April 25, 2018
The many numbers with which we are bombarded every day can be misleading for two main reasons. First, they can simply be wrong. The most egregious example is the £350 million per week we were told by the Brexiteers during the referendum campaign that we would save on our annual payments to the EU. It could be spent on the National Health Service, they said. The number is much lower. (I’ll provide the correct value later.) Another example is the numbers provided to justify the view that immigrants to the UK are a financial burden: the evidence, in the form of numbers, suggests otherwise.
In many cases, and certainly for both of the examples above, reliable data were easily available. However, the people propagating the wrong numbers were not interested in the truth. And people at the receiving end often do not check reliable sources to get valid information, and may even prefer numbers that confirm their preconceptions.
The second reason is where the numbers may well be correct but the context in which they are presented is not explained – this is what I’d like to explore. What do they really mean? One simple question is to ask whether numbers are big or not. They may sound big but, when put into context, may turn out to be inadequate for the stated purpose, or simply insignificant. Let’s look at some specific recent examples to see what this means.
Brexit has been a fertile source of misuse of numbers. In a speech on Brexit on the 14th February 2018, the Foreign Secretary, Boris Johnson, attempted to explain to the country why Brexit would benefit the UK. In his speech, he made the following statement when referring to regulation and its role in trade deals:
‘It is only by taking back control of our regulatory framework and our tariff schedules that we can do these deals, and exploit the changes in the world economy. It is a striking fact that our exports to the EU have grown by only 10 per cent since 2010, while our sales to the US are up 41 per cent, to China 60 per cent, to Saudi Arabia 41, New Zealand 40, Japan 60, South Korea 100 per cent.’
Let’s assume the numbers are correct. He does not, however, put them into the context of their significance to overall UK trade. In 2016, for instance, UK exports to China, Saudi Arabia, New Zealand, Japan and South Korea combined were £42.86 billion. UK exports to Germany alone were £49.12 billion. He is also cavalier with the significance of percentage increases. Thus, he cites exports to New Zealand as having increased by 40% since 2010. That brought UK exports to NZ up to £1.29 billion, which was 0.25% of total UK exports – not a big number. Exports to the USA were indeed significant at £99.57 billion, which was 19.07% of total UK exports. However, in the light of President Trump’s recent imposition of steel tariffs, revealing his economic ignorance, combined with his generally erratic behaviour, the chances of a decent trade deal with the US while he is in charge are less than promising. And finally, of course, all of the increases in UK trade with the USA and the others he cites have been achieved while the UK was in the EU.
Earlier, I mentioned the claimed UK contribution to the EU budget as £350 million per week, which we were told could be spent on the NHS. The Prime Minister, Theresa May, recently mentioned the budget contribution and suggested that we would save a considerable sum on departure from the EU. What is the real amount and how significant is it in the context of the UK’s GDP and government expenditure? In 2017, the UK’s gross contribution to the EU budget was £13 billion. The UK received £4.1 billion from the EU for public sector expenditure, giving a net contribution of £8.9 billion. In 2017, the UK’s GDP was £1,960 billion. The UK’s gross contribution to the EU is thus 0.66% of GDP and the net contribution is 0.45%. The net contribution, by the way, is thus £171 million per week, or just under half the (in)famous £350 million.
How does the budget contribution fit with UK government expenditure, as opposed to GDP? UK government expenditure in year April 2017 to April 2018 is (estimated) at £814 billion. The net contribution is therefore 1.09% of expenditure, while the gross is 1.6%.
The EU budget contribution is a very modest amount of government expenditure and an even more modest percentage of GDP. A GDP reduction of about 0.5% resulting from leaving the EU would be more than any saving made from not paying the EU budget contribution. Leaked government documents suggest that the impact will be greater than 0.5%: a difference of growth of between 2 and 8% over the next 15 years, depending on the exit scenario. It’s far from clear that new trade deals outside the EU would compensate for loss of EU trade.
Notes and sources
 Dustmann & Frattini published a detailed analysis of the fiscal impact of immigrants into the UK. The link below points to a UCL site containing highlights and a short video presentation of their findings: https://www.ucl.ac.uk/news/news-articles/1114/051114-economic-impact-EU-immigration . The full paper can be obtained at www.cream-migration.org/files/FiscalEJ.pdf .The paper dates from 2014.
 For the full text of his speech, see: https://www.gov.uk/government/speeches/foreign-secretary-speech-uniting-for-a-great-brexit
 See https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/whodoestheuktradewith/2017-02-21 for trade statistics from the Office for National Statistics (ONS) for 2016,
 Source: https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7886 The gross figure does not include the UK rebate, which never leaves the country.pbye