are alternative ferry routes available. As for shortages of vital foods, medicines, or vital components, they depend on the same story, now discredited by the EU port authorities who are worried about losing market share to competing ports.

With border procedures changing, there will be some short run hiccups, as some firms may fail to adapt quickly. But firms will soon learn, and will get extra support and credit to tide them over.

Has investment been hit? I show below the chart of UK total business investment up to the most recent available figures.

What the chart shows – following the Financial Crisis – is the usual irregular behaviour of most economic series around a rather smoothly moving upward trend. It is true that the latest data points to a weak and declining growth of investment as shown below in more detail from the latest ONS release. This is not surprising, given the long deferral of positive Brexit prospects due to the Government’s failure to provide a clear route to Brexit and to explain its benefits.

Therefore, it is likely that some investment is being delayed until Brexit has happened; but it then will be implemented. This is the essential point about investment; that it is delayed, not lost.

One can see from these two charts that, although investment growth is weak, its contribution to the economy is fluctuating around a stable trend. Meanwhile we can see that the economy is fully employed so that demand growth overall is continuing to create jobs; growth is fluctuating as the latest GDP figures show, but this is quite normal. The fourth quarter was slower after an unusually strong third quarter – and subsequent revisions often are higher. So from the point of view of demand, the weak investment is not preventing full employment, with an economy well at the limits of productive capacity.

Of course, EU countries would love to have our results – Germany’s just announced Q4 GDP growth is half of ours, while Italy has been in recession for six months.

NEGATIVE FORECASTS REFLECT POOR UNDERSTANDING OF BREXIT ECONOMICS AND PEOPLE’S EXPECTATIONS

The truth is that ‘uncertainty’ as a factor is much overdone by commentators. Change is a continuous feature of any economy. The ‘uncertainty’ argument depends on a belief that rational market participants will somehow not be able to cope with future change thereby freezing their activities.

In reality, businesses need to make money quickly as markets are constantly changing; households need to pay bills over the foreseeable future, and having a job is the best guarantee of being able to do so. So the ‘here and now’ situation, especially with employment, dominates their actions. As for future shocks, there are many; and predicting them a fool’s game. Of course, we can insure the obvious things.

So it is the UK’s flexible labour market that has kept the economy fully employed, full of short term confidence therefore, and growing steadily – Brexit has made little difference. It is a good lesson in the importance of market flexibility.

Whatever the short-run effects of Brexit uncertainty, they soon will give way to post-Brexit reality. It is here that official forecasts fail most seriously because they do not factor in the gains explained above. The economy, particularly investment, will respond to the prospects of these gains. That is how rational expectations of the future stimulate entrepreneurs to take advantage of unfolding new opportunities. Officials do not understand this process and, consequently, do not include such effects in their forecasts. Add in some uncertainty nonsense and out pop their doom and gloom forecasts – particularly if such forecasts support a biased perspective.

What we need now is for Brexit to occur and usher in the new opportunities from free trade and better regulation.

CONCLUSION

We see here an astonishing catalogue of bad economics coming from a determination to reverse the people’s referendum decision. This from our own Ministers and Civil Service who are supposed to support policies the people have voted for. Our civil servants must now get behind Brexit and reflect its opportunities in their forecasts. 

It is time that the Bank and the Treasury stopped making arbitrary assumptions that our flexible firms and households will suddenly behave like headless chickens. Instead they should assume rational expectations, by now a widely supported assumption in economic forecasting.

My advice to the British people is: make it known to MPs that you will not stand for their bad economics, stick to your previous thinking, ignore the ongoing Project Fear as you got it right and these ‘servants’ of yours got it all wrong.

The post How the Treasury, Bank of England and Civil Service have let us down over Brexit appeared first on BrexitCentral.

The most pro-intervention speech by a Defence Secretary since the Iraq War

Is the Treasury up for funding and voters up for supporting the ideas he sketched out ealier this week?

