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The Use and Abuse of Economists

As a professional economist of many years’ standing I am used to riding with the punches. At my wedding my wife’s deaf uncle enquired about the profession of the groom.  “He’s an economist” was the response. Uncle Max spent the rest of the wedding reception lamenting the fact that his precious niece had married a Communist…………..

But the punches we have taken during and after the EU referendum have been stronger and more frequent. Who will forget Michael Gove’s comment that ‘people in this country have had enough of experts’  and his even more venomous barb, comparing the economists who supported Remain to experts in the pay of the Nazis (though he did apologise for this one)?

Economists focus on the behaviour and interactions of economic agents (eg central banks, households, businesses, governments and foreign residents) and how economies work. By using mathematical models, we can tell you for example the likely impact on GDP of cutting the standard rate of income tax by 1%.

Economists often disagree (‘two economists, three opinions’) but before the referendum, there was a most unusual consensus, agreeing that leaving the EU was a bad idea.  88% of economists surveyed by Ipsos Mori forecast that over the next five years, leaving the EU and the single market would have a negative impact, compared with staying in.

Unsurprisingly this prognosis was unwelcome to the Leave advocates. Almost from 24 June they started to tell us how wrong or ‘doom and gloom’ predictions were. We were accused of being unpatriotic by ‘talking the economy down’.  They even covered themselves by saying that if there was a recession, it would be our fault for predicting one, thereby creating a ‘self-fulfilling prophecy’ (Tim Martin of Wetherspoons actually said this). Virtually every day the Express has featured ‘Booming Britain’ articles. Just one example was a front page headline on 2 September ‘Britain’s Economy Booms’. It was based on two data items: a rise in the Manufacturers’ Purchasing Managers Index and a rise of the FTSE 250 to 4% above its pre-referendum level.  Never mind that manufacturing is only 10% of the economy, that the PMI is a sentiment index and not a component of GDP – as indeed applies to the stock market (I complained to IPSO about this and other Express articles …….. but got nowhere).

I would like to focus in particular at four ways in which my profession might have cause for complaint at the way it has been treated over the past year or so.


1: The ‘Straw Man’ Economist

The Brexiteers delight in telling us how wrong we were to forecast a recession the day after a ‘No’ vote. (An example was Ryan Bourne in the newspaper City AM, 20 December). 

Of course none of us was forecasting this! That would be like judging the result of a marathon race after the first 100 yards. As stated above, 88% of economists were forecasting that over the next five years, leaving the EU and the single market would have a negative impact, compared with staying in. 

This is neither ‘short term’, nor is it forecasting a downturn – it is simply saying that for GDP, leaving will be worse than staying, in the medium- to long-term.

2: The ‘God-Like’ Economist

The ‘self-fulfilling prophecy’ argument is easily rebutted. If economists are so powerful that they can realise their forecasts just by voicing them, how come their forecasts are sometimes proved wrong? And how come Mark Carney and the MPC had to cut interest rates and step up QE after the vote, when they could simply have talked the economy up?

3: The Economist Meets The Politician

Because of the importance of the economy to the electorate, politicians have not hesitated to lean on economists employed in government to massage their forecasts.  To stop this happening, George Osborne – to his credit – created the Office for Budget Responsibility (OBR). These economists have statutory independence in making forecasts for the UK economy – particularly at Budget time, forecasting the implications of changes in tax rates and public spending.

Before the referendum (in April), the Treasury produced a document comparing the forecast economic performance of the UK if it remained in the EU with that if it left.

Importantly it was the Treasury that published the forecast, not the OBR.  Because the OBR’s responsibility is to assess the impact of government policy - which before the referendum was to remain in the EU. The Treasury’s assessment of the consequences of withdrawing from the EU was that by 2030 the economy would be between 3.4 and 9.5 per cent better off In than Out, depending on the assumption about post-Brexit trading arrangements.

Then in May the Treasury produced a forecast of the immediate economic impact of leaving the EU.

