Post Segments
Chris Patten on Question Time
Former Tory cabinet minister and current Chancellor of Oxford University, Chris Patten, made a scathing attack on Brexit on BBC TV’s Question Time programme on June 1st. He said that “the truth is that we are one hell of a mess. Our GDP per capita is now less not only than France, Germany and the Netherlands, it lower than Ireland. Its lower, for heavens sake than Lithuania. The poorest 20% in Britain are poorer than the poorest 20% in Poland. This is not the sign of a country which has got things going for it”
Patten conceded that not all of our problems were due to Brexit and singled out the Bank of England’s ‘necessary’ extra spending to deal with furloughs and energy prices, leading to higher inflation. However, the real culprit for our supposed economic woes is not in his view hard to find. Our problems exist he said “also, and this is a word one is not supposed to use anymore, because of Brexit. Its because of what Brexit did to the pound. It is because of what Brexit has done to make it more difficult for us to import goods and for us to import labour and importing food. Now its costing us £7 billion a year (according to the London School of Economics) because we are outside the European Union”.
This outburst is totally misleading and wrong on a number of levels. Firstly, per capita GDP in the UK is not lower than in Lithuania. Using OECD data, we can see that per capita GDP in Lithuania is around half that of the UK when measured in a common currency (US dollars). Lithuania looks better if we allow for the much lower prices of goods and services in that country. OECD figures measured at what is called ‘purchasing power parity’ place Lithuania at 11% below the UK in 2022.
In any case none of this has anything to do with Brexit. Lithuania, like Poland and other eastern bloc countries, had living standards around one third of the UK or EU averages in 1990 and have prospered mightily since emerging from Communism. With extremely low labour costs, huge amounts of western investment came their way. EU grants that formerly went to peripheral EU regions like Northern Ireland were diverted instead to eastern Europe. Living standards have not yet fully converged to the UK or EU average levels but are close to doing so.
What about France, Germany, the Netherlands and Ireland? While Germany and the Netherlands are richer than the UK, France is not. Per capita GDP in France is below the UK when measured in common currency, but if we allow for price differences the two countries are about even. Again none of this reflects Brexit. Differences in living standards fluctuate a bit, but are generally of long standing and pre-date Brexit. There is little evidence of any significant divergence between these countries since the Brexit referendum in 2016. As for Ireland, Patten appears not to know about its ‘Leprechaun economics’. The extraordinary volumes of multi-national company profits flowing through Ireland’s tax haven comprehensively distort Irish national accounts but do little for Irish living standards which even the former president of the Irish central bank believes are below those in the UK,
How about the poor of Poland being better off than the poor in the UK? We have been unable to source this odd claim but can make some progress, again using OECD data. The OECD publish data on the ratio of average incomes for the poorest 10% in each country relative to median incomes. This shows that in Poland incomes for the poorest 10% are about half the median level in Poland. This is much the same as in the UK. Since per capita GDP in Poland is around 20% below the UK, allowing for price differences, this suggests that the poor in Poland are poorer than those in the UK.
Lastly, are we really £7 billion worse off as Patten claims an LSE study asserted? The study was a bit more nuanced than the press reported but, in any case, argued that in the absence of tariffs, higher costs were generated by non-tariff-barriers. Since the UK has delayed imposing imports checks this is unlikely. A BfB article showed that higher food costs on EU imports also affected other countries not directly impacted by Brexit and hence ascribing higher UK prices to Brexit is groundless. Lord Patten is presumably unaware of these points and like many Remainers is happy to quote studies second hand without undertaking any validity checks.
Where are the BBC fact-checkers when you need them?
We may be paranoid but it is easy to believe that if this had been Nigel Farage making outlandish claims in favour of Brexit, the BBC fact checkers would have been quickly on the case. Why then have the fact-checkers not been on Patten’s back? One possible reason is a sort of confirmation bias. If Patten’s claims did not seem outlandish to BBC staff, then it would not have been a priority. The BBC may also be intimidated by Patten’s status as Chancellor of Oxford University, former EU Commissioner and former head of the BBC Trust. We do not know how many viewers called to complain, but false claims about the impact of Brexit have become so common that viewers may have grown weary. If so, this is a pity because there appears to be a trial of endurance, with prominent Remainers continually making alarmist and unfounded claims to wear down the pro-Brexit majority in the hope that a future Labour Government will take us back into their beloved EU. Thus far, Labour seems to have resisted revisiting Brexit, but Remainers live in hope.
Not the only daft Tory
The Tory MP and chair of the Commons Defence Committee, Tobias, Ellwood recently stated on the Peston show that Brexit was costing Britain 4 % of GDP per year, and hence that we must rejoin the EU. Yes, believe us, he really did say that: 4 % of GDP per year. Robert Peston did not challenge this for some reason, though presumably he must know that it is absurd. I suppose that one must charitably believe that Mr Ellwood knows no basic economics and that he is too busy to remedy his ignorance. This clearly does not inhibit him from making reckless pronouncements, perhaps the contrary.
The supposed ‘4 per cent hit’ that is often bandied about comes from a 2021 OBR averaging of a number of independent studies. On average these studies predicted that the UK might grow by 4 per cent less over the long term (unspecified) than if there had been no Brexit, not of course a ‘hit’ of 4 % to the economy’s present level, and evidently not every year. This forecast is anyway flawed by mistaken assumptions about immigration and an empirically weak claim about a link between trade and productivity. The actual data, up to the latest quarter, show no significant decline relative to major EU economies or Japan (although all have fallen behind the fiscally-stimulated US economy).
Our experience in talking to Mr Ellwood is that he has little interest in debating the facts and is happy to rely on claims from the Economist magazine. If he cannot remember these claims accurately is this due to his enthusiasm to rejoin the EU despite publicly stating the opposite? If we did rejoin the EU, what would be the cost? The most obvious would be our annual financial contribution. If Brexit has (let us say) caused a fall of 3 per cent to 5 per cent in UK goods exports to the EU, that amounts to £5 billion to £8 billion; whereas membership dues (net) were £8 billion to £11 billion in 2018 and would be much higher now. In other words, any export gain from rejoining the EU would be more than cancelled out by the membership fee.
What in fact would be the ‘gain’ from rejoining to the average voter? The Bertelsmann Stiftung (a pro-EU German think tank) calculated this back in 2014. They worked out average income gains for citizens from EU integration between 1992 to 2012. Denmark was the winner, with every Dane making €500 per year – perhaps enough for a modest family holiday. But our gain in Britain was a princely €10 per year each – not quite enough for a month’s subscription to The New European.
Compare the Bertelsmann Stiftung estimate with our membership payments. If their estimate is right, it was costing us roughly €200 each to get back €10 each from Single Market membership. Some Members of Parliament seem to think this was an attractive deal. There would also be the potentially crippling consequences of joining the Eurozone as we would be required to do if we were to rejoin the EU. Another German thinktank, the Centre for European Policy, estimated in 2019 that Euro membership since inception had cost every Frenchman €56,000 and every Italian €74,000 in lost growth.
Conclusion
Senior Tories are of course entitled to pro-EU views and may base this preference on a wide range of factors, going well beyond the economics. However, they are not entitled to their own facts and should strive to attain accuracy. The BBC and ITV should also take more care in holding them to account. We are also entitled to ask why some Tories appear to exult in talking Britain down. In both cases, it may just have been loose talk (though Ellwood has repeated his false statement) but both men should in any case issue a correction, which would be the honourable and responsible course of action. We await with interest.