Some of the Conservative Party’s most knowledgeable foreign affairs specialists are a bit sniffy about Gavin Williamson’s defence policy speech earlier this week.  One of its centre pieces was the announcement that “the first operational mission of the HMS Queen Elizabeth will include the Mediterranean, the Middle East and the Pacific region.  “Significantly, British and American F35s will be embedded in the carrier’s air wing,” he continued, with a nod to our close relationship with America, before speaking of enhancing “the reach and lethality of our armed forces”.

That sounds a lot like a metaphorical, though certainly not a literal, shot across China’s bows in that last case.  One senior MP with an interest in security policy told ConservativeHome that he is all for stepping up activity in the South China Sea.  But “if you go out every few years for a few months, there’s no point.  It doesn’t show strength, it advertises weakness”.

Williamson’s answer to that might be to highlight the £1 billion that he screwed out of Philip Hammond in last autumn’s Budget, which itself came on top of an £800 million increase during the summer.  One point of the speech was to signal that he will soon be back for more: after all, there is a £7 billion black hole in the Ministry of Defence’s equipment budgets.  Without money to help reduce it, and more, the Defence Secretary will have no chance whatsoever of achieving the aims he set out.  These were so striking that it is well worth pondering their implications.

Only a few years ago, when the Coalition Government was formed, Russia was not considered a serious danger to national security at all.  It was only last year that Williamson tore up previous assumptions and told the Defence Select Committee that it is now a bigger threat to us than terrorism.  And earlier this week, he duly added China to the list of British security problems: “all the while, [it] is developing its modern military capability and its commercial power,” he said.  It was the most pro-intervention speech that any Defence Secretary has made since the Iraq War, listing “Kuwait, Bosnia, Sierra Leone and Kosovo” as earlier, successful, valuable incursions.

Hence his reference not only to cyber and to new drones for the RAF, but to new Poseidon P-8 Maritime Patrol Aircraft, new equipment for the army, and two naval “littoral strike groups complete with escorts, support vessels and helicopters. One would be based East of Suez in the Indo-Pacific and one based West of Suez in the Mediterranean, Atlantic and Baltic”.

All this raises three questions.  First, is it the Government’s collective position that China is no longer the friend that George Osborne saw it as, but is instead, in effect, a foe – or at least to be treated with a premis of suspicion?  Second, are the voters really up for a more interventionist-leaning foreign and defence posture, especially at a time when America seems to be entering a period of relative isolationism?  (“We stand ready to support our friends in Ukraine and the Balkans,” the Defence Secretary declared.)  Finally, Williamson’s programme implies higher defence spending still.  Is the Treasury willing to fund it?

The speech might have been delivered in much the same way were Britain not due to leave the EU.  There is no necessary connection between the re-ordering to which the Defence Secretary referred and Brexit.  But quitting the EU does make a difference to defence policy.  If we are to remain committed to our common continent, that implies solidifying the army presence in Eastern Europe – at a time when its manpower is at its lowest for more than a century.  And if we are also to become Global Britain, that suggests extending our reach and capabilities.

Unlike many of his colleagues, Williamson has no military background and, in the Conservative Party, the post that he holds is greatly prized – and seen as almost on a rank with the great offices of state.  His promotion was therefore not a popular one, and he has been widely briefed against.

Furthermore, the speech is bound to be read, by a cynical Westminster Village, as a leadership election preparation exercise.  Our plea for the Defence Secretary is that he is damned if he does and also if he doesn’t.  If he sets out a policy direction, he will be accused of ulterior motives. If he doesn’t, it will be claimed that he has nothing to say.

At a time when Brexit is all-consuming, and most Cabinet Ministers other than Michael Gove seem unwilling to make an impression, it ought to be thoroughly welcome that one of the others is developing a policy, even if you don’t agree it – which by and large we do, as believers in higher defence spending.

“Not leaving would be seen as a betrayal of that referendum decision. But leaving without a deal would undermine our future prosperity.” Hammond’s Davos speech – full text

“My message today is this: Britain is a great place to do business.”

Philip Hammond’s speech to British business leaders at the CBI’s lunch in Davos.

Let me start by passing on the PM’s apologies – I know she wanted to be here to address you this afternoon, but events have dictated otherwise.

