DOMINIC LAWSON: Why won’t Eeyore’s Treasury tell us their plan for latest Brexit doom-mongering? 

On this occasion, the British are as one with the other 27 member states of the European Union.

Along with his fellow European Ambassadors to the U.S., our own Sir Kim Darroch signed a joint open letter pointing out what fabulous trade there was between the EU and the U.S., and why President Trump was wrong to put it at risk with arbitrary tariff increases.

‘Together,’ said the ambassadors, ‘the U.S. and the EU have created the largest and wealthiest market in the world … Nearly one-third of the world’s trade in goods occurs between the EU and the United States alone.’

As the Foreign Secretary put it, the Treasury, its boss the Chancellor Philip Hammond — AKA Eeyore — and others of like mind in the administration ‘don’t want any disruption of the economy’

It went on to reassure the American readers of the letter (published in the Washington Post last week): ‘The EU is the top destination for U.S. exports. This is a relationship, indeed a partnership, that other countries can only dream of.’

Wonderful. And it’s all been achieved under the rules of the World Trade Organisation. Oh, wait … isn’t that exactly the system under which the UK would trade with the remaining members of the EU if our negotiations with Brussels collapsed without agreement? Indeed it is.


And yet Her Majesty’s Treasury, as leaked private remarks from Boris Johnson confirmed last week, regards this outcome as an unimaginable catastrophe.

It is therefore prepared to give Brussels almost whatever it wants rather than end up with no deal — which, indeed, would result in significant disruption in the short term, as businesses on both sides sought to adjust to new circumstances.

As the Foreign Secretary put it, the Treasury (which he devastatingly described as ‘the heart of Remain’), its boss the Chancellor Philip Hammond — AKA Eeyore — and others of like mind in the administration ‘don’t want any disruption of the economy’.

‘The fear of short-term disruption has become so huge in people’s minds that they’ve turned into a quivering wreck,’ Johnson continued. ‘Project Fear is really working on them. They’re terrified of this nonsense.’

Project Fear was the name given to the Treasury’s warnings, under then Chancellor George Osborne, of what would happen to the British economy simply as a result of a Leave vote in the referendum of June 2016.

As the economist Tim Congdon noted in Standpoint magazine last month, when you look at what has happened to the economy since we voted for Leave and compare it with what was forecast by the Treasury, ‘it turns out that Project Fear was wrong by almost 5 per cent of GDP.

‘Instead of employment falling by hundreds of thousands, it has risen by hundreds of thousands.

‘Instead of the public finances lurching more heavily into deficit, they have been better than at any time since the Great Recession … above all, George Osborne’s scary rhetoric about a return of the Great Recession now looks preposterous.’

Despite this colossal error in what was a Government White Paper (the work of Treasury officials, not merely propaganda from the Remain campaign), Project Fear lives on, its influence undiminished. So the Treasury made longer-term forecasts, warning of what will happen to the economy after we have actually left the EU.

The respected Cambridge University economist Dr Graham Gudgin, a founder of the academic think-tank Briefings for Brexit, has sent me his analysis of these long-term forecasts. It is eye-opening.

The Treasury claims that if we don’t make a trade deal with Brussels, the British economy will, by 2030, be 7.2 per cent smaller than it would have been if we had stayed in the EU.

And yet Her Majesty's Treasury, as leaked private remarks from Boris Johnson confirmed last week, regards this outcome as an unimaginable catastrophe

And yet Her Majesty’s Treasury, as leaked private remarks from Boris Johnson confirmed last week, regards this outcome as an unimaginable catastrophe

But as Gudgin writes: ‘Colleagues at Cambridge and Ulster Universities have replicated the Treasury long-term analysis and are the only research group to have done so. This exercise revealed two major flaws in the Treasury calculations.

‘It assumed that all additional trade which the UK gained by being a member of the EU would be lost if we left without an agreement. It also assumed that no replacement trade would occur with non-EU countries.’

As if these arbitrary assumptions were not enough to tweak the forecasts in the most dismal direction, there was an even cruder downward shove in the Treasury model, because it assumed that the UK was an average European economy in respect of the proportion of its trade with the rest of the EU.


But as Gudgin points out: ‘This is extremely misleading because the UK is the only member (other than Malta) which does more trade outside the EU than within it. Some EU countries do as much as 90 per cent of their trade inside the European Union.’

Based on the reality of Britain’s trading relationship with the EU, the true estimates of the potential for reduced growth as a result of ‘no deal’, are, according to the Cambridge and Ulster Universities analysis, a quarter of the Treasury’s forecast. That is a huge discrepancy.

Admittedly, those were the Treasury’s models in 2016, and it has since modified them (as well it might). But having dropped them and introduced a new forecasting model — which is turning out yet more bleak assumptions about the effect of ‘no deal’ — it has refused to tell Dr Gudgin’s team exactly what its new model is, so it can’t be subjected to proper independent analysis.

A request for the data under the Freedom of Information Act is in order.

It is essential not least because of the paralysing effect that the Treasury’s analysis has on Mrs May’s negotiations with Brussels. The Prime Minister has given up her previous mantra that ‘no deal is better than a bad deal’.

The European Commission’s man in charge of the Brexit talks, Michel Barnier, is treating the UK with the aggression and even contempt that any experienced negotiator would show to someone he knows will never walk away from the table: for example by insisting the UK agree a £39 billion ‘departure fee’, without any succeeding trade deal in place.

As even the Brussels correspondent of the vigorously anti-Brexit Guardian newspaper wrote last week, after Barnier cursorily dismissed Mrs May’s latest proposals: ‘The Commission’s handling of Britain’s requests can be rough to the point of dangerously rude, sometimes even self-defeating.’


It would certainly be self-defeating for the member states which don’t share the Commission’s ideologically based determination to make an example of Britain for its impertinence in asking to leave.

Last week, a study by the Oliver Wyman consultancy concluded that a so-called ‘hard Brexit’ would cost French wine and cheesemakers hundreds of millions of Euros a year in lost business. And the chairman of the German car firm Audi said how concerned he was about the prospect of no deal. ‘Great Britain is a very important market for us,’ he insisted. ‘We love to sell cars to Great Britain.’

Much has been made about the risks to Nissan’s Sunderland plant (the most efficient in the world, by the way) if we left without a deal.

But the EU exports almost three times as many cars to us as we do to them. If barriers to this trade did emerge, and the prices of car imports went up significantly, then we might expect British customers to buy more British-made cars instead of German-made ones. Which would not be such bad news for Nissan in Sunderland.

And, if we do end up on World Trade Organisation terms with the EU (which I concede would be less desirable than a bespoke free trade deal), here’s another seldom-stated fact.

Since the EU single market was inaugurated in 1993, the exports to it from mature economies such as the U.S., Canada and Australia have grown at a faster rate than ours have — even though they are not single market members and we are. Indeed, by 2011, for the first time since 1972, the value of U.S. goods exported to the EU exceeded that of the UK.

So those ambassadors had a great case to make to the American people about how wonderfully easy it was for the U.S. to trade with the EU under WTO rules.

Yet we are warned that the same arrangements would be an unmitigated disaster for the UK. Something doesn’t add up.