Technocratic economic groupthink is holding Britain back

Container ship

Container ship

The UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a historic achievement for the Government and a triumph for the International Trade Secretary, Kemi Badenoch. The deal grants British businesses privileged access to a rapidly-growing market, as part of a bloc that is likely to play an increasingly significant role in combating China’s efforts to dominate the Asia-Pacific. At last, we are beginning to see the practical benefits of Brexit.

Not according to those still unreconciled to Britain’s exit from the EU, however. They pounced on government forecasts that showed that joining the CPTPP will only boost the UK economy by 0.08 per cent to declare the deal essentially worthless. Shamefully, this was even the headline of the BBC’s report on the agreement.

Aside from the geopolitical myopia of swathes of the Remainer elite, a large part of the problem is the nature of official forecasting. It would hardly be an exaggeration to say that, according to bodies such as the Office for Budget Responsibility, the only possible way to grow the economy is to admit even more immigrants or rejoin the EU. They have been criticised for assuming that some obviously pro-prosperity measures – such as cutting taxes on businesses and entrepreneurs – have a negligible impact on economic growth.

It is little wonder, then, that such predictions are so frequently wrong. When it comes to the CPTPP, it is likely that government forecasts have been skewed by an overreliance on the “gravity” model of trade, in which geographic proximity is seen as having a preeminent influence on trade volumes between countries. Little matter that, increasingly, trade is less about physical goods and more about intangible services. It is obvious that the CPTPP is a bloc with extraordinary upside potential.

It is welcome that senior politicians have begun to criticise how these forecasts are put together, as well as the excessive reliance that some ministers put on them. The economics establishment does not have oracular powers. Nor is its work meant to be anything more than a guide to policy-making: as in the case of the CPTPP, politicians have to make their own judgments about the benefits of particular decisions. But it is clear that reforming the broken architecture of official forecasting can no longer be put off. Technocratic groupthink is holding Britain back.

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