Top Econ Prof: Media Reports on £80Bn Cost of Hard Brexit ‘Very Misleading’

A leading economics professor has rebuked the establishment media reporting on a “secret government analysis”, stating that the true “cost of hard Brexit” would be within the margin of error in terms of economic growth rates.

Prof. Tony Thirlwall — who teaches Applied Economics at Keynes College at the University of Kent — wrote to the Guardian on Monday expressing concerns over the £80bn figure cited by the paper and others:

“The way you (and other newspapers) have reported the Treasury estimates of the potential costs of Brexit to the UK as a whole, and to the regions, under different Brexit scenarios is very misleading,” Prof. Thirlwall began.

Challenging the economic literacy of news reporters, he explained:

The reported average estimated cost of 10% or so is not of a “hit to growth” (as you put it) but of the potential reduction in the level of output over a period of 15 years compared with staying in the EU. A reduction in output of 10% over a 15-year period is a “hit” to the growth rate of less than 0.5% per annum (compound), which is within the margin of error, and takes no account of compensatory domestic policy.

Prof. Thirlwall, hardly a right-wing figure, went onto state that it is his belief that UK government austerity policies had caused far more damage to Britain’s economic growth rate than a hard Brexit could:

The unnecessary economic policy of austerity that has been pursued over the last few years has done far more damage to the growth rate of the UK economy than any of the Brexit scenarios, and an end to austerity would more than compensate for any putative Brexit loss.

This pro-infrastructure investment plan — alongside criticisms over the targeting of national sovereignty exercises such as Brexit — form the basic economic nationalist arguments proffered across the Atlantic by figures such as former Breitbart News Executive Chairman Steve Bannon.

Robert Kuttner, writing for the left-wing American Prospect magazine, reported: “…Bannon cultivated a brand of economic nationalism that had a strategic coherence. He favored a large program of public infrastructure, tax increases for the rich, and a get-tough program with China intended to bring home industrial jobs”.

“Trump intermittently channeled the positive part of the Bannon strategy, but mainly at the level of rhetoric. The actual tax, trade, and investment policies he’s promoted reflect the more substantial influence of the corporate wing of the administration, and do nothing for the working class. This will only intensify with Bannon’s departure”.

Prof. Thirlwall has previously challenged the orthodox view of free movement of labour, too, writing to the Financial Times in 2016 to state:

Labour migration is a dynamic process that tends to generate cumulative expansionary forces in the countries of destination and relative contractionary forces in the countries of origin; a process of “circular and cumulative causation”, as the famous Swedish economist Gunnar Myrdal once called it.

…

The disequilibrating nature of free factor movements is a powerful reason for taking work to workers, rather than encouraging the free movement of workers to work. The EU could do much more in this regard if it is serious about the economic plight of the peripheral economies of Europe with high unemployment.

The Guardian’s original reporting on the Brexit memo remains unchanged since the publication of Prof. Thirlwall’s letter, and states:

A no-deal Brexit would blow an £80bn hole in the public finances, with the leave-voting heartlands of north-east England and West Midlands worst affected, according to new detail from the government’s own secret economic analysis.