Ignore the Treasury’s Outlandish Claims of Dire Outcomes

25.05.2016 • Investing

From Merryn’s Blog (GREAT BRITAIN) –

This is hard for me. Deep breath. Here we go. I think it is likely to be a one off, but I agree with the SNP’s Nicola Sturgeon.

When it comes to the EU referendum, the Treasury, she says, is beginning to cross into “almost insulting people’s intelligence”. I’m not the only one here. Steve Hilton is with her too. The government, he says, is “frankly treating people like simpletons” with its almost comically “outlandish claims of dire outcomes”.

The worst of these so far come of course in the Treasury’s latest report on how Brexit can’t fail to mean what George Osborne is calling our first ever “DIY recession”, a phrase designed to suggest that neither government policy nor lousy voter choices have ever caused a recession before.

According to the Treasury, a vote for Brexit means a shock or a severe shock (there are no other options – it seems it is impossible that things might be just fine). That means the economy being either 3.6% smaller or 6% smaller over two years. It means house prices being at worst 18% lower (that makes them 8% lower in absolute terms as they are expected to rise 10% if Remain win). It’s also all nonsense.

As the Times points out, “no other credible forecaster” (to the extent that there are any at this point) is predicting a recession as their central case after Brexit. The UK might be heading for one at the moment – but that’s more about the economic cycle than about Brexit.

The report also assumes no government measures to soften any blows – in fact it assumes no real policy changes at all, something that shows a remarkable lack of confidence in whatever government we might have after Brexit and for that matter in its own ability to advise the government.

It suggests that the consequences of a Brexit win are “immediate” when there are at least two years before there will be any change. It ignores the easiest and most likely post Brexit deal (remaining in the EEA). It presents forecasts as clear facts (when they just aren’t). It uses Armageddon headlines to hide non scary results (the fine print tells us that in the “shock” case the economy would just contract by 0.1% a quarter for a year) Finally, it comes to its relative doomsday scenario by inventing a bizarrely optimistic outlook for the economy if we stay in the EU. It is, in summary, just a bit silly.

-Read more at MoneyWeek.com (English)-

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