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The Treasury’s long term forecast for 2030 is absurd. Mr Cameron now tells us he does not have a forecast for how many people there will in the country by 2030 if we stay in the EU, so how can he defend a forecast of  how big our National Income will be?  Why did the Treasury use the wrong number of people when trying to work out GDP per head figures and then pretend these were family income figures?

The Treasury’s short term forecasts have so far proved simply to be wrong. Remain says that fear of Brexit and then Brexit itself will

Raise interest rates

Lower the pound

Push us into a shallow recession

Since the end of February the polls have moved considerably in favour of Brexit. Where the City and markets thought in February Brexit had no chance of winning, now many think Brexit could win. So how has the Treasury forecast fared?

 

Interest rates (government bond rates) have fallen considerably.

The pound has gone up against the dollar and other currencies, and our foreign exchange reserves have risen.

Retail sales and manufacturing output have b0th risen encouragingly in May as the polls narrowed.

 

So there we have it. The Treasury so far has been wrong, wrong and wrong.

They also have been busy contradicting themselves. At the same time as telling us interest rates will go up, their Governor of the Bank of England favouring Remain tells us he stands ready to cut official short rates further on Brexit.

So what does Leave think?

We think the pound and interest rates have gone up and gone down during the long period we have been in the EU, and will doubtless fluctuate when we are out of the EU. Over the  rest of this year US rate changes and other major international events will doubtless affect the value of the pound, but there is no good reason to expect major change to either rates or the pound from Brexit itself. As recent output and retail figures show there is certainly no reason to forecast the temporary end to growth if we vote leave.

The French are floating the idea of a pan EU naval force to patrol the South China Sea in response to China’s creation of artificial islands  and use of the Spratley islands to extend its influence and military presence beyond its narrower domestic waters.

The Chinese action is contested by other regional powers and by the USA. It is difficult to see why the EU needs to get involved militarily in  this matter when the USA and regional powers are trying to sort this out and have made clear they intend  to stand up for free access to these waters by all wishing to trade or go about their legitimate business.

It is apparent  from this intervention and from hostile rhetoric and foreign policy stances  that are  a daily part of EU life that  many in positions of power do wish to see a tougher EU on the world stage seeking influence like the USA and gradually adding military power to back up its attitudes. Far from helping the peace or promoting stability, this seems to me to be a further force for instability.

The main EU nations are also members of NATO. Nato is a known force in the world, led by US military  might. Surely it is the best way of allowing European countries who wish to do so to work alongside the USA and make common cause about any international problem  or challenge any country who invades or disrupts another, as we did with the liberation of Kuwait.

The danger of the EU’s increasingly noisy interventions is that they are not backed by sufficient force to make them credible, but they  can be diplomatically disruptive, as we saw with the EU/Ukraine Association Agreement. Pushing for military and security co-operation with Ukraine as part of that agreement was treated as a provocation or an excuse by  Russia to seize the Crimea which the EU was impotent to prevent.

My advice to the EU is keep out of the China Seas militarily. If the USA and the regional powers there need help from EU countries with navies, NATO would be the obvious body to add European naval capability to the region under a combined command with the USA.

Mrs Merkel’s intervention in the EU referendum debate was the one I wanted. There’s  nothing like a bossy German telling us what to do to mobilise the Leave vote.

Her intervention was at one with many of the absurd predictions and threats that characterise so much of the Remain campaign.  She told us we will get a better deal by being in the room, meaning we have to be a member to be able to do things we want with the rest of the EU. She clearly has no sense of irony.

The UK has just tried out the proposition that if you are in the EU you can get a sympathetic hearing for your needs. So how did Mr Cameron get on?

He wanted to control free movement to hit his immigration targets. He was told by Germany not to even ask for change on that, so he didn’t. The solemn and popular promise to the UK voters to control immigration does not matter to the EU.

He wanted to stop us having to pay Child Benefit t to children who do not live in our country. He was told we still have to in the EU.

He wanted to stop paying in work benefits to recently arrived EU migrants, asking them to work for four years before being entitled to such money. He was told this was impossible, and offered a modest change for a transitional period only.

He wanted to stop the movement to ever closer political union. He was told there might be some Treaty change to that effect in future, but in the meantime the UK daily loses powers to the EU as they merrily continue issuing more directives, regulations and court cases pursuing their objective of more centralised power.