The Treasury was careful to obtain the advice of a highly respected academic economist, Professor Sir Charles Bean (former Deputy Governor of the Bank of England).  He commented as follows:

While there are inevitably many uncertainties – including the prospective trading regime with the EU – this comprehensive analysis by HM Treasury, which employs best-practice techniques, provides reasonable estimates of the likely size of the short-term impact of a vote to leave on the UK economy.”

 

It is this second short-term forecast on which the Brexiteers have focused their criticism.  The forecast shows a shallow recession (Table 2.C page 46), with GDP falling by 0.1% in each quarter from 2016 Q3 to 2017 Q2. Obviously that has not happened and has led to a chorus of Brexiteer condemnation of economists in general and Treasury economists in particular.

That criticism is somewhat unfair, although it is true that the forecasts may well have been subject to political ‘overlay’ (despite Professor Bean’s signoff) because they were not produced by the independent OBR.

The truth is that is it perfectly possible that there will be a sharp slowdown or recession in 2017/18.

There are two principal reasons why it has not happened yet.

The first is that the forecast assumed that Article 50 would be triggered immediately. But this did not happen. The Prime Minister has said it will happen by the end of March, but that timetable might well slip, given that it needs legislation (following the judicial ruling) and the House of Lords will probably try to delay it. In addition, there is still uncertainty surrounding the process. For example, it might be that Article 50 can be revoked if for example a second referendum on the terms of the UK’s new relationship with the EU rejects those terms. The fact that the triggering of Article 50 has been delayed is important in explaining why the economy has not slowed yet. It is not - as one pro-Brexit economist, Ryan Bourne, has alleged – “dire sophistry”.

The second reason is that the Treasury forecast assumes that monetary policy is held fixed. However the Bank of England’s MPC eased policy substantially in August, cutting interest rates to 0.25% from 0.5%, expanding Quantitative Easing and declaring its intention for the first time to buy commercial debt as part of the QE programme.

Only when Article 50 is triggered - and the reality of what the EU is prepared to offer versus what the UK demands becomes clear – and only when the backward-looking data are published – will it be fair to judge the Treasury’s forecast of a mild recession. That is, around June 2018, assuming Article 50 is triggered by June 2017.

(Note that some other parts of the Treasury forecast are proving correct. It predicted a sharp fall in the pound and a rise in inflation and government borrowing).

4: The Economist Misrepresented and Misundertood

More often than you might think, the forecasts made by economists are misinterpreted. I lost count of the number of times it was stated during the campaign that the Treasury forecast was for a fall of between 3.4% and 9.5% in GDP by 2030.   It wasn’t. That forecast was simply a comparison of 2030 of GDP under two scenarios: staying in the EU and leaving it.  No actual fall in GDP could be implied from the ‘leave’ scenario.


And even if our forecasts are interpreted correctly, we economists are frequently misunderstood, most commonly in terms of what we can and cannot achieve. What we can do is to use a systematic framework to forecast an outcome, given a change in a parameter (eg a tax rate) and a set of assumptions about how the economy works.  Or at the micro level, an economist can tell you for example whether a planned new rail line – HS2 say – is good value.  Indeed (and fortunately!) economists are necessary.  Businesses need forecasts to help them plan. Modern economic policy requires forecasts. The Bank of England was given responsibility for predicting inflation before it was given control of monetary policy. Without a forecasting framework, its Monetary Policy Committee would be whistling in the dark.  And even when a forecast is wrong, knowing why it is wrong helps us understand a bit more about how the economy works.

Conclusion

Economists do not have perfect foresight. But they can help in planning and optimising the use of scarce resources.

Let Professor Jag Chadha, the Director of NIESR, have the last word:

“It is quite obvious that we cannot know the future.  But it is equally obvious that we cannot afford not to think and plan for the future.  Our projections about future states of the world depend on a combination of information and models, which are essentially devices for turning that unstructured information into a view.  Even if we make the most extreme assumptions and assume that all relevant information is free, we would still not say that this structural view is anything other than a false depiction of the world that will transpire.  So they need to be treated with care, particularly when they are used to inform policy.  Forecasts can be used or abused but they need to be made.”