But I am delighted to be back here in Davos…

…and to have the opportunity to address you once again.

Professor Schwab first invited political leaders to what would become the World Economic Forum in January of 1974.

It was a more leisurely affair in those days…

In between skiing, the group of leaders who gathered here in 1974 were grappling with profound economic and political uncertainties:

…the energy crisis…

…sky-high inflation…

…the collapse of the Bretton-Woods consensus.

And here we are, 45 years later…

…grappling with profound economic and political uncertainties!

Plus Ça change!

Closest to home, the terms of Britain’s withdrawal from the European Union remain unresolved, as the deadline looms ever larger.

More broadly, the global economy is slowing…

…and the threat of rising protectionism is increasingly affecting patterns of trade.

And the impact of the coming wave of technological change on our societies and our economies is becoming ever more apparent…

…bringing with it both challenges and opportunities.

But I want to argue today that even against this rather inauspicious backdrop, Britain can – and will – prosper in the years ahead.

The fundamentals of our economy are strong.

Its resilience through the turbulence of the Brexit process has been particularly noteworthy…

…and its growth prospects, according to the latest IMF forecast – providing we approve a deal with the EU – look perfectly respectable alongside our G7 peers.

Our commitment to free and open markets is deep and enduring.

And we are at the front of the pack in preparing our economy for the technology change.

So my message today is this: Britain is a great place to do business.

And we are determined, as we leave the European Union, to make sure that it remains that way.

Let me begin with the subject that is uppermost in everybody’s mind – Brexit.

It’s clear from our soundings last week that while Parliament has voted against the PM’s deal…

…it has not yet formed a clear view of what it is in favour of.

Next week, we will see various interventions by backbenchers.

Some of which will attempt to create a mechanism for Parliament to express its view of the way forward.

And in the meantime the government will continue to pursue a negotiated settlement that is likely to be acceptable to Parliament.

And believe me, I understand the perplexity with which many of you, as business leaders, view the politics of Brexit.

And I feel your frustration at the process and I have to say I share much of it!

But politics doesn’t work like business.

And while I am pretty clear what all my business interlocutors are seeking is an economic fix…

…I want to explain to you this afternoon why we need to get the politics, as well as the economics, of this process right.

Because even from the narrowest interpretation of business interest, it would be a Pyrrhic victory indeed to deliver a Brexit that appeared to meet the needs of the economy…

…but which shattered the broad consensus behind our country’s political and economic system.

In the 2016 referendum a promise was made to the majority who voted for Brexit – that they were voting for a more prosperous future.

Not leaving would be seen as a betrayal of that referendum decision.

But leaving without a deal would undermine our future prosperity, and would equally represent a betrayal of the promises that were made.

And that is why I, having campaigned vigorously to remain, in the referendum have come to believe that the only credible and sustainable solution is for us to leave the European Union.

To honour the referendum decision but to do so in a way that protects our economy in order to allow us to deliver that future prosperity that those voters were promised when they voted to leave the EU.

The only sustainable solution is a negotiated settlement with the EU:

A deal that supports the economy, protects jobs and allows us to continue a close trading partnership with our European neighbours.

Now to do that right now, we need to find a way around the impasse over the backstop.

And if we are to do so, it will take ingenuity and flexibility on the part of the EU.

As well as a spirit of compromise on the part of some of my colleagues.

It is surely in our national interest, all of us, to preserve faith in the political system and the democratic process…

…as well as protecting our economy as we leave this process…

…Surely in our interest to move forward to agree a negotiated Brexit that is a compromise that can begin to heal the nation and heal both political parties.

Failure to do so could lead to instability, populism (political content removed).

I know that for many business leaders…

…right up there alongside the question of access to European markets…

…is the question of access to labour.

Openness to global talent is a fundamental feature of the UK economy.

Migrants have made a huge contribution to our country over our history – and they will continue to do so in the future.

But at the same time, one of the messages that almost all politicians divine from the Referendum result…

…is a concern about our ability to control European Union migration: less, I personally think, about absolute numbers and more about a sense we have lost control of our own borders.

