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The man who triumphed over Project Fear

How Patrick Minford debunked the Treasury’s Brexit doom-mongering

1 October 2016

9:00 AM

1 October 2016

9:00 AM

‘There was never a consensus among economists that Britain should stay in the European Union,’ insists Professor Patrick Minford. ‘That was always rubbish.’

During the heat of the referendum campaign, Chancellor George Osborne asserted it was ‘economically illiterate’ to back Leave. ‘It’s Osborne himself who is economically illiterate,’ Minford shot back.

Three months on from the UK’s EU vote, Minford has reason to feel pleased with himself. Economists for Brexit — the campaign group he hurriedly founded on a shoestring — is credited with helping to swing the result.

Yet Minford is anxious, in part about the dismal behaviour of his fellow scientists. ‘I was deeply shocked by the economics profession during the campaign,’ he says. ‘Many deliberately rigged their assumptions to generate lurid predications of economic collapse — it was outrageous.’

Minford is adamant that Prime Minister May, on the eve of Conservative party conference, ‘must get over this fixation of trying to strike a deal that won’t happen’ with the rest of the EU. ‘There is no half-in-half-out compromise — one or more members will always object,’ he argues. ‘So we should stop this talk of extended negotiation and just leave as soon as we can.’

Minford has always dealt in stark statements. He rose to prominence in the early 1980s when, as professor of applied economics at Liverpool University, he led a highly influential research group promoting monetarism — the then outlandish economic creed of tight money, balanced budgets and low inflation. When Chancellor Geoffrey Howe delivered his 1981 ‘monetarist budget’ — countering ‘Keynesian’ conventional wisdom by slashing borrowing — 364 leading economists famously objected in a letter to the Times.

Almost alone among economists, Minford backed Howe, dismissing the letter as a ‘dangerous and dishonest game’. As inflation receded and recovery took hold, the unfashionable ‘Liverpool school’ was proved right — and Minford became a trusted advisor to Margaret Thatcher. Despite his reputation as a solid forecaster, and a stellar academic publishing record, the snooty economics establishment has never forgiven him.


Now 73 and teaching applied economics at Cardiff University, Minford had disappeared from the national spotlight. ‘In 2005, I wrote a book on why we should leave the EU, updating it last year — so I felt I’d done my bit,’ he says. ‘But when I saw Project Fear, with the Treasury spouting this constant stream of propaganda, I thought “Crikey, this is my country, I need to act.”’

His eight-strong campaign group — including respected economists such as Roger Bootle of Capital Economics and Gerard Lyons, economic advisor to Boris Johnson when he was London mayor — tore into the official Brexit forecasts.

‘The Treasury analysis was deeply flawed,’ says Minford. ‘They used a so-called “gravity model”, emphasising trade with nations you’re close to and already trading with, so overstating the future importance of the EU,’ he explains. ‘They then ignored that, post-Brexit, Britain can sell to Europe under World Trade Organisation rules, just as the US and many other sovereign nations do, while ignoring [the fact of] lower consumer prices and less regulation once we’ve left.’

He pauses. ‘To get an even more alarming result, the Treasury then assumed Britain itself imposes high trade barriers, using the resulting trade reduction, in turn, to forecast lower foreign investment.’ Minford purses his lips and shakes his head. ‘Scandalous — the Treasury falsely heaping Pelion upon Ossa, putting out ultra-pessimistic GDP forecasts with absolutely no justification.’

Using their own model, Minford and his group estimated during the campaign that leaving the EU would boost UK output 2 per cent by the end of the decade. ‘Brexit was widely portrayed as an inward-looking, protectionist move, but it’s actually about expanding our overall trade.’

What of the UK’s strong performance since the referendum? ‘While Brexit hasn’t yet happened, the official analysis warned of immediate falls in consumer spending and collapsing financial markets — none of which we’ve seen,’ says Minford. ‘On the contrary, growth is holding up well.’

So was the Bank of England wrong to cut interest rates in August, making UK rates even more negative in real terms? ‘Yes — that was a mistake, not least as credit has recently accelerated,’ he says. ‘And negative rates do terrible damage, acting as a tax on banks when we need them to be dynamic, while imposing financial repression, with investors having to pay for the privilege of lending the state money.’

So how would Minford achieve Brexit? ‘Joining the European Economic Area would mean free movement of people, EU regulation and a big annual contribution to Brussels — a complete denial of the Brexit vote,’ he says. ‘So I’m glad people are starting to realise that declaring unilateral free trade is not only the best strategy for Britain economically, but the only one that can fly.’

Minford wants a short act of parliament relieving the UK of all obligations of EU membership, while carrying over EU statute applying to Britain into domestic law — so, in the first instance, nothing changes. ‘After that, we invoke Article 50 and leave, before altering EU-inherited rules as and when we want.’ This strategy provides business with ‘as much certainty as possible while being true to the electorate,’ he argues. ‘We’ll then be well placed to trade successfully with the EU under WTO rules, as do numerous other countries.’

How about those, including some UK manufacturers, worried about being exposed to the full force of global competition outside the EU’s protectionist walls? ‘Industry has to shape up and use the transition of a lower pound to move up the value-chain,’ says Minford. ‘Half our manufactured exports go to non-EU markets, so are already globally competitive — the rest can achieve that too.’

While uncomfortable for some, the ‘Minford plan’ of simply leaving and trading with the EU under the WTO’s auspices — similar to a scheme put forward by Lord Lawson and Lord Owen — has the benefit of relative simplicity. ‘We could be done and dusted within a year, perhaps sooner,’ he says.

So is Minford available if Prime Minister May wants some advice? ‘I am, but the phone hasn’t rung yet,’ he says with a mighty laugh. ‘They say I’m not a team player, so I doubt it will.’

Liam Halligan is a writer with the Sunday Telegraph.

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