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Merry Christmas – and a hopeful and determined New Year

Part of this end-of-year message is to wish everyone a merry Christmas, happy holidays and great New Year. Sadly, as we lookimage1.JPG back at the events of 2016 with regret, or forward to 2017 with of a sense of foreboding, we may feel that there is ample ground for pessimism. However, we must now collectively show resolve and determination, demonstrate the courage of our convictions and stand up against the forces of insularity, intolerance and dogma that too-often characterised public debate in the western world during 2016. 

Thanks to all of you and your support, courage and will, the forces of reason, balance and tolerance have not been consigned to the shadows. The voices of those opposed to the current direction of travel have not been quelled in the face of the constant drum beat of reality-denying narrow-mindedness. Our task now is to face down those who would have us believe that the votes of just over a third of the electorate in a referendum – particularly one lacking in any manifesto or detail – should irrevocably bind the fortunes of all our people.

As we continue our work we must continue to recognise the disquiet and concern of many who did vote for change – and patiently engage with them to understand and persuade them that the likely terms of leaving the EU will run counter to their own wishes and ultimately result in the exacerbation of their ills. But we must also deny also that a tiny minority of outlandish thinkers somehow have the self-appointed, undemocratic right to define exactly what that flawed referendum meant. The cold light of day must shine upon the reality of disengagement with Europe. Many Americans may lament Trump, but he will face re-election. A hard Brexit is a one-way ticket.

Nevertheless, as the year draws to its poignant end, we should reflect how many of us have stood in defence of the values of the modern world. Britain for Europe has stayed true to its founding principles, engaged with people across the country and tried to play our part in bringing renewed hope and organisation to our cause. At London’s City Hall as well as in Bristol and Birmingham we have come together – as we will again soon in Leeds – to debate and build a new future. We have reached out to fellow activists and created alliances and bonds with others.

Like any organisation built from scratch, fuelled by the enthusiasm of its activists, driven by individuals giving freely of their time and lacking the material clout of established campaigns, B4E has followed a bumpy but straight course. There are many people I could thank, some still involved, others having to turn their attention to jobs or other areas of their life, who have taken this enterprise to where it is today. You all know who you are. 

We now look forward to working with our allies, including the European Movement and others, to continue to uphold a message of hope and determination that our future and the prosperity of our children will not be hijacked by a small number of fanatics. 

All the team at Britain for Europe therefore wish you all a merry Christmas, a happy holidays and all the best for 2017. Remember that the pendulum of time will strip bare the falsehoods of the leavers. This will strengthen our hand as we face up to reality. We must neither lose hope, nor our determination.

2017 will be all about your and our actions, about campaigns and reaching out, about changing the mood music surrounding this debate. For long enough they taunted us with ‘Project Fear’. Now we strike back across the nation and on street corners with ‘Together our Future’. We are planning a number of events and campaigns early next year. We will hold this government to account. Together we can do this, alone we are but silent voices.

Tim Skeet

Chair

 

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How Boris changed his mind on Europe

boris-johnson-eu-square.png



Writing exclusively for the Daily Telegraph in 2013, London Mayor Boris Johnson said that if Britain left the EU, “we would have to recognise that most of our problems are not caused by Brussels.”

 

 

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MEP proposing duel EU citizenship for Brits “overwhelmed” with support from UK

The MEP behind a proposal to allow duel EU citizenship for people from the UK has been “overwhelmed” by support, Britain for Europe have reported today.

On Monday 21 November, the EU’s Constitutional Affairs Committee will discuss a proposal from Charles Goerens that would give “associate citizenship for those who feel and wish to be part of the European project but are nationals of a former Member State” and give them “the rights of freedom of movement and to reside on its territory” as well as being represented in the European Parliament.