As you will see, all those demands which were roundly rejected  could all be achieved by leaving the EU.

I remember in the run up to the formation of the Euro I was asked to various lunches, dinners and meetings with powerful Germans. They had heard of my books, articles and campaign around the country to keep us out of the Euro, and thought they could persuade me to change my mind.

The conversations always started pleasantly enough. They thought I might be intelligent enough to see how right they were about the need for the single market to have a single currency and how it would  be best for business. As the event wore on and I doggedly held to my forecast that the Euro would create either boom or bust or both  in various countries as the Exchange Rate mechanism had done, their tone would change. They would then seek to bully me, telling me I was wrong. The City they said would be at risk and outside the Euro the UK would have no influence.

I feel this Merkel intervention is in the same spirit. Deja vu all over again.

 

Amidst all this unreal talk from remain about possible future damage to business if we dare to leave the EU, there is a stunning silence about all the damage our EU membership has already done to many  businesses. Remain claims to have perfect foresight over future damage if we leave, but complete memory loss over all the actual known damage done by staying in.

 

The other day I was asked by a remain supporter what he thought would prove a difficult question. “Mr Redwood, which of EU regulations do you think are damaging and would you like to repeal?”

Where do you begin? How can you compress the long list into a short answer?

We can all agree the rules and regulations of the single currency are not for us, though keeping out of some of them is difficult. Remain has total amnesia about the recession and huge damage to  business the EU’s Exchange rate regulations did to  us in the late 1980s.

Remain is usually silent about our fishing industry. An island  nation with one of the world’s richest fishing grounds when we joined the EEC/EU has lost much of its industry under the rules of the common fishing policy. We are reduced to importing our own fish, plucked from our seas by foreign vessels. Out of the EU we could regulate our own fishing grounds and catch more of the permitted catch in UK vessels.

They are not that keen to talk about our steel industry either. Labour in the 1960s made a massive investment in a 45 million tonners a year industry, with five large modern integrated plants paid for by taxpayers. Sine we joined the EEC/EU we have seen continuous decline, to an industry of under one quarter the capacity we had on entry in 1972. EU rules on steel trade, energy prices and state aids have helped bring us to this sad situation. The German industry, still at 43 million tonnes of output, has fared much better with a regime for cheaper energy and state support which is deemed legal when we struggle to get help or permission for us to help  from the EU. EU policies have driven us to much more import dependence for steel, including having to import the steel for our submarines.

Then how about our electricity industry? EU regulations have turned a productive relatively low cost generator into a high cost one. EU energy policy is forcing us into more import dependence through interconnectors to the continent where before we were self sufficient.

 

When we joined the EU we produced 4% of the world’s aluminium. Today it has practically all gone, thanks to plant closures brought on the EU’s dear power policies.

 

Industry by industry the EU has damaged us and assisted industrial decline. If we were in charge of our own rules and spending plans we should do better.

The desperate Remain campaign have been predicting higher interest rates if we leave.

Why then have official interest rates plunged since January whilst expectations of Brexit have risen?

 

(10 year official bond rate fallen from 2% around the opening of the year to 1.29% on Friday)

There is one feature of the Treasury’s ludicrous forecasts for 2030 that I agree with. They reckon in our out of the EU the UK will be better off in 2030 than today. Given the rate of technological change and the ability to work smarter and better in the years ahead, it would be surprising if we were  not better off.

The issue in dispute is will be even better off if we leave or stay?  2030 is too far ahead to be sure. Whichever route we choose, we will never be able to answer that question definitively, as the country can only live one of the two options. I do think it more likely we will be better off out, for the many reasons I have set out in recent weeks on this site.

It is easier forecasting the next two or three years. Forecasting the next fifteen is just about impossible. Will China be the world’s largest economy in 2030, still growing well, or will there have been a China crisis as some fear? Will there be major new breakthroughs in technology, or will still be adapting and using the main internet, materials and biotechnologies we already know about? Will the world comfortably absorb the huge supply of potential labour from the poorer countries, or will there be difficulties in spreading wealth and incomes more widely?  Will political tensions in the Middle East, in the China Sea and elsewhere remain contained?

It seems likely that if we leave the EU we can look forward to a better pay rise at the bottom end of the pay scale than if we stay in. Lord Rose, the Chairman of Remain, said as much in a rare honest forecast from that campaign. Assuming a post Brexit government does take control of our borders and impose sensible and effective controls on EU migrants wanting to come to take low paid jobs, we will remove some of the downwards pressure on wages.