And so we have to be clear that as we leave the European Union, free movement will end…

…although I can assure you that short-term mobility for both business and leisure will continue.

And the immigration white paper, published in December, offers a pragmatic way forward.

First, while it constructs a universal framework for future migration control, it does not rule out the possibility that future trade deals – including with the EU – might make provision in this area.

Second, it proposes a skills-based immigration system – where it is workers’ skills that matter, not which country they come from.

And third, we have announced an extensive consultation into where the threshold for the highly skilled tier should be set…

…and how we should deal with the challenge presented by the economies need for intermediate-skilled workers:

The technicians; the carers; the chefs, the construction workers and the myriad others whose skills we badly need – but who often earn less than £30,000.

Business should be hugely reassured by this commitment to engagement.

And particularly to a twelve-month consultation period.

So, while free movement is ending, the detail of what will replace it remains to be decided.

And business has a real opportunity to help shape the policy.

But if I may say so, it will only do so if it engages effectively and presents a clear consensus from the business community.

So I urge you, collectively, to seize the opportunity to engage with this consultation…

…and to bring forward constructive, consistent and evidence-based proposals.

Let’s work together to design a system that responds to public concerns about immigration…

…but also protects our economy and our businesses…

…and becomes a part of the UK’s competitive advantage for the future.

While negotiating Brexit it must of course be the immediate priority, we must also deliver a message to the British people and to our trading and investment partners, about Britain’s future, beyond Brexit.

And it is a future based on a fundamentally strong economy.

One that has grown continuously for the past eight years…

…with employment breaking records again just this week…

…and wages now thankfully rising significantly faster than inflation.

The world’s fifth largest economy, ranked the 8th most competitive by the WEF

…which between 2015 and 2018, attracted more Foreign Direct Investment than any other EU nation, and more than France and Germany combined.

These achievements are not an accident.

They are the result of a deliberate economic strategy by this government:

…to deal with the deficit so that debt is now falling…

…to cut taxes on the wages people earn…

…and on the businesses that employ them…

…and deliver an Industrial Strategy, that is tackling the productivity challenge head on to sustainably improve our competitiveness, and hence the living standards of our people.

We are driving investment through initiatives like the National Productivity Investment Fund…

…the biggest sustained programme of public sector investment since the 1970s…

…and our commitment to 2.4% of GDP as R&D spending.

I am not, for one moment, complacent about our economic performance…

…especially as we see increased risks in the global economy, and lower forecasts for global growth…

…and I certainly recognise that continued Brexit uncertainty is taking a toll.

But that should not obscure the strong foundations we have built for the future…

…foundations that will ensure our economy grows and prospers, whatever the future has in store for us.

That prosperity will be sustained by a deep and enduring commitment to free and open markets, to intelligent and appropriate regulation, and to a globally competitive tax system.

We know that the free market is the only way to deliver the high-wage, high-skill economy of the future.

And that Free Trade is the way to spread prosperity globally.

(And by the way, the quickest way to boost global growth right now would be to liberalise trade in services).

But we also know that to maintain public trust in the free market, we must make sure that the rules of the game evolve to keep pace with the changing nature of the economy…

…especially when there are populists waiting in the wings to propose radical – and dangerous – so called “solutions” in response to every perceived failure.

For example, it is clearly not sustainable or fair that global digital platform companies can generate substantial value in the UK, without paying UK tax on their earnings.

That’s why the UK has been leading attempts to deliver international corporate tax reform for the digital age.

But pending that global agreement, we have introduced a UK Digital Services Tax…

…to make sure that global tech giants, with profitable businesses in the UK, pay their fair share towards supporting our public services.

And now the French have followed us – with a tax broader in scope and with higher rates.

We are also conducting an external Review of competition policy in the digital economy…

…to examine the impacts of the emergence of a small number of dominant players in digital markets…

…and how we can ensure that competition plays its proper role in driving business innovation and expanding consumer choice…

…so that the economy as a whole benefits from new technologies.

