RexN Euroblog

RexN Euroblog

RexN's euroblog

This has been set up with a view to the EU referendum.

My own interest derives from teaching Economics, making lessons relevant by using the various treaties to add relevance to theory.

Views expressed are my own and hopefully contribute to debate.

George Osborne's defence and own goals

EuroblogPosted by RexN Wed, May 11, 2016 19:51:15

The Treasury Select Committee (TSC) met on the afternoon of 11th May to question George Osborne and Treasury official, Mark Bowman over the EU Referendum campaign. The session can be seen here.

For those who are unaware, select committees are broadly organised to reflect government departments. Naturally, the TSC reflects the Treasury. The committee is made up of 11 MPs from across the parliamentary spectrum, at least as far as party representation is concerned.

In practice, the significant majority of the committee are currently on the IN side as far as the referendum is concerned. Seasoned observers of the TSC, that Jacob Rees-Mogg usually cuts a lonely figure, sitting at one end of the horseshoe of tables. For once, he had two other Conservatives positioned adjacently.

Those who have seen other recent TSC meetings might have expected a forensic examination of Osborne’s figures. When figures from Leave campaigners, Arron Banks, Richard Tice and Matthew Elliott had appeared, questioning was penetrative. TSC made recommendations to change figures on their web site. Could we expect the same?

The Chair, Andrew Tyrie, opened proceedings revealing that a further document will be produced by the Treasury, concerning the short term impact of a Leave vote.

The first challenge, from the Chair, came from a Cabinet paper, the Best of Both Worlds. The question was whether Britain can unilaterally enforce access to the European Council over management of the economy, as outlined in the document, if principles are not being respected.

Osborne showed what he does well, obfuscated the process with a long winded tangent of his own agenda, of the type he was to repeat for much of the afternoon. What appears to be the case would be met based on the balance of probabilities rather than legally enforceable.

Stephen Hammond started to probe on two points, whether sensitivity analysis was conducted. Bowman and how the famous figure of being £4,300 worse off was arrived at. The sensitivity analysis question was asked several times, to which Bowman replied not fewer than 6 times that the Treasury used “cautious neutral assumptions”.

So what is sensitivity analysis and what is the point? This is a method of accounting for uncertainty, using alternative assumptions to test how robust a model is, sometimes removing some variables. The fact that it was not carried out can suggest that a model is not “robust” as we were told when the document was released. In short,l the Treasury did not challenge its own assumptions.

The question set up Osborne to return to the increasingly hackneyed phrase that “we don’t know what leave looks like”. At this point nobody challenged as to how this government would seek to shape what leave looks like whilst they are in power.

Rees-Mogg took his turn to question. The early part of his questioning concerned productivity growth, highlighting that European productivity growth has indeed been a problem since 1992, at least compared with international competitors. Osborne chose an alternative time frame to disagree.

The Chair intervened to suggest that the £4,300 figure was “the product of imprecise modelling, ranges”. Osborne had been given a lifeline of an alternative position to defend.

To his credit, Rees-Mogg persisted to attempt to identify what other reasonable assumptions had not been included by the Treasury. In his 4th apparent attempt to cut Rees-Mogg off, the Chair shifted the discussion to Foreign Direct Investment (FDI) and an admission that statistical significance was not established.

Attention shifted to Labour MP Rachel Reeves, Osborne’s “new very close friend” which was perhaps reflected by her approach, including Tweeting from inside the committee. Unsurprisingly they agreed that all was doom and gloom outside the EU. Osborne let himself off the hook by shifting policy measures to the Bank of England.

One curiosity out of the Reeves/Osborne love in was that house prices would fall but would not stop foreign investors buying UK property due to a falling exchange rate? Unfortunately, there was nobody left who was allowed to challenge his economic literacy as to why foreign buyers would want to invest in a falling market with weak exchange rates and nobody able to want to buy their failing investments.

Some tests came from Steve Baker who asked why Osborne made “the assumption of no confidence as to what the British government can achieve”. He received the response that it would take 15 years to get a trade deal with the EU. Apparently, existing templates would not provide a basis for other trade deals.

Chris Phelps briefly highlighted foreign trade, growth in trade deficit with the EU, the 61% growth in trade with the USA (with who we don’t have a trade agreement) compared with 44% growth in the EU over the last 10 years. According to Osborne, the EU is the only area to have had a hard time over that period. There was no challenge as to why the EU is stagnant.

The soft questions secured the potential for an own goal by Osborne in admitting that the German and French would beat us in any negotiation over freedom of movement. Unfortunately, the defence had gone missing so nobody was there to knock in the winner over the extent of our trade deficit with Europe.

The last real challenge came from the Chair, with what turned out to be around an hour before the Monty Python like inquisition. This was over deregulation should the nation choose to remain. Even though new regulation has shrunk by 80%, no existing costly regulation was to be repealed.

Further questions resembled the comfy chair, soft cushions, coffee and glass of milk coming from Anne Goodman, George Kerevan, John Mann, Wes Streeting and the particularly helpful Andrew Garnier.

More potential own goal emerged. This government has no contingency plan. We can not project public expenditure savings. We are apparently in a position from inside to clean up the EU, despite being unable to pressure them into producing signed off accounts for a quarter of a century.

Strikingly, there was no challenge as to the EU’s ability to remain protectionist, reducing the scope and impact of WTO deals over decades.

The Chair summarised with an attack on the Leave camp, glossed over the lack of contingency planning and set Osborne up for the potential winner. Osborne was invited to reiterate his slogans.

The questions that were not asked were glaring. What if we were to reciprocate with tariffs on the EU? How would we spend the receipts? Would the EU want to protect their biggest export market? Would the EU really be stronger with Britain out? What did the report cost? Is it moral to use Treasury resource to scare the public?

Sadly, the forensic questioning that we have seen of late was not forthcoming. There is no requirement for the deeply flawed Treasury document to be edited. We can see that in our parliamentary democracy, some are more equal than others.

You are invited to judge for yourself, based on the links provided in the text. To finish on a positive note, congratulations to those on the TSC on their stamina. Listening to George Osborne for two and a half hours demonstrates certain qualities.