Costas Milas is Professor of Finance in the University of Liverpool’s Management School
Repeated use of ‘Greek statistics’, such as the £350m a week we send to Brussels, or Amber Rudd’s statement that “Boris [Johnson] is the life and soul of the party but he’s not the man you want driving you home at the end of the evening” do not help voters in reaching a well-informed decision about the economic benefits and costs of BREXIT.
‘Greek statistics’ became infamous and (of course) discredited in 2009 when the newly elected government announced that Greece’s budget deficit, at 12,7% of the country’s GDP, was almost 7 percentage points higher (!) that the figure reported by the outgoing administration only a month earlier.
The Leave camp appear to be following the…Greek script. Take, for instance, its central claim that we send £350m a week to Brussels. Detailed analysis by Sir Andrew Dilnot, chair of the UK Statistics Authority as well as David Smith (Economics Editor of the Sunday Times) indicates that the true figure is (not even) half of that. Conservative MP Dr. Sarah Wollaston defected from Leave as a result of this…‘Greek statistic’. But then again, the Leave camp insists on using it.
Similarities with the…Greek plot do not stop there. Vote Leave’s Michael Gove said that Britain will not leave the EU before 2020, even if it votes out in this month’s referendum. It is not clear whether this has to do with cumbersome and lengthy BREXIT negotiations or the (wishful) thinking of the Leave camp that it can use the outcome of the referendum to re-negotiate a better Remain deal with the EU which will then justify a …new referendum. It should not go unnoticed, however, that Mr. Gove’s statement brings into mind what followed the outcome of the Greek referendum in July 2015 when, despite an overwhelming 61.3% majority in favour of rejecting a deal with Greece’s Troika lenders (namely the European Commission, the European Central Bank and the International Monetary Fund), Greek prime minister Alex Tsipras ruthlessly proceeded by endorsing almost the very same deal that Greek voters objected to.
Another central claim of the Leave camp is that European Union bureaucracy is “holding the UK back”. Nobody doubts that EU bureaucracy does exist. But has it really held us back? This is far from clear. To see this, let me draw on the World Bank’s authoritative governance indicators. The World Bank reports, for as many as 215 countries, an authoritative regulatory quality index. The index measures the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development. Assuming that EU membership has taken a bureaucratic toll on our economy, the indicator should have shown a deteriorating UK position over the years. This, however, has not been the case.
In 2004, the UK stood at the very impressive 97th percentile. In 2014 (last year for which data are available from the World Bank), we retained our impressive position. In fact, we were ranked above the US which went down from the 93rd percentile in 2004 to the 88th percentile in 2014. We were also ranked above Germany, which went up slightly from the 91st percentile in 2004 to the 94th percentile in 2014. How about Norway or Switzerland? BREXIT supporters often praise Norway and Switzerland as successful “survivors” outside the EU. Norway stood, in 2014, at the 92nd percentile whereas Switzerland stood in 2014, like us, at the same (97th) percentile. In short, so much for EU bureaucracy taking a (huge) toll on our economy.
This is not to say that the Remain camp resists the use and interpretation of ‘Greek statistics’. For instance, fresh Bank of England statistics indicated large capital flows which, rather than reflecting an overall drop in deposits in UK banks, merely signalled that clients of British banks have wisely been taking out insurance against a large drop in our sterling currency. Yet, as Chris Giles, Economics Editor of the Financial Times inventively wrote, the Remain camp immediately jumped on the statistics like “flies landing on excrement”.
There is (much) more. When Amber Rudd MP, Energy Secretary and a Remain politician, famously said that “Boris [Johnson] is the life and soul of the party but he’s not the man you want driving you home at the end of the evening”, she did nothing more than relying on…‘Greek statistics’. Indeed, is there any hard evidence (or, any evidence at all) of the validity of her claim which was only made to undermine the credibility of Boris Johnson?
If the Leave camp wins, it is my view that David Cameron will have to step down at once. Indeed, Eurosceptic Tories would hardly digest the paradox of Mr Cameron negotiating, in a credible manner, BREXIT when he has passionately argued in favour of Remain. Whether transition to a new leadership proves smooth or turbulent remains to be seen. Bearing in mind that Tory Eurosceptics have made substantial noise and (of course) relied increasingly (and more often than their opponents) on ‘Greek statistics’ during the Brexit campaign, it is more likely than not that we will witness substantial political instability, a capital flight from the UK and an economic recession.
The irony of the whole matter is none other than David Cameron’s decision to call a Referendum vote. Despite David Cameron warning the British voter against triggering a Do It Yourself (DIY) recession, it is more likely than not that a BREXIT win will, at the end of the day, be followed by a David It’s You (DIY) recession…