These initiatives show our determination to remain at the cutting-edge of these policy debates – and of regulatory solutions.

Demonstrating in deeds, not just words, our commitment to build a digital economy that works for everyone.

I spoke to you last year about the opportunities of the fourth industrial revolution:

About how technological advances will lead to a revolution in the way we live and work…

…with Artificial Intelligence transforming everything from factories to hospitals…

…and in turn boosting our productivity and our living standards.

But I also spoke about the challenges that this revolution represents…

…and how they link to some of the concerns that drove the Brexit vote.

About the need to address fears that automation and new technology may bring, not higher wages, but mass unemployment…

…and that as new technology drives greater productivity improvements, the returns may flow to capital, rather than labour.

In Britain, we are taking these concerns seriously.

We are providing investment of course to build on the UK’s position as a world-leader in innovation and new technology:

We have announced £1.6 billion funding in science and innovation and £950 million in our Artificial Intelligence sector deal…

…and £50 million for the new Turing Artificial Intelligence Fellowships, which will attract and retain the best researchers from around the world.

But we can and must go further.

Artificial intelligence could add $15.7 trillion to the global economy by 2030.

But only countries with the most advanced digital skills will fully realise these benefits. And we intend that Britain will be at the front of that cohort.

So I can announce today that in addition to the Turing AI fellowships…

…we will commit £100 million to establish 1,000 new PhD places in centres across the UK…

…to create the next generation of AI innovators and build on the established research excellence of Britain’s universities.

The potential prizes of the 4th industrial revolution are great, but we can only seize them if we can take our public with us.

So we are also taking action to manage the impact of technological change on Britain’s society and economy…

…by investing in programmes like the National Retraining Scheme – which we are delivering in partnership with the CBI and the TUC – to provide employers with the skills they need as the economy evolves…

…and to reassure workers that they won’t be abandoned when the technological revolution reaches their job.

And the new ‘T Levels’, which will also – admittedly decades too late – import into the UK’s technical education system important lessons from Germany, Scandinavia and the US.

And Britain is also leading the debate on the ethical challenges of the Fourth Industrial Revolution.

With the establishment of the Centre for Data Ethics and Innovation…

…and through the Regulators’ Pioneer Fund, we are leveraging Britain’s track record of regulatory innovation to deliver a competitive advantage for our future economy.

So in conclusion the future of Britain’s economy clearly depends on making a success of Brexit.

But that is a necessary, not a sufficient condition for a prosperous future.

If we look up for a moment from the immediate challenge of Brexit, we can see profound change ahead – and enormous opportunity.

And Britain is leading the way into this future.

Investing in new technologies…

…promoting, not abandoning our commitment to free and open markets…

…taking action to manage the impact of profound technological change…

… building on our strong economic foundations.

And, when the economic history of the first half of the 21st century comes to be written, it will not be about Brexit.

It will be about a technological revolution of a speed and impact the like of which the world had never seen before…

…a revolution that touched every aspect of our society, our economy, and our politics…

…and if we get it right, it will be the story of how we in the UK leveraged our historic strengths to manage this change…

…and to place Britain at the forefront of it…

…as a nation ready for the future…

… a great place to do business.

Thank you.”

“No-one voted for Brexit to become poorer.” Really? We vote to deny ourselves money all the time.

Security, cohesion, integration, solidarity: all are intangible. But we pay – literally – to gain them. Why single out self-government?

Philip Hammond may have coined the phrase – an appropriate use of the term, in this case.  “No-one voted to become poorer or less secure,” he told the Conservative Party Conference in 2016, less than six months after the Brexit referendum vote.  As others have taken those words up, the last three have tended to drop off it.  But was he right?

Obviously, even as senior a Minister as the Chancellor cannot have read the minds of all 17 million plus of those who backed Leave – the largest number of people who have ever voted for anything in a British poll.  But let us leave the point there, and turn to his own department’s forecasts.  The Treasury’s median long-term estimate is that a WTO-based outcome would reduce cumulative growth over 15 years from about 25 per cent to about 17 per cent.  In other words, GDP would, under this scenario, be eight per cent lower than it would otherwise be.  It would rise more slowly, not fall.

