Project Stupidity kicks in

As a general rule I am not given to reading newspaper editorials, preferring to form my own biases rather than imbibing those of others. But this one from the Daily Telegraph is so extraordinary that it simply cannot be allowed to pass without comment. It is entitled "Don't blame Brexit for this rate cut. Blame Project Fear" and argues that the Bank of England is responding to irrational fears by easing monetary policy. As it happens, I am not sure that bold monetary easing is necessarily the right response to a shock of this nature although it is easy to understand why the MPC acted as it did. But when the Telegraph goes on to say that the economic problems facing the UK in the wake of the Brexit referendum are "due to the pessimism of the previous government, the Labour Party, Barack Obama, global institutions, sections of the media and, of course, the Bank [of England] itself" the only sound I hear is the rattling of loose screws.

I'm not sure whether the Telegraph is in the habit of allowing inexperienced teenagers to dictate their editorial policy, but it seems that Project Stupidity is taking over from Project Fear as the dominant feature of the post Brexit debate. I would certainly suggest to anyone working for me, who tried to pass off such a work of fiction as a piece of analysis, that they might want to seek alternative employment. It is risible, and shame on the Telegraph for allowing this to be published in a newspaper which is read around the world. 

Such abrogation of responsibility will not be allowed to stand. Those responsible for promoting the case for Brexit without giving a clear vision of the economic consequences will continue to be held to account. And the Telegraph gave plenty of column inches to such parties, notably Boris Johnson. Not everyone writing for this newspaper takes such a blinkered view, however. Ben Wright took a much more pragmatic view, arguing in a very sensible article that whilst the deed is done, the "grumpy Remainers" perform a necessary service by acting as a check on the worst instincts of the gung-ho leavers.

But before we all get carried away with the impact that Brexit will have on the economy, let us remember that we have no real idea at this stage, thus rendering the efforts of those who wish to get their retaliation in first rather futile. The NIESR has suggested that GDP contracted in July, but its estimate is based on nowcasting techniques rather than hard data, so we should be wary of extrapolating too much from that. Data later this week on retail sales will give us a firmer view of how consumers acted last month. The survey evidence is mixed: British Retail Consortium data suggested a decent rate of expansion in July although the CBI's Distributive Trades Survey pointed to a weaker outturn. However, the forecast consensus is that spending held up.

Whatever happens in the next few months, it is likely that the real damage will occur only over the medium term. It is only then that we will see the full impact of the cancellation of an investment project here or a factory closure there. And by reducing immigration flows, the UK will also limit the contribution to potential GDP growth from labour. This may not be noticeable immediately but if the economy grows by, say, 0.25% more slowly per year this adds up to an income loss of 2.5% over 10 years, 5% over 20 years etc. Had this performance been repeated over the last 43 years – coinciding with the period of EU membership – the economy would be around 10% smaller than otherwise (and that does not account for any second round effects which would likely raise the potential losses).

I have made it clear all along that I believe the UK will be poorer by being outside the EU, although I never signed up to the worst predictions of George Osborne that it would lead to imminent collapse. But I have also pointed out that many of Britain's economic problems are home made and are not all the result of international issues, as the Telegraph editorial suggests. The Brexiteers have long made the claim that building better relations with the rest of the world will help the economy to make up for the shortfall in loss of trade with the EU. Undoubtedly some of them will be frothing at the mouth in the wake of the suspension of the Hinkley Point deal which threatens the flow of Chinese investment. But it just goes to show that the UK is not the attractive investment location it is cracked up to be if foreign capital can only be lured with deals which are inimical to the interests of British taxpayers. So the challenge to Brexiteers remains: Convince us you have an economic plan. I have been listening for months and all I hear is the sound of silence. And don't blame any economic downturn on Project Fear. This is down to you, and the lies which were spun during the referendum campaign. And I for one will continue to hold you to account.