Treasury

The existence of the Laffer Curve can be proved by thought-experiment alone. If a government levies an income tax rate of 0 per cent it will raise zero revenue. If it levies a rate of 100 per cent it will also raise zero revenue, as no-one will bother to earn any money – or at least declare any earnings. Somewhere between those extremes lies an optimum point at which the tax-take reaches a maximum value. Trouble is, no-one really knows where the peak of the Laffer Curve lies for income tax, or for any other tax for that matter. George Osborne asserted that – at least for income tax in

In the run-up to the referendum, the Treasury warned that unemployment would rise by half-a-million. Today, this prophecy comes in for criticism in the papers following yesterday’s news that the number of Brits out of work had tumbled to an 11-year low. It’s not only Project Fear which gets a hard time in the editorials though. The moaning ‘anti-Brexit mob’ are also criticised – while the Guardian savages Boris Johnson for making a ‘fool of himself’. The Sun launches an attack on the moaning ‘anti-Brexit mob’ in its leader this morning, saying that it seems that the better the economic outlook since the referendum ‘the louder the caterwauling’ from those unhappy with the

So now we know. The recession that we were told would be ‘inevitable’ if we voted to leave the EU was not quite so inevitable after all. In fact, it hasn’t happened at all. The Office of National Statistics’ first estimate of economic growth for the third quarter has the economy growing by 0.5 per cent. Though this is just an early estimate and could well be revised – revision upwards or downwards of 0.1 to 0.2 per cent are perfectly normal – it is certainly not indicating a recession, which would be two quarters of negative growth. It is pretty much in line with how the economy was growing

Can someone please tell HM Treasury that the referendum is over? During that campaign, it made history by producing a claim that Brexit would make people £4,300 worse off per household. It was nonsense, debunked here at the time. It was not just a porkie, but a historic porkie: polls showed just 17 per cent believed this figure, around the same number that think Elvis is still alive. Even Sir Will Straw, head of the Remain campaign, admitted later that his case was actually damaged by this ridiculous campaign. The Treasury ought to be holding an inquiry into how such a wilfully misleading figure was eve produced by the civil service,

The Brexit bounce continues. HM Treasury has today released forecasts of the economists it follows, as it does every month. Last time, there was a flurry of downgrades and forecasts of an immediate recession. Now, these forecasts are being torn up by everyone, including by the FT (although you can bet the FT won’t report on the upgrades as eagerly as it did the downgrades). The average new forecast suggests GDP will grow by 1.8 per cent this year, far better than the 1.5 per cent forecast last month. This back to where the consensus was before the Brexit vote. The OECD, which had previously predicted “immediate” uncertainty after a

George Osborne has turned his back on ‘Project Fear’ after finally breaking his Brexit silence. The aim of his speech this morning was all about reassuring the financial markets before they opened. To help him do that he reeled off a couple of sound bites about how Britain was open for business, how it ‘will not be plain sailing’ but that it was a good job we’d ‘fixed the roof’. The Chancellor also said that whilst this ‘is not the outcome I wanted or that I threw everything into campaigning for’, ‘the people have spoken’ and we must all accept that result. But what was more interesting was what wasn’t

The Bank of England’s decision to keep interest rates pegged at 0.5 per cent won’t surprise anyone. What is more interesting, after today’s row involving Mark Carney, is how much the Bank had to say about the EU referendum. Brexiteers hoping Mark Carney and the BoE’s Monetary Policy Committee would keep quiet about next week’s vote will be disappointed. In its meeting minutes, the MPC gives it both barrels when warning about the dangers of Brexit. The MPC says a vote to leave would send sterling’s exchange rate tumbling. It goes on to add that: ‘As the Committee set out last month, the most significant risks to the MPC’s forecast

The Treasury says that the cost of the UK leaving the EU would be £4,300 per household – but compared with what? We’re not told. As a cross-bencher, I naturally take very seriously the task of checking and challenging the work of the government so I put down two Parliamentary questions which eventually elicited the response that: ‘HM Treasury did not produce a forecast of how big the economy would be in 15 years’ time….’ Really? A whole report about the impact of Brexit by the year 2030, taking in hundreds of different factors – but no estimate about how big the economy would be by then? Why on earth not? The

The Commons may have rather big legislation to debate at the moment, but the government itself seems to have tuned out until after the referendum is over. There was no Cabinet meeting this morning, and ministers are busy fighting one another at campaign events, rather than bustling about in their departments. Even departmental question sessions have changed from being an opportunity for backbenchers to ask questions about the work of Whitehall and ministers to session where the two camps in the EU referendum work together to get their messages into Hansard. Treasury questions today was a prime example. Yes, there were questions about the Northern Powerhouse and cuts to disability

Leaving the EU should boost pay and create more jobs. Spending our own money on our own priorities ensures that is true from the first post Brexit budget onwards. The dreary gloomy predictions of Remain are all based on the absurd idea that the rest of the EU will want to impose new barriers on their trade with us, and will be able to do so. As we are more the customer than the supplier and as we and they live under World Trade Organisation rules this is pure fantasy. There is one feature of the Treasury’s ludicrous forecasts for 2030 that I agree with. They reckon the UK will

The Treasury’s analysis of the short-term impact of Brexit offers us two scenarios for the two years following the referendum: a base ‘shock’ and a ‘severe shock’ scenario. The base case means 3.6pc less economic growth in the two years following Brexit, with inflation up 2.3 percentage points and house prices down 10pc. A first thing to grasp is the connection between the scenarios in this report and those in the previous Treasury report on the longer-term impact of Brexit. In its long-term impacts, the Treasury had three scenarios, for each of three options it claimed the UK had for its trade arrangements post-Brexit (all of which were very unlikely): an ‘EEA’ option; a ‘Canada’ option

We’re now at the stage in the EU referendum debate where every announcement is explained in terms of its relationship to Brexit – whether relevant of not. So today we learn that inflation is still flat, dropping to 0.3pc in April. As per usual. But bizarrely, the Treasury is pretending that this tell us about the misery coming our way if Britain walks away from Europe. Here’s what a Treasury spokesman had to say about the figures: ‘Today’s inflation figure continues the trend we’ve seen over the past year. Pay is growing faster than prices, boosting families’ spending power. Last week the Bank of England’s Monetary Policy Committee warned that a vote to leave

Another day, another warning about the economic bombshell which would follow Brexit. This time it’s the turn of the IMF. In a press conference at the Treasury, Christine Lagarde spoke of the outcome of a vote to leave the EU ranging from ‘bad to very bad’. Whilst the IMF’s report said: ‘A vote to leave the EU would create uncertainty about the nature of the UK’s long-term economic relationship with the EU and the rest of the world. A vote for exit would precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output.’ George Osborne was clearly grateful for the support of the