Budget Resolutions — House of Commons, 2017-03-09
Topic: Macroeconomics
William Arthur Roger Mullin (Scottish National Party, Centre-left): During the heated interchanges that took place a short time ago, I was wondering whether this was merely a private fight or if anybody could join in—I will take this opportunity to join in. Let me declare first of all that my approach to understanding economics is different from that of the Front-Bench spokesmen, so if the House will forgive me, I will take a couple of minutes to set out why I see things slightly differently so that Members can better understand my critique of particular aspects of this Budget I am highly critical of an approach to economics that seeks to mimic the physical sciences and imagines that it can predict the future through statistical means. Great economists of the past of different traditions, ranging from Adam Smith to Karl Marx, would have rightly scoffed at that notion. When I picked up the Office for Budget Responsibility’s "Economic and fiscal outlook" yesterday, it fell open at page 45, which Members will recall contains chart 3.8, on effective exchange rate assumptions. If we look at that chart—some hon. Members are doing so—we can see that the OBR is able to accurately plot the past, which contains wild variations in the exchange rate, and that the biggest variations are often due to not economic decisions, but political ones, such as the EU referendum. The OBR’s prediction for the future, however, is a perfect straight line parallel to the horizontal. The only thing we know is that that is the least likely thing to happen to the exchange rate but, owing to that approach, built-in assumptions make us highly vulnerable to misreading the actions that need to be taken. Straight lines rarely predict human activity It was therefore with genuine concern that I heard the Chancellor deem it important in the opening section of yesterday’s statement to read out spreadsheets and forecasts as though they were going out of fashion while entirely failing to mention in any depth the key issues challenging the future economics of this country. As has been said, he failed adequately to address the challenges of Brexit, for example, but I will come to that in a moment Allow me to reflect a little on different ways of looking at the economy and to make three key observations. First, an economy is not a machine but a network of relationships among human beings. What do these networks do? They are built upon myriad individual and collective decisions that are affected by an almost infinite array of influences. Not only do we not know the future with any degree of precision, but we cannot know the future with any degree of precision, yet that is what such detailed forecasts pretend, and they are provided without even any margins of error We know that decisions are critical, so I thought about how I could highlight the importance of that and some of the things that the Government could do. The best example came to me yesterday when, along with many Members, I attended the WASPI women demonstration. Those people face having to make key decisions about their future, but this Government utterly disrupted the way in which they were able to make rational decisions, because they were given no proper notice about the huge changes being made to their pensions. Rather than helping to give some coherence to the economy to enable people to make as rational a decision as possible, the Government’s actions have caused disruption. The effective operation of the marketplace is being disrupted, not helped Secondly, we cannot ignore the influence of politics on economic activity and vice versa. By entirely ignoring the effect of Brexit in his speech, the Chancellor ignored the influence of such a political decision, but some of the effects of Brexit should have been tackled. The failure to guarantee the rights of EU citizens in this country will lead to disruption in the labour market. I am sure that I am not alone in knowing constituents who either have already left or are preparing to leave the country, including people who run small businesses, a German couple, someone in the creative sector, and one or two university researchers.