Carney’s errors

Soon after he became his party’s leader, David Cameron spoke dismissively of Conservatives who ‘bang on about Europe’. He had a point. The subject has a peculiar ability to turn intelligent people into crashing bores who obsess over Europe to the exclusion of all else. Often, the subject warps good judgment. Since the referendum, this phenomenon has become much worse.

Take the Bank of England governor, Mark Carney. Twice this week, he has claimed that households are £900 worse off as a result of the referendum. Why? Because his officials had overestimated salary growth, and he sees the Brexit vote as an explanation for their error. This is odd. Given that the Bank has been getting its forecasts wrong for years, why blame Brexit?

But Mr Carney is right in one regard. Almost two years have passed since the vote, so we can now look at forecasts made at the time and compare them with the outcome. And, perhaps, see if there are lessons to learn.

In a speech this week, Mr Carney boasted that the Bank of England’s Monetary Policy Committee had predicted a drop in the pound after the referendum. “That is exactly what has happened” he said. But he didn’t mention its other forecasts.  Take, for example, its post-referendum forecast that exports would fall by 0.5 per cent in 2017 – a baffling assumption given that the (welcome) fall in the pound was always likely to boost exports. In fact, exports went on to rise by 7.2 per cent. Carney’s forecasters also envisaged a 2 per cent drop in business investment. The opposite happened: it rose by more than 2 per cent. Foreign direct investment also hit a record high.

The Bank’s rather hysterical claim that up to 10,000 City jobs would be lost before Britain leaves the EU now seems to be twice the real number, perhaps more.