Opinion – Read Original National Audit Office Report – HM Treasury’s economic analysis in the lead-up to the referendum on European Union membership

Paul Krugman, Laureate of the Sveriges Riksban...

Paul Krugman, Laureate of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 at a press conference at the Swedish Academy of Science in Stockholm (Photo credit: Wikipedia)

Londres - HM Treasury

Londres – HM Treasury (Photo credit: Wikipedia)

If you’re tired of the inherent bias in the UK’s mainstream media, read the NAO’s report into HM Treasury’s economic analysis in the lead-up to the referendum on European Union membership. This is important because the Brexit referendum was secured on basis of promoting fear of immigration, rampant xenophobia, and false news, rather than independent evidence and risk analysis.

Source: HM Treasury’s economic analysis in the lead-up to the referendum on European Union membership

Obviously, the terms of reference and political interpretation of the HMT results will demonstrate an element of bias. But the Treasury’s basic methodology was sound, its assumptions reasonable and clearly defined – in short, a professional piece of work. The NAO report highlights the HMT economic analysis compared to other independent studies. It’s perfectly reasonable for the projected results to vary based upon assumptions and modelling methodology.

What is important is the generalized conclusion, rather than the precise metric.

The world’s leading economists, including Nobel Prize Winning, Paul Krugman, have argued that the medium to long-term cataclysmic outlook following Brexit is water-tight. Depending upon the terms of the Brexit, leaving the EU will damage the UK economically for years into the future. Finance theory allows us to capitalize the impact of a future cashflow at the prevailing cost of capital and provide a one-time net present value, or simply a one-time cost of the decision. Last year, I did this calculation and it was eye-watering – it’s a shame that it was not highlighted by the UK’s outrageously biased media.

Secondly, there is the short-term economic impact following the Brexit decision. Here’s there is more room for doubt as a wider range of assumptions comes into play.

But what is clear is that the medium to long-term impact of Brexit will be tragic, disasterous, calamitous, dire and ruinous, penalizing future generations.

For deeper coverage, I recommend the following earlier blogs:

So what should be done to redress the catastrophic damage done by false news from deeply biased politicians and media, promoting self-interest ahead of national well-being?


Opinion – The Macroeconomics of Brexit: Motivated Reasoning? – Paul Krugman – The New York Times

Nobel Prize winning economist, Paul Krugman, in his NYT op-ed blog accuses the economics profession of over sexing fears of post Brexit referendum  short-term consequences. He argues that sloppy thinking is always a vice.

Source: The Macroeconomics of Brexit: Motivated Reasoning? – The New York Times

To be absolutely clear, Krugman confirmed that the long run economic consequences of Brexit are massively damaging. Because of the loss of trade, he expects an output loss of 2-3% in perpetuity. This is a truly staggering loss of UK wealth (see earlier blog).

However, Krugman argues strongly that the short/medium term consequences have been seriously overstated by the economics profession and are not based upon sound economic theory. This is significant because politicians, like former UK Chancellor, George Osborne, hyped up the consequences of Brexit.

Regular readers of this blog will know that I campaigned passionately for Remain. But I’m a realist. I’m beginning to adjust to a post-Brexit world.

But it’s not just about the trade and immigration deal that the UK strikes with the EU and other countries.

It’s very much about other radical policy changes in post-Brexit Britain. The UK must pay for the permanent loss of output amounting to 2-3% in perpetuity. How this is achieved deserves some serious analysis and debate. Here are a few straw-man suggestions:

  • Radical change to public services at both the national and local level
  • Higher national productivity
  • Far greater innovation
  • Increased exports
  • Massive increase in skills
  • Reduced energy consumption
  • Reduced waste
  • Reduced population, e.g. export people/ lower immigration
  • Reintroduction of national service