THE EU

In reading the latest pack of inventions and outright lies from George Osborne and The Treasury, the only remarkable thing is how devoid of any credible rationale their 'report', entitled 'HM Treasury analysis: the immediate economic impact of leaving the EU', is. One can only assume that Osborne thinks that the news headlines of an economic recession will be sufficient to influence voters who will not wade through the report themselves. No doubt Osborne has in mind the postal vote forms which are about to be sent out.

There has been a more robust response to this diatribe, compared to earlier bunk. Even so, that response has not been robust enough. Some Tories have threatened to mount a leadership challenge once the referendum is over. They should mount one now rather than demean themselves by being associated with Cameron's and Osborne's brazen dishonesty. Britain's future and even its existence as a country hangs in the balance. 'Dishonest Dave' should be thrown out of office without delay and his lying should be unequivocally made clear.

Once again, Osborne has written the Forward. He starts as he means to go on, with dire allegations that a vote to leave the EU will be apocalyptic not only for relations with the EU but also 'our relationship with the rest of the world' which would be affected by 'instability and uncertainty that would [be] trigger[ed]' as 'a vote to leave would represent an immediate and profound shock to our economy'. According to Osborne, the economy would go into recession, with between 500,000 and 800,000 losing their jobs, with higher inflation and higher government borrowing. Sterling would fall. Even house prices 'would be hit' and there is a danger in his 'more acute scenario' that 'The rise in uncertainty could be amplified, the volatility in financial markets more tumultuous'.

The report claims that there would be three causes of a shock to the economy: a transition effect; an uncertainty effect; and a financial effect. The transition effect supposedly means that the long-term effects (alleged in the Treasury's previous report – see the English Rights Campaign item dated the 12^th May 2016) would take place immediately. The uncertainty effect alleges that 'Businesses and households would respond to this [uncertainty] by putting off spending decisions until the nature of new arrangements with the EU became clearer' and that 'immediately' following the vote 'Businesses would reduce investment spending, such as the purchase of new machinery and moving to new premises. They would also cut jobs, consistent with lower expectations of external demand and financial investment, including from overseas, in the future. Individuals would adjust their purchases of major items, particularly where they involved extra borrowing, on the basis of lower future incomes'.

There is no reason for this to be true. It is babyish nonsense. Life is full of uncertainty and people have to carry on their lives as best they can. They do not just stop at home because of the uncertainty of the traffic lights being at red rather than green, or that there might be a traffic jam, or roadworks. It is a good job that people in 1939 at the outbreak of WWII, when there clearly was very serious uncertainty, were made of sterner stuff than 'Dishonest Dave' and 'Chinese George' would have us believe people to be. Businesses will take advantage of profitable opportunities come what may.

Regarding the financial effect, the report claims that 'In the immediate aftermath of a vote to leave, financial markets would start to reassess the UK’s economic prospects. The UK would be viewed as a bigger risk to overseas investors, which would immediately lead to an increase in the premium for lending to UK businesses and households'. It claims that personal investments 'would also decline' and that inflation would increase due to a fall in sterling.

These are merely bald assertions. Financial markets always assess speculative potential. It is far more likely that they would conclude that the impending deregulation of the British economy, would make Britain more prosperous and more competitive; in other words, investment might well increase. They might decide to continue as normal given that the process of leaving the EU could take up to two years. The report is merely inventing an apocalyptic scenario without any foundation. As the previous Treasury report admitted 'To allow the UK to access the Single Market without agreeing to the rules of the Single Market would put their own businesses and consumers at a disadvantage'. In other words, Britain would be better off out!

Having made its bald assertions, the report then seeks to extrapolate precise figures for the supposed economic consequences. In this, the report relies upon computer models. Furthermore, Osborne and The Treasury have even devised their own model: 'For this document’s analysis, a comprehensive UK uncertainty indicator was constructed. The Bank of England has also used a similar indicator to evaluate movements in uncertainty'. Given the report's bias and dishonesty, one can imagine how objective the especially constructed 'uncertainty indicator' is designed to be. The report additionally relies upon VAR: 'A vector autoregression (VAR) model is employed to identify the impact of increased uncertainty on overall economic activity'.