We will also have £10bn a year to spend at home that we have to give way to EU in contributions we don’t get back. This will enable us to hire more people for the NHS and schools who will tend to be better paid people with more skill. This also helps boost UK family incomes as we train more nurses, doctors and teachers and get them into employment.

There is also the stimulus effect of the first post Brexit budget, spending that money and removing VAT on fuel to increase  people’s spending power. That too will boost incomes and help create more jobs as the money circulates through our economy instead of being paid away. The left has often called for more so called fiscal stimulus. They want the state to spend more to create activity and jobs. That is exactly what we can do if we reclaim our own money to spend on our priorities.

 

(A longer version of this has appeared as an article in City am)

This week I attended a presentation to a group of investment professionals in London about the world economic outlook by a leading strategy house with a U.S. Economist. This was a private event.

They examined at some length the possibility of a world recession before concluding there would not be one soon. Amidst all the possible threats that could cause one there was no mention of Brexit, nor did any of  the expert guests ask about it though there were lots of questions. It seems the wilder thoughts of the Bank of England do not even warrant discussion as people do not think it plausible.

I am one of the few MPs who foolishly will stand up for Investment bankers. I have no problem with them earning big money as long as they live by the market and financially suffer by the market if they get it wrong. I think paying them  bonuses in good times is a good idea, as long as these are removed in bad times, as that makes their businesses a bit more stable.  I don’t want any public subsidy or government guarantee. I do accept that at their best they do good work in financing projects and companies, in underpinning and helping create new jobs and activities.

I do find it odd that some of the foreign owned ones whine and whinge about the UK’s possible exit from the EU. The very essence of good corporate and investment banking is managing risk and change. They are usually ace at finding their way round rules without breaking any, outwitting lumbering governments and  bureaucracies, and avoiding tax legally. I don’t mind them piling in for Remain. As  they are so unpopular with many UK  voters I suspect their over the top dire  forecasts help the leave side and provide many with another reason to dislike them.

The new scholarship level question they wish Leave to answer is how will they manage without the passport system of access to the single market when we leave. There are four simple points to make.

The first is, why should we lose the passports? As Germany wishes to avoid a WTO 10% tariff on her cars she will see the reasonableness of  not altering arrangements that suit her in return for not altering arrangements that suit us. Why would the UK agree to ending the passports?

The second is even if they found a way of withdrawing the formal EU passport, under MIFID II any external country to the EU with equivalent financial regulations would be free to sell services and product in the EU. The UK will clearly qualify, as our regulations will be not merely equivalent but identical as most of them are now  based on EU law.

The third is the number of successful passported products is limited. The best example, used by the government, is UCITs investment funds. Practically all of these EU funds are domiciled in either Dublin or Luxembourg. So they will remain when we leave the EU. The UK will still be able to continue our contract work for these EU domiciled funds, which will  retain their passport status.

The fourth point is most of these grand Investment banks that complain have other subsidiaries around the EU in addition to their London office, so they will always have a brass plate address to qualify.

I have every confidence that these  bright and motivated people will flourish out of the EU in London. Some of the same people and their predecessors told us if we stayed out of the Euro they would all have to  move to Frankfurt or Paris. They didn’t and London did even  better by staying out of the single currency.

They may be bright and good at what they do,  but some of them do seem unable to grasp the simple realities of how the EU works and of modern politics.

 

(this item was requested by a reader)

Today the cost of government borrowing for ten year money has fallen to just 1.29%. Last November and even this January before  Brexit came to dominate much market commentary the cost of UK borrowing was over 2%. It is particularly noteworthy that as the chances of Brexit have risen in the polls and in the betting, so the cost of UK state  borrowing has fallen.

This is of course the opposite of the predictions of the Treasury and the US investment banks. They have been wrong again. UK public finances will obviously be sounder out of the EU, as we will no longer have to pay all that money to them. We will no longer risk being dragged into ever more expensive EU policies trying to offset all the economic damage Euro austerity does.

Last night I put the case for Brexit to a meeting attended by 200 people in the Willink School in Burghfield.

When the Remain side put some of their more absurd fears to the audience, many just laughed.

Project Fear seems to be backfiring.