The proposal follows a widely-circulated article by a Bristol campaigner – and Britain for Europe organiser – Joe Williams, who argued for voluntary dual citizenship if Brexit goes ahead (https://www.euractiv.com/section/uk-europe/opinion/tuesday-give-brits-voluntary-dual-eu-citizenship).

Goerens said: “I have been overwhelmed by support both for my amendment and the idea of associate EU citizenship for Brits as proposed by Joe Williams, illustrating the passion that a wide section of UK society still holds for the European Union – and the benefits that their citizenship brings.

“ Amid the uncertainty and anxiety created by the referendum, we should be supporting ideas that seek to create a brighter future for people across the continent and the European Union as a whole.”

Britain for Europe said that over 30,000 emails had been sent to committee members by UK citizens in support of the proposal as part of its lobbying campaign.

Williams (@earsopen) said: “Many of us in UK remain passionate Europeans and the prospect of leaving the EU has only increased our sense of pride.

“Brexit threatens to deny us the rights, responsibilities and opportunities that the EU provides for its citizens, but surely there's a simple way to accommodate the undulled enthusiasm we have for the European project – as well as our sense of fellowship with citizens of our continent overseas?

“By securing voluntary dual citizenship, we won't stop the economic misery that Brexit is creating nor the hatred and division that the result has inspired, but we could retain all the direct individual benefits of EU membership for anyone willing to sign up – as well as keeping our democratic voice in one of the world’s biggest largest political and economic forces.”

The “individual benefits” that the committee will consider extending to “nationals of a former member state” are:

- Permit and visa free travel across 28 countries.
- The right to live and work in an area of over 4 million square kilometres.
- Free healthcare throughout.
- The protection of their security, employment, human and consumer rights as well as the environment.
- The chance to have representation proportionate with their numbers in the European Parliament.

Goerens has put forward the proposal as an amendment to a paper by “chief Brexit negotiator”, Guy Verhofstadt, on the future of the EU.

Britain for Europe is also supporting a petition, set by the European Movement, to support the idea of associate citizenship (www.saveourcitizenship.eu).

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So who wants to remain an EU citizen? It really could happen!

As you may have heard, the European Union will soon discuss a proposal to allow people in the UK to keep their EU citizenship voluntarily after Brexit.

Can you help us make the idea a reality?

On Monday 21 November, the European Parliament’s Constitutional Affairs Committee will discuss a proposal that would give “associate citizenship for those who feel and wish to be part of the European project but are nationals of a former Member State” and give them “the rights of freedom of movement and to reside on its territory” as well as being represented in the European Parliament.

The proposal follows a widely-circulated article by the Secretary for Bristol for Europe – and Britain for Europe organiser – Joe Williams, who argued for voluntary dual citizenship if Brexit goes ahead (https://www.euractiv.com/section/uk-europe/opinion/tuesday-give-brits-voluntary-dual-eu-citizenship).

Here's how you can help!

1) Address an email to contact@britainforeurope.org
2) Use the subject line ‘please support amendment 882'
3) Cut and paste these email addresses into the ‘BCC’ section of your email. They are all members of the committee who will make the decision.

