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Disresponsibility

Special Reports

I recently started musing about what it takes to be an expert witness – from which I started musing on what it means to be a professional. Many groups and individuals use the term “professional” with little justification. While my source, Webdictionary “Lexico” is broad regarding the adjective (engaged in a specified activity as one's main paid occupation rather than as an amateur - "a professional boxer"), it is more restrictive regarding the noun (a person engaged or qualified in a profession - "professionals such as lawyers and surveyors").

I would maintain that a professional is more than just being paid for what you do. I would say that the acid test is the nature of professional requirements. There are things that a true professional must do. There are things that he or she must not do. There are professional bodies set up to ensure that those things are or are not done. Finally, there are disciplinary sanctions, up to the level of expulsion, for transgressors.

However, being a member of any profession is not a necessity for being a good expert witness. In my main field, pensions on divorce, there are many actuaries who act as expert witnesses. There are also former actuaries, and non-actuaries. These, in my experience, all provide excellent support for the Court.

This issue came to mind when I was reading about the Treasury’s Brexit forecasts. These had been provided by Government economists, and generated controversy amongst other senior economists, as a letter from them to the Treasury Select Committee shows:

The text was as follows:

The Rt Hon Nicky Morgan MP

Chair, Treasury Committee

House of Commons

London SW1A 0AA

Dear Ms Morgan

It is evident from both oral and written evidence submitted to the Committee that there is widespread unease about the very negative post-Brexit outcomes predicted by the Treasury’s economic model, as published on November 28th. While the Treasury made some effort to explain its approach, this explanation does not permit even experienced macroeconomists to understand how the model works and what the impact of alternative assumptions might be.

These economic projections have been a key part of the Government’s rationale for its Brexit proposal and are influencing this critical once in a generation debate. It is vital that Parliament and the public have an opportunity to understand the basis for the model’s conclusions in greater depth than afforded by the report and, particularly, how different assumptions to those used by the Treasury would alter the projected economic outcomes.

Therefore – as a broad group of economists with both Remain and Leave inclinations – we believe the Committee should discharge its responsibility for scrutiny by recommending that the Treasury make its model available to qualified independent economists who can review the Treasury’s conclusions and assess how different assumptions might change these conclusions.

If you are in agreement with this, we are available to advise on how this might best be organised.

We look forward to an early reply.

Yours sincerely

The letter was signed by 26 eminent economists, which included both Remain and Leave supporters; and such leading lights as Roger Bootle, Tim Congdon, Patrick Minford and Andrew Sentence. *

From a professional point of view, this is quite shocking. Imagine that these 26 are the disciplinary committee of a professional body. No real professional could turn around and say “These are my results, and I’m not telling you how I got to them”. In the medical profession, you would be regarded more as a witch doctor than a real doctor! However, in these forecasts, professionalism is replaced by political patronage and Treasury economists’ reputations for “cleverness”.

Economic modelling is not very different from actuarial modelling. I have carried out much of the latter: where you use it to establish capital requirements and solvency assessment for life assurance companies. The main thing that you learn is that small adjustments to the assumptions can engender significant changes in the results.

The bitterness of the Brexit fight was horrendous, with each side making clearly exaggerated claims, and rubbishing those of their opponents. As the Government was campaigning heavily for Remain, supportive forecasts were clearly seen as Government propaganda, which may have contributed to the result. Imagine an expert witness giving evidence in court, and refusing to reveal, under examination, how they arrived at their results. They would be thrown out of court, seen as “Hired Guns”, and their credibility seriously compromised.

Had the Treasury’s modelling assumptions and methodology been published prior to the 2016 referendum, and debated on a more open manner, it is possible that the Government’s position would have obtained more support – and, in any case, the debates three years after the event would be less vituperous.

This way of operating, which treats secrecy as essential, provides the title of this article. Disresponsibility is more than the lack of responsibility – it is a deliberate separation of actions and any possibility that individuals have to take responsibility for those actions. “The Secret Treasury” was the title of the autobiography of the Treasury, written in 2000 – and the only real secret is that the Treasury clearly commissioned and wrote it, rather than its purported author, Lord David Lipsey.

My interest in this behaviour started in January 2018, with the far-reaching declaration of insolvency of Carillion Plc. The audit trail led to an anonymous paper, written by the Treasury in 2006, which facilitated the language supporting the viral mis-selling of “interest rate hedging” by banks to corporates. This exacerbated the depth and duration of the crash, and doubtless contributed to a sub 1% UK Base Rate for ten years. No personal responsibility was ever assigned to the person who provided this “advice” (nothing is ever checked in the Treasury) – nor will it ever be.

The syndrome is not limited to the Treasury. The essay on Dominic Cumming’s Blog, “The Hollow Men 2”, describes how in the Department of Education, there was the following:

• no effective chain of command,

• expensive and time-consuming errors were frequently made

• anyone seemed to be allowed to issue a press release, without peer review

• which might contain all sorts of clearly wrong information,

• any attempts at addressing incompetence was determinedly blocked

• if the miscreant had moved to another department, it would be regarded as impossible.

Disresponsibility. Pure Disresponsibility.

Any public utterances from civil servants, who appear regularly in the national press, bemoan the loss of so many staff via redundancies, and how difficult things are afterwards. Of course they are! If incompetent staff are protected and disguised, the inevitable culls will not be able to discriminate between good and bad staff. The result will be no improvement in quality, and mediocrity reinforced.

Dominic Cummings’ background was from a business start-up – where energy and accuracy are essential – but professional firms demand no less. A friend of mine used to be a partner in an electrical engineering consultancy. His work in his younger days was regularly “red penned”, torn to bits, and he was told in no uncertain terms that a higher standard was demanded – which he strove for, and finally achieved. In my pre-qualification days, my attention was drawn in 1989 to my not reserving for Guaranteed Annuity Rates in a small life fund valuation. Interest rates were around 13% pa, and the guarantee was at 8.5% - way below. I learned my lesson. The Equitable Life’s Roy Ranson decided that he could take a bet on GARs – and he was supported by the Treasury agency that was supposed to be supervising their solvency (The Government Actuaries Department). We all know the result.

This is not to say that economists or civil servants cannot have professional standards imposed upon them. In 1997, Gordon Brown took control of short term interest rates away from the Treasury, and passed it to the Bank of England. Regional centres were set up to inform a group of nine independent economists, who voted on whether to change Base Rate every six weeks; with the twin goals of facilitating economic growth, and containing inflation. If inflation exceeded target, the Governor had to write to the Chancellor, explaining why this had happened. The Office of Budget Responsibility was set up with the aim of “depoliticising” forecasting prior to Brexit – but was only supposed to work on forecasts generated by the Government’s current economic policy. The Treasury was then convenient to produce the forecasts that David Cameron and George Osborne wanted.

Real professionals, whether expert witnesses or not, have to make decisions which, albeit difficult in practice, are simple in principle. Consult your professional standards, and your conscience. Be aware of how your work might be criticised in the future, possibly under hostile examination. Then you can sleep easily in the knowledge that your professional duties have been well discharged.

Article by Peter Crowley FIA BSc MEWI

Managing Director

Windsor Actuarial Consultants *

https://order-order.com/2018/12/10/remain-leaveeconomists-pressure-treasury-reveal-project-fear-models/

 

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