As the UK prepares to leave the European Union on January 31, there are two important issues still unresolved: the monetary cost of Brexit, and the future of UK’s trade relations with the EU. Surprisingly, Sajid Javid, the British Chancellor of the Exchequer, who is in charge of the finance ministry, has not been shy of voicing his strong reservations about evidence-based policymaking, and has time and again articulated his lack of trust in data and economic forecasts to guide strategic negotiations, and during the national debate on Brexit. One cannot, therefore, doubt that future trade negotiations and talks on various aspects of the mutual regulatory framework are going to be tricky.
A key role in shaping the UK’s post-Brexit policy and strategy will be played by Chancellor Javid, who has been very sceptical of any attempt to narrow down the uncertainty surrounding the economic cost of the break-up, and has in the past shrugged off questions on the national debt and the GDP. Last May, when he was the Home Secretary in Theresa May’s cabinet, he criticised other ministers for their focus on the costs and benefits of Brexit. “We’ve been in office for nine years now, and I’ve noticed a growing perception that we view the country through a lens of spreadsheets and efficiency savings,” he said at the Welsh Conservative Party conference, while he was the Home Secretary.
Javid stands in sharp contrast to his predecessor Philip Hammond who was referred to by his colleagues as “Spreadsheet Phil”, for his adherence to facts and estimates of the economic impact of Brexit. Hammond was known to be a politician who wanted the facts to come out when the British citizens were weighing the pros and cons of leaving EU. He faced a pushback within his own party from the hard-core Brexiteers keen to keep the public focused on only the beneficial effects resulting from the break-up with the EU.
We all remember the case of the former Brexit Minister David Davis who inveighed against economists for their unfavourable econometric forecasts on the impact of Brexit. Davis not only expressed his distrust of the statistics that economists sometimes come up with, but also blamed them for the financial crisis of 2008 and mocked their inability to forecast it.
Incidentally, Javid’s disdain for spreadsheets, an electronic tool that plays an important role in policy discussions involving data on costs, losses and rates of return resulting from policy actions, is not very unusual. It is, in fact, a widespread sentiment not only among British politicians but also in many other countries. Spreadsheets are, in this instance, a proxy for model-based forecasting, data and fact-based decision-making, econometric analysis, and sensitivity analysis that are often used in financial institutions.
Sajid Javid belongs to a coterie of politicians who want the public to believe what they say regardless of whether there is any hard evidence to support it. “Trust in democracy and bringing an end to the division that has characterised this debate over the past three years, is something that cannot be measured solely through spreadsheets or impact assessments, important though they are,” he wrote in a letter in October in response to a parliamentary committee’s request for an economic analysis of Boris Johnson’s Brexit deal. “Evidence is superfluous to good policy making,” Javid said.
This disregard for data and facts runs through the vein of many politicians on both sides of the Atlantic. In the USA, for example, President Trump dangled the prospect of greater investment to get his 2017 tax cuts passed in Congress. He and the Treasury Department shunned any realistic assessment of the impact of the massive tax cuts which were a bonus mostly for the upper-income classes. A new Congressional Research Service report finds that the 2017 Tax Cuts and Jobs Act had little measurable effect on the overall US economy in 2018. “And, no, the tax cuts didn’t come remotely close to paying for themselves by turbocharging the economy as President Trump repeatedly promised. This was a surprise to few, since most independent analysts predicted more than a year ago that the law would have little economic impact,” wrote Howard Gleckman, Senior Fellow at Tax Policy Center, a think tank at the Brookings Institution in Washington, DC.
Public debate on many important issues in the USA these days is surprisingly devoid of any reference to hard data and evidence. Take the case of immigration policy, where politicians on both sides of the debate do not share critical information with the public. Blaming the immigrants for any economic issue relating to jobs or crimes has been an American pastime for some time and has been quite common recently. President Trump has frequently railed against immigrants for negatively impacting the economy and national security. He declared in a well-quoted speech, “I want people to come into our country in the largest numbers ever, but they have to come in legally.”
“Working-class Americans are left to pay the price for mass illegal immigration: reduced jobs, lower wages, overburdened schools, hospitals that are so crowded you can’t get in, increased crime, and a depleted social safety net,” Trump said on another occasion. However, immigrants were only 15 percent of the population in 2019 (according to Migration Policy Institute), and more than 75 percent of the immigrants arrived legally. The public perception of immigrants and their role is highly skewed because politicians will just give the thumbs down to facts and truths when they are running for elections.
Three Harvard University economists released a paper last June that looked at immigration in multiple countries and concluded that native-born Americans overestimate the prevalence of immigrants. “These Americans estimated, on average, that legal immigrants made up 36 percent of the US population, more than triple their actual share. They thought that immigrants were less likely to work and more dependent on government aid than immigrants actually are—and these stereotypes made them less supportive of social programs that might aid immigrants.”
“We were surprised by how much of a misperception there was about the level of education, income and contribution to society that immigrants give,” said Alberto Alesina, Nathaniel Ropes Professor of Political Economy at the Department of Economics at Harvard, an economist who co-wrote the paper.
Dr Abdullah Shibli is an economist and works in information technology. He is Senior Research Fellow, International Sustainable Development Institute (ISDI), a think-tank in Boston, USA.