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The row over Treasury forecasts — and the FBI v Trump saga — show how often unelected officials overstep the mark

My Times column on the impartiality of public servants:

Last week saw political eruptions on either side of the Atlantic about a similar issue: whether government officials are neutral. The row over the leaked forecasts for Brexit, and whether civil servants were being partisan in preparing and perhaps leaking them, paralleled the row in America about the declassified Congressional memo on the FBI and Donald Trump. “Trump’s unparalleled war on a pillar of society: law enforcement”, said TheNew York Times. “Brexit attacks on civil service ‘are worthy of 1930s Germany’ ” said The Observer.

To summarise, in London a government forecast that even a soft Brexit would be slightly worse for the economy than non-Brexit was conveniently leaked. This happened just as some politicians and commentators were trying to shift the country towards accepting a form of customs union with the European Union — that is to say, not really leaving at all.

In Washington, the president declassified a memo prepared by Devin Nunes, the chairman of the House intelligence committee. It alleged that the FBI got a warrant from a secret court to bug a Trump campaign executive, using as evidence mainly a “salacious and unverified” dossier (the former FBI director James Comey’s words) prepared by a British ex-spy paid by the Democratic Party, a fact that the FBI apparently failed on three occasions to tell the court. The FBI also allegedly leaked the dodgy dossier to the press.

There are two sides to both stories. In Washington, the Democrats and some Republicans see a president prepared to break secrecy to make the FBI look bad, presumably as a distraction from its investigation of his alleged links with Russia. In London, Remainers focus on the fact that it is unusual and wrong for politicians to attack civil servants who are not allowed to answer back.

Nobody disputes, surely, that civil servants have views. Since 91 per cent of Washington DC voted for Hillary Clinton in 2016, and a similar percentage of public servants here probably voted Remain, we can guess what those views are in most cases. Former mandarins in the House of Lords and on Twitter are among the most outspoken opponents of Brexit in any form. In the FBI case, several key people (including the British 
ex-spy, Christopher Steele) are on record as having been passionately opposed to Mr Trump’s election.

As chancellor, George Osborne set up the Office of Budget Responsibility precisely to remove economic forecasting from political pressure. Yet the Treasury returned to economic forecasting during the referendum campaign. It said that “a vote to leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000, GDP would be 3.6 per cent smaller” and so on. This turned out to be based on ridiculous assumptions and was utterly discredited by what actually happened.

This case is different, however. By all accounts the Treasury was stung by the humiliating failure of Project Fear (which would never have been exposed if Remain had won the referendum, remember). This latest forecast is not from a Treasury model at all but a “cross-departmental tool”, as Amber Rudd said yesterday. Nor is it based on the discredited “gravity” assumption, that trade decreases with the square of distance. It is thought to be a “computable general equilibrium model” of the kind that the Treasury’s critics have long recommended.

It is not clear who developed the model. It might have been contracted from an outside consultant. There is no evidence it has been “back-tested” on the British economy’s past performance to see if it works. More problematically still, the model does not test the government’s preferred policy at all, and makes ludicrous assumptions about what would happen under its three scenarios.

For example, if we leave on World Trade Organisation terms, it assumes we would keep the external tariffs of the EU that inflate the household costs of British consumers. Given that trade with the EU is about 12 per cent of British GDP, in order to achieve an 8 per cent hit to GDP, the model has to assume we would lose at least half that trade, which is for the birds. Garbage in, garbage out, as they say in modelling.

Who commissioned the forecasts? It appears it was not Treasury officials but nor was it a politician. The relevant ministers have distanced themselves. It looks increasingly like a freelance operation from within the top layers of the civil service. If so, this might indeed justify criticism not so much for doing analysis, but in who they got to model it. Being culturally averse to Brexit and free markets, they just would not think of going to economists like Roger Bootle, Gerard Lyons, Ryan Bourne, Liam Halligan and Patrick Minford, who see opportunities in leaving. They do not even realise they are being biased.

The pass-the-smelling-salts shock of those leaping to the defence of civil servants is excessive, as was their comparison of the critics to Hitler and snake-oil salesmen. Civil servants get secure, well-paid jobs with early retirement and excellent pensions. And when they screw up, politicians generally carry the can for them. An occasional question from a politician about whether they are letting their prejudices get in the way of doing their job may be uncomfortable, but it’s hardly unreasonable.

If they mount a freelance operation that frustrates a democratic mandate then all bets should be off, just as if it emerges that the FBI was freelancing to undermine a presidential candidate (either of them), then it would be a major scandal.

Britain faces its greatest decision in decades. If we leave the customs union, keep its tariffs and do nothing else, of course there will be pain. But if we also open up our economy more to the growing markets of Asia, Africa, Australasia and the Americas, and take measures to encourage investment and innovation, we will blow away any pessimistic forecasts. Civil servants should be modelling those possibilities.


By Matt Ridley | Tagged:  rational-optimist  the-times