Ditch Project Fear for Project Prosperity

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Ditch Project Fear for Project Prosperity

Professor Tim Congdon argues post-referendum economic data has dispelled Project Fear, which is why he and fifteen other leading economists are calling for the Brexit pessimists to get on board with Project Prosperity. 

Remember the three-million-jobs-at-risk claim that was central to the economic case for remaining in the European Union. It originated in a 1999 report from the National Institute of Economic and Social Research, which observed that “up to 3.2 million jobs are now associated directly with exports of goods and services to the EU countries”.

The Britain in Europe group, a cross-party ginger group launched by Tony Blair, Kenneth Clarke and other bigwigs, rejigged the National Institute’s words so that three million jobs “depended” on EU membership. This evolved on restatement to something much more spine-chilling. Nick Clegg’s formula in a Daily Telegraph story of 11th January 2013 was that three million jobs were “dependent on our position as a leading member of the world’s biggest borderless single market, you play with that status at your peril; there are jobs at stake, livelihoods.” He warned that leaving the EU meant isolation, and that “isolation costs jobs, costs growth, costs people’s livelihoods”.

Britain remains for the time being an EU member, and Blair, Clarke, Clegg & Co. might argue that a true test is yet to come. But forecasts of an early recession and heavy job losses were certainly part of Project Fear, both ahead of and in the immediate aftermath of the EU referendum on 23rd June 2016. The doom-mongering was as much about what would happen just after a majority vote to leave as it was about the sequel to Brexit proper. The Financial Times might be seen as the intellectual leader of Brexit pessimism and its economic commentator, Martin Wolf, as its foremost Jeremiah. His judgement, less than a week after the referendum result, was that, “I would be very surprised if we don’t have a year or two or three of a real recession.” He also sneered at the Brexiteers’ “mendacious campaign”.

That is why a group of sixteen leading economists – including myself – is calling for the UK’s Brexit pessimists to ditch Project Fear for Project Prosperity by seizing the Brexit boost of as much as £135 billion a year unlocked by leaving the protectionist bloc. Economists for Free Trade point out that this can be seized by quitting both the single market and the customs union – adding to the positive economic news we have already had since the referendum.

We have not yet had two or three years since 23rd June 2016, but we have now had over a year, and we also have almost a year of official employment data. If the three-million-jobs-at-risk proposition were even a quarter correct, and if “a real recession” were indeed attributable to leaving the EU, something ought to be evident by now in the numbers. So what does the 12th July 2017 Statistical Bulletin on the ‘UK labour market’ from the Office of National Statistics say about the situation?

Let us start with employment. In the year to the three-month period from March to May employment increased in the UK by 324,000 people from 31,686,000 to 32,010,000. Yes, it increased. It did not go down, as the pro-remain politicos and pundits said it would. Moreover, the rise in employment was higher in this twelve-month period than on average (266,000) in the 25 years from 1992, which is the first year reported for this series in the present ONS database. Since the referendum not only have jobs been created, but the rate of job creation has been better than normal over the last generation.

What about unemployment? The Brexit pessimists might have a case of sorts if the above-normal rate of job creation had occurred in a slack labour market, with many disappointed job-seekers. But that is not the reality at all. On the contrary, the unemployment rate reported in the 12th July ONS release was 4.5 per cent. This was the lowest – repest, the lowest – in the 25 years for the unemployment rate series in the ONS database, as that database is currently available. The statistics on vacancies tell the same story. As is well-known, the official vacancies figure understates employment opportunities in the British labour market, but the figure is still a valid indicator of job availability. Here the official series is shorter than for employment and unemployment, and starts in 2001. Anyhow vacancies in April-June this year stood at 774,000, just a smidgeon (4,000) down on the previous month, but the totals for the two months were the highest in the 16-year period under review.

Now that over a year has passed since the Brexit vote, it does make sense to recall statements made in the debate, and to check who has been right and wrong. Has even a fraction of the three million jobs allegedly at risk actually disappeared in practice? We may be only a year into Wolf’s “a year or two or three”, but can a “real” job-destroying recession be found in the official record? Has the start of Brexit negotiations led to the “isolation” of Britain, and hence to heavy costs in jobs, livelihoods and growth? The answer to all three questions is “no”.

It is vital that the message is sent out that Project Prosperity is here to stay – and that is exactly what Economists for Free Trade proposes to do. With the Brexit boost that can be achieved by ditching the protectionist prison of the EU and embracing global free trade, a dividend worth about £5,000 per year to families across the country accompanied by an 8 per cent fall in prices tells us that the cost of watering down/avoiding a clean Brexit would be calamitous.

The arguments between the Leavers and Remainers are not settled yet. Perhaps a decade of post-2016 (or post-2019) experience and information is needed. But the first round in the debate about jobs – so prominent in the pro-EU campaign – has gone, clearly and decisively, to the Leavers. Will the EU’s supporters have the courtesy to acknowledge that? And can we have less from Martin Wolf and others about Brexiteers’ supposed “mendacity”?

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  • Professor Tim Congdon
    Professor Tim Congdon
    Professor Tim Congdon is the founder of Lombard Street Research and previously a member of the Treasury Panel of Independent Forecasters and one of the “Wise Men” between 1992 and 1997 who advised the Chancellor on economic policy.
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