What Peter Oborne doesn’t get

Maybe Oborne didn’t notice that the whole basis for the Chancellor’s economic strategy – stemming from work by Carmen Reinhart and Kenneth Rogoff – has been shown to be ruined by spreadsheet errors.

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‘‘Economics in the end trumps politics,” said Peter Oborne on Newsnight in his infamous 2011 “that idiot in Brussels” interview. At the time, Jeremy Paxman accused him of being gratuitously offensive – and it seems to be his modus operandi. The mouthy buffoon (MB) was similarly offensive again the other day in a delusional Telegraph column, “The left talks gibberish while David Cameron racks up successes”, in which he argued that after three years the Tory-Lib Dem coalition’s daring reforms are “starting to pay dividends”. No mention, naturally, of the 50-odd U-turns such as the pasty tax, the joint strike fighter and minimum alcohol pricing.
 
The MB accused me of being a “cod-Keynesian”, which is rather surprising, given that I’ve never expressed any view whatsoever about the fishing industry.
 
Let’s plaice his comments in context. The MB apparently spoke with Tony Travers, who, he argued, is from the “respectable” part of the London School of Economics, even though he is not a member of the permanent faculty. I am wondering whether he thinks my distinguished friends Tim Besley, John Van Reenen, the Nobel laureate Christopher Pissarides, Nick Stern and John Hills are from the “respectable” bit. Or Richard Layard, or David Metcalf?
 
Let’s go through a couple of other bits of nonsense. First: “. . . the government’s audacious and thoughtful strategy for economic and social reform is holding up very well”. You could have fooled me. Unemployment is 2.5 million and still rising – the last six monthly observations were 7.8 per cent, 8.1 per cent, 8.0 per cent, 7.4 per cent, 8.0 per cent and 8.0 per cent, and the employment rate is falling. Youth unemployment is still around a million, long-term unemployment is rising and real wages continue to fall. “Thoughtful” the strategy is not. Indeed, it is hard to find a single economist who supports it.
 
Maybe Oborne didn’t notice that the whole basis for the Chancellor’s economic strategy – stemming from work by Carmen Reinhart and Kenneth Rogoff – has been shown to be ruined by spreadsheet errors. Recall that in 2010 the Chancellor argued in his Mais Lecture that: “The latest research suggests that once debt reaches more than about 90 per cent of GDP, the risks of a large negative impact on long-term growth become highly significant.” We now know it doesn’t.
 
The underlying picture for the public finances is one of stalled progress in deficit reduction. As the independent consultancy Capital Economics notes, “stripping out various temporary factors, the fiscal position remains fragile”.
 
Then there’s this from Oborne: “Economic growth, though weak, has not been entirely extinguished in a weak international environment. Anyone who predicted such an outcome three years ago would have been labelled mad.”
 
In his Budget statement of 22 June 2010 the Chancellor said as follows: “Growth in the UK economy for the coming five years is estimated to be: 1.2 per cent this year and 2.3 per cent next year; then 2.8 per cent in 2012 followed by 2.9 per cent in 2013.” We got 1.7 per cent, then 1.1 per cent and 0.2 per cent and perhaps 1 per cent for 2013. Great success – growth was a quarter of what was predicted by the coalition.
 
Oborne is right about one thing: economics in the end trumps politics. Given the worst lack of recovery in a century, the only sensible conclusion is that Cameron has established a track record of economic failure. No dividends.
 
David Blanchflower is the New Statesman’s economics editor 
George Osborne. Photograph: Getty Images

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 29 July 2013 issue of the New Statesman, Summer Double Issue

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.