danuta.huebner@europarl.europa.eu, barbara.spinelli@europarl.europa.eu, pedro.silvapereira@europarl.europa.eu, kazimierzmichal.ujazdowski@europarl.europa.eu, paulo.rangel@europarl.europa.eu, mercedes.bresso@europarl.europa.eu, elmar.brok@europarl.europa.eu, kostas.chrysogonos@europarl.europa.eu, richard.corbett@europarl.europa.eu, pascal.durand@europarl.europa.eu, esteban.gonzalezpons@europarl.europa.eu, ramon.jaureguiatondo@europarl.europa.eu, constance.legrip@europarl.europa.eu, jo.leinen@europarl.europa.eu, morten.messerschmidt@europarl.europa.eu, maite.pagaza@europarl.europa.eu, jacek.saryusz-wolski@europarl.europa.eu, gyorgy.schopflin@europarl.europa.eu, ana-claudia.tapardel@europarl.europa.eu, josep-maria.terricabras@europarl.europa.eu, guy.verhofstadt@europarl.europa.eu, rainer.wieland@europarl.europa.eu, martina.anderson@europarl.europa.eu, max.andersson@europarl.europa.eu, pervenche.beres@europarl.europa.eu, sven.giegold@europarl.europa.eu, sylvie.goulard@europarl.europa.eu, roberto.gualtieri@europarl.europa.eu, enrique.guerrerosalom@europarl.europa.eu, brice.hortefeux@europarl.europa.eu, sylvia-yvonne.kaufmann@europarl.europa.eu, jerome.lavrilleux@europarl.europa.eu, david.mcallister@europarl.europa.eu, markus.pieper@europarl.europa.eu, jiri.pospisil@europarl.europa.eu, cristiandan.preda@europarl.europa.eu, viviane.reding@europarl.europa.eu, dacianaoctavia.sarbu@europarl.europa.eu, helmut.scholz@europarl.europa.eu, sion.simon@europarl.europa.eu

4) Write an email explaining why you'd like to retain EU citizenship and asks them to support the amendment. Feel free to use your own words, but here's a suggestion:

On Monday 21 November, the European Parliament’s Constitutional Affairs Committee will discuss Charles Goerens amendment 882, hoping to insert paragraph 37a to Guy Verhofstadt’s report on the future of the EU.

The amendment suggests “associate citizenship for those who feel and wish to be part of the European project but are nationals of a former Member State” and give them “the rights of freedom of movement and to reside on its territory” as well as being represented in the European Parliament.

Many of us in UK remain passionate Europeans and the prospect of leaving the EU has only increased our sense of pride.

Brexit threatens to deny us the rights, responsibilities and opportunities that the EU provides for its citizens, but surely there's a simple way to accommodate the undulled enthusiasm we have for the European project – as well as our sense of fellowship with citizens of our continent overseas?

By securing voluntary dual citizenship, we won't stop the economic misery that Brexit is creating nor the hatred and division that the result inspired, but we could retain all the direct individual benefits of EU membership for anyone willing to sign up – as well as keeping our democratic voice in one of the world’s biggest largest political and economic forces.

As a result, as a UK citizen and supporter of the campaign group Britain for Europe, I wholeheartedly support this proposal, and ask that you do the same when you have the opportunity to discuss and vote on this amendment.

For more information on this idea, please see https://www.euractiv.com/section/uk-europe/opinion/tuesday-give-brits-voluntary-dual-eu-citizenship.

Thank you.

5) Click send!

We’ll let you know any progress on this campaign. In the meantime, please let us know if you get a response from any MEPs.

Thank you, and fingers crossed!

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Pro-European campaigners secure chance that Brits will keep EU citizenship after Brexit

The European Union will discuss a proposal to allow people in the UK to keep their EU citizenship voluntarily after Brexit, Britain for Europe has confirmed.

On Monday 21 November, the EU’s Constitutional Affairs Committee will discuss a proposal that would give “associate citizenship for those who feel and wish to be part of the European project but are nationals of a former Member State” and give them “the rights of freedom of movement and to reside on its territory” as well as being represented in the European Parliament.”

The proposal follows a widely-circulated article by a Bristol campaigner – and Britain for Europe organiser – Joe Williams, who argued for voluntary dual citizenship if Brexit goes ahead (https://www.euractiv.com/section/uk-europe/opinion/tuesday-give-brits-voluntary-dual-eu-citizenship).

Williams (@earsopen) said: “Many of us in UK remain passionate Europeans and the prospect of leaving the EU has only increased our sense of pride.

“Brexit threatens to deny us the rights, responsibilities and opportunities that the EU provides for its citizens, but surely there's a simple way to accommodate the undulled enthusiasm we have for the European project – as well as our sense of fellowship with citizens of our continent overseas?

