Queen’s Speech — House of Lords, 2016-05-23
Topic: Macroeconomics
Norman Stewart Hughson Lamont (Conservative, Centre-right): My Lords, it is a great privilege to speak in this debate on the humble Address, which was made particularly memorable by the eloquent maiden speech from the noble Baroness, Lady Jowell, and the valedictory speech of my noble friend Lady Perry Normally at this time of night and this stage in a debate, it is customary to say that everything has been said and there is nothing left. However, if you are on the Brexit side of this argument, you are in a very small minority in this House and there is plenty left to say. The noble Lord, Lord Ashdown, referred to this House being undemocratic and not elected. Were it elected, there would be many more noble Lords advocating the viewpoint that my noble friend Lord Lawson and I will put forward tonight Like my noble friend Lord Forsyth, I very much admired the Prime Minister’s Bloomberg speech and its emphasis on reform. However, today, given the Treasury’s extremely dire predictions of what would happen in the event of Britain leaving the EU, I wonder not just—as my noble friend Lord Forsyth said—why the Prime Minister ever dared think about the possibility of a referendum but also how he managed to suggest that he was considering leaving the European Union. How could he have possibly thought that? I dread to think this, but either he did not mean what he said about considering leaving, or the forecasts made by the Treasury and many other distinguished bodies are far too pessimistic The dismal outcome predicated in the Treasury forecast seems to depend on two premises: a short-term effect on confidence, and structural changes following changes in trading patterns. On the short-term effect on confidence, it is fairly difficult to forecast a shock—which is, by definition, completely unexpected. Confidence depends on psychology. Shifts in confidence—and psychology—are no better forecast by economists than by anybody else. The Chancellor of the Exchequer yesterday talked about house prices falling by 10% by 2018. The link between the economy and house prices is always difficult to forecast, but the OBR in its forecast at the time of the Budget expected house prices to rise by 10%, so the Chancellor was saying that, on Brexit, house prices might stabilise. I wonder if that would be such a bad thing. Then, we have the forecast that Brexit will cost households £4,300. That has been pretty widely, comprehensively and thoroughly rubbished. Even the Financial Times, the house journal of the pro-Europeans, said that, far from it being an inspired guess, it is more likely that the numbers were simply made up Like other people, economists can be full of groupthink. The most famous examples were the 365 economists who forecast that the economy could not possibly recover after Geoffrey Howe’s famous Budget. A strong consensus often indicates that we are about to make a very bad decision. For lots of people it is self-evident—or appears self-evident—that the single market brings great benefits, and brought great benefits to exporters. However, the fact that people say this, or believe it, does not mean that it is necessarily true. The Minister referred in her speech to full access to the single market. The single market is portrayed as a sort of walled garden to which only a few people have a secret key I refer noble Lords to the work of Michael Burrage—whom even the Chancellor of the Exchequer could not call economically illiterate—an academic who has been at Harvard and the LSE and has held various professorships in Asia. He has just written a 200-page book, Myth and Paradox of the Single Market, which is available on the Civitas think tank website, and challenges the orthodoxy. It investigates the trade flows to and from the single market and challenges the theory behind the OECD, IMF and Treasury models. If the historical facts do not fit the theory, I suggest that there is something wrong with the theory. The facts are relayed in enormous detail. I invite noble Lords to look at them on the website. Michael Burrage’s analysis of trade flows into the single market suggests there is no evidence that the single market has increased the UK’s exports or those of the founder members of the single market. Further, there is no evidence that the UK’s exports have grown and benefited during the period of the single market. Non-EU members have benefited most, and non-EU members without any special trade arrangement with the EU have benefited most of all Services is the area where the British economy is supposed to be in the vanguard and has most to offer, and which is supposed to be the area of the future. However, Burrage points out that services within EU trade have grown much less than services trade from the EU out into the wider world. Although we like to say that we belong to the largest trading bloc in the world, this work argues strongly that the advantages to us from that are marginal and probably non-existent As regards the book’s title, Myth and Paradox, the myth is that we benefit hugely from this large market but the paradox is that non-members have benefited much more. Noble Lords will be familiar with the FT Europe correspondent Wolfgang Münchau, who said of the single market that it is, "a giant economic non-event, for both the EU and the UK" If we leave the EU and are forced to leave the single market, I believe that we have nothing to fear but fear itself. It is rather regrettable that the Government have stirred up so much of that fear with groupthink and all the different studies The IMF has been a willing collaborator with the Government in sidestepping the rules the Government have themselves prescribed for the referendum. Normally, the IMF does not intervene in a national argument at the time of a general election. It is quite wrong that it should intervene in this debate at this time in the way that it has, particularly as it has said that it will make another pronouncement on the UK economy three days before polling day, during the purdah period. I very much hope that the Minister will tell the IMF that this is not appropriate and that a period of silence would be welcome. This issue ought to be considered by all sides of the House because, whatever the outcome of the referendum, it is important that it is accepted by everybody and seen to be fair.