This is a guest post by my friend Benedict White. Unlike me, and George Osborne, he can do sums. He’s very good on twitter. Please give him a follow on @BenedictMPWhite. He also has his own excellent blog which is well worth reading.
Last week the Treasury Report was roundly panned by just about anyone who is anyone in economics, the fact checkers at the BBC and Channel 4, as well as by people like Liam Halligan at the Telegraph. The key claim in George’s rigged report was that each household would be worse off to the tune of £4300 per year by 2030. Now, let’s put to one side the fact that Osborne can’t get his sums right from month to month never mind over 14 years, and look at the claims in a little more detail. Before we do though, I’d like you to consider this nugget, Osborne himself stopped using Treasury forecasters because they were so crap. That’s why today official government economic statistics all come from the Office of Budget Responsibility.
Now, to the substance of the report. One point of contention is that the figures are based on a made up metric of GDP per household which no one uses, or rather no one has used it before, and no one is likely to use again, apart from me, in this article.
The report also assumes that we love all existing EU regulations, would ditch none and make no trade deals apart from those with the EU. This is about as likely as Jim Davidson being asked to be the turn at the Guardian Christmas do, but we’ll run with it for now.
Bear with me here please, this next bit involves sums, but unlike Boy George I can do maths without taking my shoes and socks off. According to Liam Halligan’s article we currently have 27 million households in the UK, and if we remain in the EU the treasury assumes we will have 31 million by 2030. Its £4300 per household figure is based on projected GDP in 2030. It assumes a growth rate of 36% over 15 years in the EU, and 29% out. This is where Osborne attempts to perpetuate his gigantic con on the British public:
• First, the figure £4300 is reached by dividing the projected 2030 GDP by the 27 million households we have today, not by the 31 million households the Treasury assume we will have in 2030. So, the GDP per household the Treasury figure represents is the GDP per household of the 27 million households we have now, not the GDP per household of the 31 million households the Treasury expect us to have in 2030. As we all know Boy George is lousy at maths, but even he should know that that will distort the GDP per household upwards, which if you think about it, is exactly what he wants.
• Second, if I tell you you’re going to be £4300 worse off you immediately look at your bank statement and credit cards and think “Oh ?$*#”. But this is manifestly not what the Treasury report says. Both in the EU and out of the EU we’ll be better off, but according to the dodgy assumptions from the Treasury, which I referred to above, we will be even more better off if we stay in the EU.
If you accept Osborne’s dubious figures, 36% growth if we stay in, 29% growth if we stay out, and then assume a lower growth in households (one of the main reasons for leaving is regaining control of our borders and reducing migration from the EU), and actually use the Treasury’s own figures for projected households if we stay in, the maths work out very differently.
It’s not unreasonable to assume there would be 3 million less households in the UK. The aim would be to reduce immigration to under 100 000 a year, so that would slow down the rise in the number of households considerably. The only way that that would not happen would be if, after Brexit, we opted to join the European Economic Area. Under those circumstances we would still have to allow free movement of people, but we would still have access to all EU markets, so one imagines our GDP would at the very least be no worse than it would be if we remained in the EU.
Now, back to sums, current UK GDP is £1.808 trillion. So in the EU it will rise to £2.459 trillion by 2030. If we leave, it will rise to £2.333 trillion. If we divide £2.459 trillion by 31 million households we get a GDP per household of £79,349. By contrast if we leave, we divide 2.333 trillion by 28 million households, we get a GDP per household of £83,329 or £3,980 better off out. I’m sure that isn’t the number George Osborne wants you to take from his report.
Unlike Boy George, I’m not saying my figures are accurate. As everyone knows there are no one handed economists because there always has to be another hand; and if all the economists in the world were laid end to end they still wouldn’t reach a conclusion. But these figures are at least as plausible as the Treasury’s. And again, unlike them, I’m not saying bet your country’s future on predictions that have as much basis in reality as Mystic Meg’s horoscopes. Even if we will be better off financially when we come out, the real prize is the revitalization of our democracy, the restoration of the rule of law and being in control of our own destiny once more.