So even the Treasury, the high temple of Remain, doesn’t expect us to become poorer – but rather, less rich than we would otherwise be.  You may counter that this lost growth would mean lost wages and tax receipts, lower spending and higher tax.  Or that some short-term forecasts do suggest that we will become poorer this year in the event of No Deal.  (The CBI is pushing a very-worst-case scenario today.)

We could come back by pouring cold water on all such forecasts, starting with George Osborne’s referendum campaign projections of an “immediate” recession, half a million more people unemployed, and house prices 18 per cent lower than they would otherwise have been.  Instead, the economy grew, unemployment fell and house prices rose.  But rather than vanish into a statistical snowstorm, we ask our readers to view Hammond’s statement from a different angle – two angles, to be precise.

The first is from the Left.  Trident costs the taxpayer roughly £2 billion a year.  That money could instead be spent on tax cuts or public services.  Very many on the Left (and some on the Right) argue that it should be.  They say that we don’t use Trident, wouldn’t ever use it, shouldn’t ever use it.  The cash should go instead on schools or hospitals or benefits or childcare.

Next, mull an argument from the Right.  Overseas aid comes at a price of about £14 billion annually.  Again, that money could be spent on public services or tax cuts – or, the Right being the Right, on debt repayment.  A lot of people on it – and a sprinkling on the Left – hold that development aid is wasted or stolen and perverts incentives and is subject to the law of unintended consequences.

Now stand back from the fray, and ponder a stubborn fact.  Voters consistently back Trident and aid.  No, that’s not quite right.  Rather, put it this way: voters consistently return governments committed to both.  Then turn to another subject to illustrate the same point.

Pro-migration campaigners argue that it makes us richer – both overall and per head.  Others dispute that claim.  Let’s assume for the sake of the argument that those campaigners are right.  Even if every single voter could be persuaded of this, there is reason to doubt that all of them would come round to wanting higher rather than lower migration.  Very many would believe that there would still be costs in some places to higher immigration – in terms, for example, of pressure on housing.  And then there is the i-word: integration.

At which point, it is worth standing back from Hammond’s statement, and asking not whether he was right or wrong, but what he actually meant – or implied.  Who is the “no-one” in question?  Who are those to whom he glancingly refers?  Obviously, the British people.  But that’s a term which invites further thought.

In one sense, the British people is a single entity; in another, it is lots of groups of people, breaking down in turn into families and individuals.  Many of them help to pay for others.  Older people tend not to use schools, but they help to fund them.  Younger people use the NHS less than older ones, but they help to pay for it.  Londoners, some say, subsidise the rest of the UK.  And so on and so forth.

Readers will see where all this is going.  At each election, we vote to “make ourselves poorer”, in the sense of becoming less rich than we otherwise would be.  We plump for Trident because we worry about our security (to reprise the Chancellor’s word); or for lower migration because we think it will mean more cohesion, or for overseas aid because of solidarity with those who suffer. We vote to fund public services we don’t use and parts of the country we don’t live in.  Security, cohesion, solidarity: these are intangibles.  They can’t be touched or smelled or tasted – seen or heard.  They may lead to material gains, but they are not material themselves.  None comes with a price tag, but all have value.

Let’s end by illustrating the point.  John Hume was fond of quoting his anti-sectarian father, who used to say: “you can’t eat a flag”.  True – and anyone who has tried to do so has presumably been disappointed.  But the reverse also applies.  No-one, we suspect, has ever sung: “I vow to thee, my breakfast.”  Those intangibles – such as self-government, to cite another – matter.  From one point of view, the desire for the last is a form of solidarity or even for, to use a more EU-ish word, subsidiarity.

You can properly reply that self-government and patriotism aren’t the same thing, or even that they don’t overlap at all.  So be it.  What you can’t do, this site believes, is claim that Brexit alone, uniquely, exceptionally, will make us less rich than we otherwise would be (if it does so at all).  By commission, by omission, in the ballot booth and out of it, we opt to do this all the time – almost without noticing.