“By securing voluntary dual citizenship, we won't stop the economic misery that Brexit is creating nor the hatred and division that the result has inspired, but we could retain all the direct individual benefits of EU membership for anyone willing to sign up – as well as keeping our democratic voice in one of the world’s biggest largest political and economic forces.”

The “individual benefits” that the committee will consider extending to “nationals of a former member state” are:

- Permit and visa free travel across 28 countries.
- The right to live and work in an area of over 4 million square kilometres.
- Free healthcare throughout.
- The protection of their security, employment, human and consumer rights as well as the environment.
- The chance to have representation proportionate with their numbers in the European Parliament.

The proposal has been put forward by Charles Goerens, a Luxembourgish Liberal, to a paper by “chief Brexit negotiator”, Guy Verhofstadt, on the future of the EU.

 

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Britain for Europe welcomes High Court decision on Article 50

Britain for Europe, the new national group campaigning to keep the UK in the EU, has welcomed the High Court’s ruling that Parliament must vote before the government triggers Article 50.

Tim Skeet, Chair of Britain for Europe, said: “Today is a victory for both democracy and common sense, and everyone that believes in parliamentary representation should be pleased that the principles of our constitution have been upheld.

“Nevertheless, it is just a small step in the direction of continued UK membership of the EU, and the focus of the campaign by pro-Europeans will now be to ensure that MPs remain true to their consciences, recall their own arguments over Brexit – and vote against the isolation and misery that withdrawal would create.

“That the government was willing to take such a colossal measure without consulting our elected representatives demonstrated a troubling disregard for parliamentary sovereignty – and revealed their fears that a large proportion of MPs and their constituents are desperate to reverse the destructive course that they seemed determined to follow.”

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Britain for Europe backs Richmond Park Unites campaign as chance to ‘open new chapter in UK politics'

 

Britain for Europe, the new national group campaigning to keep the UK in the EU, has said it supports efforts to unite pro-Europeans behind a single candidate in the forthcoming Richmond Park by-election. 

Tim Skeet, Chair of Britain for Europe, said: “We’re delighted to see pro-Europeans within political parties and beyond setting differences aside to work together and stand against the lies and hatred of the pro-Brexit campaign.

“The by-election presents a wonderful chance for a positive, inclusive campaign that overcomes the divisions of the past and focuses on the only political show in town: the fight to keep this country in the European Union.

 “We must seize the chance to open a new chapter in UK politics, put principles before party politics and turn away from the miserable course that lies ahead for us all if we abandon our senses and withdraw from Europe.”

For more information, visit http://richmondparkunites.co.uk/

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A talk to Surrey For Europe

 

- A talk given to Surrey For Europe, 19 September 2016 by Jonathan

Hoffman

 

Good evening. Thank you very much for inviting me and thank you all for
coming. I am an economist – one of the experts of whom this country has had enough,
according to Michael Gove. I am not going to go over the nightmare of the referendum.
Suffice it to say, I believe the decision to hold it was the biggest mistake of modern political
history in the UK. The result was won on the basis of serial lies and the failure
of the Remain campaign to respond to them, because David Cameron was sure
of winning and put Conservative Unity above all else. As Lord Mandelson said
in the BBC analysis of the referendum, not to be able to respond to lies from
the other side in a political contest is like taking a spoon to a knife fight.
But we are where we are. The famous Irishman when asked directions, said “I
wouldn’t start from here”. But of course we have no choice!
There have been more models talked about for the UK outside the EU than you
can find on the stage for Miss World. The Swiss model, the Norwegian model,
the Canadian model, the Albanian model... 
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Britain For Europe Launches at City Hall

PRESS RELEASE

Britain For Europe launches at City Hall, London

A new grass roots campaigning organisation, Britain For Europe, launched at City Hall in London on 17th August, by kind permission of Andrew Dismore AM.  Its aim is to create a central organisation to support a grassroots non-party nationwide network of Remain campaigners who will continue to strive for the UK to remain in the EU.

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