IDS: Osborne’s Economic Forecasts of Doom ‘Ridiculous Fantasy’

• The Treasury has admitted its forecasts are fixed under political pressure.

• The Treasury’s worst case estimate is worse than the Great Depression. This is fantastical.

• The last time the Treasury forecast an economic shock was if the UK left the Exchange Rate Mechanism. All its predictions were hopelessly wrong.

• The Treasury failed to predict the last recession and championed the fact its error was supported by the Bank of England, the IMF and the OECD.

• Leaving the EU will cut the current account deficit. Claims of a run on the pound are ridiculous. Sterling has maintained its value since the referendum was called.

• Foreign investors are continuing to invest in the UK despite the uncertainty supposedly created by the referendum and the prospect of leaving.

• Industry experts have made clear that leaving the EU is unlikely to affect mortgages or house prices.

Responding to the Treasury’s report on the short-term impacts of leaving the EU, Iain Duncan Smith said:

“As George Osborne has himself admitted, the reason he created the independent forecaster, the OBR, was because by 2010 the public simply did not believe the Government’s own economic forecasts. The Treasury has consistently got its predictions wrong in the past. This Treasury document is not an honest assessment but a deeply biased view of the future and it should not be believed by anyone.

“It is a fact that we hand over £350 million a week to the EU. If we Vote Leave we can take back control of that money and use it to help people here in Britain. We will also take back control over our economy creating hundreds of thousands of new jobs as we do trade deals with growing countries in the rest of the world.”

The Treasury has previously admitted its economic forecasts are fixed by the Government of the day to suit its political policies. We cannot trust such forecasts today.

The Chancellor of the Exchequer, George Osborne, has said:

“..the public and the markets have completely lost confidence in government economic forecasts… Unsurprisingly, these forecasting errors have almost always been in the wrong direction… The final decision on the forecast has always been made by the Chancellor, not independent officials.And that is precisely the problem… Again and again, the temptation to fiddle the figures, to nudge up a growth forecast here or reduce a borrowing number there to make the numbers add up has proved too great… I am the first Chancellor to remove the temptation to fiddle the figures by giving up control over the economic and fiscal forecast. I recognise that this will create a rod for my back down the line, and for the backs of future chancellors. That is the whole point. We need to fix the budget to fit the figures, not fix the figures to fit the budget. To do this, I am today establishing a new independent Office for Budget Responsibility”.

The Treasury’s worst case estimate is worse than the Great Depression. This is fantastical nonsense.

The Treasury is suggesting the economy would contract between 3.6% and 6% within two years.

Such a contraction would be worse than the 1980s recession (4.6%) and the 1990s recession (2.5%). It would also be worse than the Great Depression (5.2%). Osborne’s scaremongering is beyond fantasy and laughable.

Leaving the EU will cut the current account deficit. Claims of a run on the pound are ridiculous.

The UK recorded a current account deficit of £96.3 billion in 2015, which could be substantially reduced if we left the EU.

Oxford Economics has concluded that if the UK voted to leave the EU, ‘in most cases (five out of nine), the UK’s trade balance improves’.

Contrary to Osborne’s False Claims, Sterling has maintained its value since the announcement of the referendum.

The minutes of the most recent meeting of the Monetary Policy Committee state clearly that: ‘The sterling exchange rate had appreciated on the month’.

Sterling has maintained its value since the announcement of the referendum from $1.4406/$ on 19 February to $1.4502/£ today. This suggests the growing prospects of a leave vote are not driving movement in the foreign exchange markets.

Foreign direct investment has continued during the referendum despite the prospect of a leave vote. This suggests UK will not have a problem financing the current account deficit if we Vote Leave.

Despite the referendum and the prospect of a British exit from the EU, the Chinese investment group SinoFortone announced £5.2 billion of investment into the UK in October 2015.

In November 2015, the UK and India struck £9 billion worth of commercial deals, with the Government noting that: ‘India invests more in the UK than the rest of the European Union combined’.

In February 2016, HSBC decided to remain headquartered in the UK, stating: ‘London is one of the world’s leading international financial centres and home to a large pool of highly skilled, international talent. It remains therefore ideally positioned to be the home base for a global financial institution such as HSBC’.

Mortgage lending is currently on the rise, suggesting the prospects of leaving the EU have had no impact on the supply or price of credit.

Gross mortgage lending in March 2016 was £25.7 billion, up by 59% from March 2015. This is in spite of ‘leave’ rising in the polls.

Gross mortgage lending has increased from £117.7 billion in 2013 to £253.6 billion in the year ending March 2016. This suggests that the increased prospect of leaving the EU since the Prime Minister announced the referendum has had no impact on lending.

Industry experts have made clear that leaving the EU is unlikely to affect mortgages or house prices.

Philip Shaw, Chief Economist at Investec Bank, has said: ‘I don’t necessarily see a massive impact on house prices. In the UK domestic property market, the biggest driver is demographics and regulation’. He has also claimed interest rates could be cut, stating that ‘is a risk’.

The Council of Mortgage Lenders has said: ‘As a relatively small, open economy and a major financial centre, the UK has, and will continue to have, close links with global economies, including those within the EU. There is no simple answer to the question of how Brexit might affect housing and mortgage markets’.

The EU’s failure to strike free trade agreements is costing hundreds of thousands of jobs.

The European Commission’s own figures show that the EU’s failure to conclude trade agreements has cost the UK 284,000 jobs.

A Government memo also suggests the UK economy is being disadvantaged to the tune of £2.5 billion per annum due to the EU’s protectionism.

The Treasury failed to predict the last recession and championed the fact its erroneous assessment was supported by the Bank of England, the IMF and the OECD.

In March 2008, the Chancellor of the Exchequer, Alistair Darling, predicted there would be no recession, stating: ‘This year my forecast is that—as growth in the world economy slows further—growth in the British economy will be between 1 3/4 per cent. and 2 1/4 per cent. in 2008, but faster than that in Japan, the US and the euro area. I expect growth to shift towards companies and exports, with growth rising to 2 1/4 to 2 3/4 per cent. in 2009 and 2 1/2 to 3 per cent. by 2010. My forecast shows that the UK economy will continue to grow throughout this period of global uncertainty—a view supported by the Bank of England, the International Monetary Fund and the Organisation for Economic Co-operation and Development’.

In fact, the UK economy entered recession in the third quarter of 2008, experiencing six successive quarters of economic contraction.

George Osborne’s blatant economic doom scaremongering is not working and the facts speak for themselves. No one believes Osborne any more, and this is why the majority will Vote Leave on June 23.