The news that the government is to inject £1.6bn into the
economies of some of the UK’s less well-off regions after Brexit is not
unwelcome, but it is a piffling sum in the grand scheme of things. The government’s press release stated that the Stronger Towns Fund “will
be used to create new jobs, help train local people and boost economic activity
– with communities having a say on how the money is spent.” The press
release did not say how long it would take to disburse the fund, but in a radio
interview this morning the Communities Secretary said it would be available until
2026.
To put this into context, the UK’s GDP last year was £2.1 trillion which means that the total amount of the fund is equivalent to less than 0.1% of annual output. Spread over seven years the package is invisible in macro terms – £228 million per annum, or 0.01% of GDP. For reference, the troubled retailer Debenhams PLC is the smallest company in the FTSE All Shares index by market cap – the 646th largest firm in Britain – yet it still made a gross profit last year of £232 million. In other words, the government is distributing an amount equal to Debenhams’ annual profits to “create new jobs, help train local people and boost economic activity.”
We can slice the numbers up another way. The £1.6bn fund is split into an amount of £1bn to be allocated on a needs-based basis to eight English regions, with the government setting out the specific amounts, whilst the remaining £600 million goes into a fund that communities in any part of the UK can bid for. The population of the eight regions in question is around 46.5 million, implying that the fixed £1 billion element of the fund will allocate just £21.50 per person. Over a seven year period that is just over £3 per person per annum, with people in the south east being allocated 59 pence per annum whilst those in the north east receive the princely sum of £5.69 (chart). I must have missed the bus which carried the slogan “Vote Leave and get a fiver.”
Clearly this is not enough to provide any sort of fiscal boost, which would lead us nicely into a discussion of how ineffectually the government has used fiscal policy since 2010 (and one day we will revisit this particular topic). But there is another issue here which goes to the heart of how economic issues are reported. Far too often, headline figures are reported in absolute terms without giving any context, particularly when it comes to government outlays. Take, for example, the UK’s defence budget. In FY 2009-10 outlays totalled £45.9bn measured in 2016-17 prices, and the government can argue that for the last three years spending has risen in real terms. What they don’t say is that savage cuts between 2010 and 2015 mean that defence outlays are currently 20% below 2010 levels in real terms.
Another particular favourite are the migration statistics. Remember how the government promised to cut net immigration to the “tens of thousands”? Latest data show that as of September 2018, annual net immigration was still running at 283k – admittedly down from a record 336k prior to the EU referendum but still a long way from target. And here is the real kicker. Net migration from the EU has indeed fallen to the tens of thousands (57k in the year to September, down from 189k in mid-2016). But non-EU migration hit record levels of 261k. This, you will recall, is the component over which the UK has control but it would appear not to have taken back the control the electorate believed it voted for (never mind the fact that the data are barely fit for purpose).
There does seem to have been a growing tendency in recent years to misrepresent economic data for policy purposes. The claim that the UK would save £350 million per week by leaving the EU was a misrepresentation based on the UK’s gross budget contribution, not the net figure. It was based on a grain of truth but was distorted beyond credibility. More generally, data are taken out of context and represented as fact when they are only a partial representation of the truth. It is a growing problem and social media exacerbate the issue by allowing misconceptions to become established before they can be refuted.
The press has a duty to hold a lot of this stuff to account but often politicians get away with it. There are some journalists who do a great job in calling out the nonsense but all too frequently the focus is on the personalities behind the story rather than the substance. For that reason, I can heartily endorse Full Fact, a charitable organisation that spends its time checking the numbers behind the spin. Of course, the misuse of economic statistics is not a new phenomenon. Back in 1935, Roy Glenday told the Royal Statistical Society, one of the commonest pitfalls awaiting the economic statistician “is to draw general inferences from partial and limited experience.” More than 80 years later, it is the politicians who increasingly try to pull the wool over our eyes.
To put this into context, the UK’s GDP last year was £2.1 trillion which means that the total amount of the fund is equivalent to less than 0.1% of annual output. Spread over seven years the package is invisible in macro terms – £228 million per annum, or 0.01% of GDP. For reference, the troubled retailer Debenhams PLC is the smallest company in the FTSE All Shares index by market cap – the 646th largest firm in Britain – yet it still made a gross profit last year of £232 million. In other words, the government is distributing an amount equal to Debenhams’ annual profits to “create new jobs, help train local people and boost economic activity.”
We can slice the numbers up another way. The £1.6bn fund is split into an amount of £1bn to be allocated on a needs-based basis to eight English regions, with the government setting out the specific amounts, whilst the remaining £600 million goes into a fund that communities in any part of the UK can bid for. The population of the eight regions in question is around 46.5 million, implying that the fixed £1 billion element of the fund will allocate just £21.50 per person. Over a seven year period that is just over £3 per person per annum, with people in the south east being allocated 59 pence per annum whilst those in the north east receive the princely sum of £5.69 (chart). I must have missed the bus which carried the slogan “Vote Leave and get a fiver.”
Clearly this is not enough to provide any sort of fiscal boost, which would lead us nicely into a discussion of how ineffectually the government has used fiscal policy since 2010 (and one day we will revisit this particular topic). But there is another issue here which goes to the heart of how economic issues are reported. Far too often, headline figures are reported in absolute terms without giving any context, particularly when it comes to government outlays. Take, for example, the UK’s defence budget. In FY 2009-10 outlays totalled £45.9bn measured in 2016-17 prices, and the government can argue that for the last three years spending has risen in real terms. What they don’t say is that savage cuts between 2010 and 2015 mean that defence outlays are currently 20% below 2010 levels in real terms.
Another particular favourite are the migration statistics. Remember how the government promised to cut net immigration to the “tens of thousands”? Latest data show that as of September 2018, annual net immigration was still running at 283k – admittedly down from a record 336k prior to the EU referendum but still a long way from target. And here is the real kicker. Net migration from the EU has indeed fallen to the tens of thousands (57k in the year to September, down from 189k in mid-2016). But non-EU migration hit record levels of 261k. This, you will recall, is the component over which the UK has control but it would appear not to have taken back the control the electorate believed it voted for (never mind the fact that the data are barely fit for purpose).
There does seem to have been a growing tendency in recent years to misrepresent economic data for policy purposes. The claim that the UK would save £350 million per week by leaving the EU was a misrepresentation based on the UK’s gross budget contribution, not the net figure. It was based on a grain of truth but was distorted beyond credibility. More generally, data are taken out of context and represented as fact when they are only a partial representation of the truth. It is a growing problem and social media exacerbate the issue by allowing misconceptions to become established before they can be refuted.
The press has a duty to hold a lot of this stuff to account but often politicians get away with it. There are some journalists who do a great job in calling out the nonsense but all too frequently the focus is on the personalities behind the story rather than the substance. For that reason, I can heartily endorse Full Fact, a charitable organisation that spends its time checking the numbers behind the spin. Of course, the misuse of economic statistics is not a new phenomenon. Back in 1935, Roy Glenday told the Royal Statistical Society, one of the commonest pitfalls awaiting the economic statistician “is to draw general inferences from partial and limited experience.” More than 80 years later, it is the politicians who increasingly try to pull the wool over our eyes.
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