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The Case against Philip Hammond and HM Treasury

Summary:
It will be shown that Philip Hammond, whilst in the public office of Chancellor of the Exchequer, willfully indulged in misconduct to a degree that was an abuse of the public's trust.The misconduct was calculated to injure the public interest and was an affront to the standing of the office of Chancellor. The offence under consideration created clear harm to the public interest.In November 2018 the Bank of England produced a report: EU withdrawal scenarios and monetary and financial stability and in January 2018  The CrossWhiteHall Briefing on the effects of Brexit was produced, both of which were subsequently abused by the Treasury and Chancellor to mislead the public.Hammond described the effect of a No Deal Brexit to the Treasury Select Committee and the public at large as: "in a no

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It will be shown that Philip Hammond, whilst in the public office of Chancellor of the Exchequer, willfully indulged in misconduct to a degree that was an abuse of the public's trust.

The misconduct was calculated to injure the public interest and was an affront to the standing of the office of Chancellor. The offence under consideration created clear harm to the public interest.

In November 2018 the Bank of England produced a report: EU withdrawal scenarios and monetary and financial stability and in January 2018  The CrossWhiteHall Briefing on the effects of Brexit was produced, both of which were subsequently abused by the Treasury and Chancellor to mislead the public.

Hammond described the effect of a No Deal Brexit to the Treasury Select Committee and the public at large as: "in a no deal/WTO scenario GDP would be 7.7% lower relative to a status quo baseline. This represents the potential expected static state around 15 years out from the exit point."

Note that he mixed slowed population growth figures with economic growth figures to achieve a 7.7% fall over 15 years.  The per capita GDP figure was only 6.25% fall over 15 years. The Cross Whitehall Briefing predicted a fall in GDP per capita of only between 0.24% and 0.6% per annum after a No Deal Brexit.

Hammond also failed to note that the consensus of external estimates of a No Deal FTA Brexit was 4% fall in GDP over 15 years, which, with the presumed fall in population growth would have been very little fall in GDP per capita over 15 years (less than 0.2 % pa). The WTO Brexit predictions by external economists showed about less than 0.26% pa fall in GDP per capita as a result of 5.7% fall in GDP over 15 years.

Hammond produced his predictions just a month after the Economist ran an article: GDP predictions are reliable only in the short term (Dec 15th 2018) .  The punch line from the article is that "Predictions made more than 16 months out suffer from large errors".   It is inconceivable that Hammond's staff did not read the Economist.  It is inconceivable that his staff and hence Hammond did not know that 15 year GDP predictions are in the category of economic nonsense (see for instance  McNees(1992)).

So Hammond is guilty of misleading the public and fellow politicians on three counts. Firstly he exaggerated the effect of a No Deal Brexit, secondly he suppressed any mention of alternative analyses in his public statements, thirdly he gave entirely imaginary predictions for UK GDP over a 15 year period to bulk up the figures into larger, scarier numbers.  It is this last offence, using absurd 15 year predictions when all economic research shows them to be nonsense, that most clearly shows his intention to wreck Brexit.

Hammond also referenced the Bank of England scenarios as predictions that confirmed his Treasury figures despite the fact that the Bank's figures were about maximal stress testing of banks and not to be used as a prediction for economic purposes :

“.. a worst-case scenario that could be associated with a ‘no deal no transition’ Brexit. The “disruptive” and the “disorderly” Brexit scenarios are therefore not forecasts for the economy in the event that the UK leaves the EU with no deal and no transition period.” (EU withdrawal scenarios and monetary and financial stability page 6).

Hammond made no attempt to correct media reports that incorrectly mistook the Bank of England stress test figures as predictions for a No Deal Brexit.

What was Hammond's motive?  He had come under pressure from large multinational corporations to ensure that their international trading profits were not affected by Brexit.  On the 17th January 2019 it was revealed that Philip Hammond described plans to take No Deal off the table and even rescind Article 50. He suggested that ministers may even back the planned attack on No Deal when asked for an “assurance” by the head of Tesco that the Government would not oppose the motion.

How much damage has Philip Hammond done to the UK?  His actions stopped Brexit.  They overturned a Referendum.  They have prevented the UK from taking a tough line in negotiations with the EU by allowing the EU to believe that all it need do is wait and the UK will rescind Article 50. 

Hammond is guilty of Misconduct in a Public Office and should be arrested as soon as possible so that he can be put on trial and his crimes exposed.

The Treasury has previously produced reports on Brexit that have wildly overstated possible damage.  As a responsible public official Hammond should have made this clear when publicising the latest Treasury Report on No Deal.

 Look at what the Treasury predicted for 2017 before the Referendum - see HM Treasury analysis: the immediate economic impact of leaving the EU :

The Case against Philip Hammond and HM Treasury
The Treasury paper was prefaced with this comment by George Osborne which allows no wriggle room for those who think the forecasts applied to anything other than the immediate post-referendum economy:

The Case against Philip Hammond and HM Treasury
As early as the Autumn 2017 Statement - section 2.9 the Treasury had amended its predictions to reasonably strong growth of 2.1, 1.4, 1.7, 2.1 percent growth for 2016, 2017, 2018 and 2019. These figures are not even vaguely in the deep recession territory predicted by the Treasury and little different from the growth figures that might have been expected had the Referendum not happened.
The Treasury has a record of getting predictions for Brexit entirely wrong yet Hammond has retailed its report on No Deal as the utter truth, even though 15 year predictions for national GDP figures are utterly impossible.  Notice that within 5 months of predicting absolute calamity for the UK economy in June 2016 the Treasury predicted that everything would be normal.  How can we explain this complete turnaround except in terms of malicious interference with the governance and policymaking of the UK by Treasury officials and their bosses?

McNees, SK (1992) How Large are Economic Forecast Errors? New England Economic Review July/August.
https://www.bostonfed.org/-/media/Documents/neer/neer492c.pdf

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