There are huge numbers of claims and counter claims being made in the current, important, EU membership debate. I can see just how confusing the whole thing is becoming. As a member of the Treasury Select Committee, we are spending a huge amount of time analysing this! So I thought it might be helpful to explain one or two of the myths over the next few weeks.

The first is to look at the economic forecasts that are being put forward.

Economic forecasting is a notoriously tricky challenge. There are so many interchanging dynamics in a domestic economy trading with the world that it is almost impossible to guess what will happen next week, let alone twenty years hence. The whole process makes predicting climate change look simple.

But that is not to say that it is impossible.

Economists have been designing and developing models for decades that give a broad guide as to how things will look in the future and they are used by people like us on the Treasury Committee to get an idea of outlook. But what is crucial to economic models is that they look at an outcome based simply on everything that is known right now.

When looking at our EU membership, the economists will run their models based on current known facts. But they can also run the model based on the changes that will happen if we leave the EU. We know there will be different trade relationship so they can run the models based on the tariffs likely to be imposed. We also know that the current money we pay to the EU is government money, but tariffs will affect consumers with higher prices on imported goods, and manufacturers with price pressure on exported goods. But of course, the government then has to decide if it wants to spend the EU membership saving on public services and investment and the models can be run to include that as well.

So the economists look at all the options and run the models using all the different scenarios. So what they are doing is comparing outcomes with different starting points. So while we can’t predict with any accuracy where our economy will be in twenty years’ time, we do know that the changes will restrict our economic growth rate by a range of outcomes, and that is how we get to the predictions of us being worse off leaving the EU.

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  • Email: mark.garnier.mp@parliament.uk
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