The report refers to VAR repeatedly and attaches much importance to it, describing it as an 'approach [that] builds on the method used by the Bank of England to empirically link measures of uncertainty to economic outcomes, based on a growing number of studies by leading economic researchers. Using over 25 years of data, the approach estimates the relationship between the uncertainty indicator, overall economic activity and financial market conditions. This approach makes it possible to isolate the impact of an uncertainty shock on other economic and financial variables'.

VAR has its uses for Osborne, as he can feed in allegations of doom and get the precise figures he wants out in response. He can cite VAR as proving that to continue to run a balance of trade deficit on the current scale is perfectly normal and safe due to the precise numbers produced by the VAR about the risk of leaving the EU. Britain's assets, even power stations, can be sold to the Chinese, and gilts (i.e. government debt) can be sold to the Chinese without reproach as the VAR model condones this. Unpaid bills in the form of underfunded public services and a housing shortage etc. can continue to be run up. The Ponzi Class are hiding their financial dishonesty behind computer models and are not challenged at all to justify their activities. As is well known, if bunkum is fed into a computer model then bunkum is produced. As David Davis recently stated in an excellent speech (that did not receive the coverage it should have and the text of which will be posted here immediately after this item):

'The assumptions that the Treasury and the IMF have plugged into their models are essentially that we will lose trade in Europe and not gain any in global markets. Neither, in my view, are remotely plausible. All their calculations are doing is putting an implausibly precise number on an entirely improbable scenario. Just look at the Chancellor’s latest claim that Brexit will plunge us into recession later in the year. By predicting what is the absolute bare minimum for a technical recession, this forecast is a victory for precision over accuracy, and for politics over economics. A forecast designed to deliver the maximum scary headlines with minimum justification. As with the last Treasury forecast, dubious assumptions have led to the required outcome. The Chancellor has been given a result which allows him to link a potential recession, the main cause of which is actually that ‘dangerous cocktail’ of global risk that he so recently warned us of, to Brexit.'

So the Treasury forecast is not an economic forecast, in the normal sense. It is a political forecast, with a political purpose.

Having contrived its doom-laden prediction, the report then proceeds to try and convince that things could even be worse. It holds out the prospect of 'tipping points', higher inflation, higher unemployment, increased government borrowing, and even a 'sudden stop' of 'financial inflows, reflecting concerns about the size of the current account deficit'. Nor does the report include any allowance for 'a sharp tightening of fiscal and monetary policy to restore credibility'.

By contrast, the report alleges that a vote to Remain 'would see uncertainty fall back rapidly with little lasting impact on the economy'. Presumably, we are to believe that we will all live happily ever after. In fact we will not. Due to Osborne's incompetence and his Ponzi economics, Britain has a massive and growing balance of trade deficit. The report itself states: 'The UK current account deficit of 7.0% of GDP in 2015 Q4 is high by historical and international standards'. The deficit is already causing falling tax revenues, increased borrowing and an escalating debt.

This cannot continue indefinitely. However, the report is predicated on the basis that it can. It states 'the UK’s current account deficit remains reliant on inflows of capital from abroad. Some of these inflows are linked to business related to the UK’s access to the Single Market, including financial services'. Inadvertently, the report does aver that the deficit is a risk 'The extent to which a large current account deficit can be sustained, and the pace at which it adjusts to a more sustainable level, depends on the willingness of foreign investors to hold assets in that country. This in turn would depend on a broad range of factors, including the structural features of the economy (such as how open an economy is), the size and composition of its external liabilities and other external variables'. This waffle abdicates responsibility for the trade deficit to foreigners rather than government policy or the competitiveness of industry. It shifts trade policy and the cause of the deficit away from the Single Market. In fact the scale of the escalating deficit requires leaving the so-called Single Market and the EU in order to implement an economic policy to tackle that deficit and bring trade back into balance. The aim of a responsible policy should be to eliminate the deficit not simply to reduce it to 'a more sustainable level', nor to proceed on the basis that provided foreigners are prepared to continue to provide loans and buy national assets (Osborne treats this as investment) then everything is fine.

Importantly, the various pro-EU (perhaps anti-British might be a better term) reports take no account of the massive increase in population brought about by mass immigration, in particular they take no account of the economic consequences of Turkish accession to the EU (according to a recent survey, around 16% of Turkey's population would consider moving to Britain). The scale of the mass immigration is a real risk that people should take into account before voting. Osborne's various lies and inventions should be ignored.