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Posted: 21 Feb 2018 09:07
Over the next few days I will share with you the text of my lecture in
Speakerís House on Tuesday evening. Today I start off by disagreeing
with the assumption that we have been winners from the single market and
we will lose from leaving it.
Let me question the thoughtless assumption of some who think this should
be an argument about trade and not about these wider truths
Let me challenge their view that our membership of the single market and
customs union has boosted our economy
They wish us all to discuss in worried tones what we might lose from
If you look out the economic growth figures for the UK you will discover
that the UK economy grew faster from 1945 to 1972 when we joined the EEC
than in the long years since we joined
You will discover that the growth rate did not accelerate again in 1992
when the EU claimed it had completed its single market
The immediate sequel to joining the EEC and to completing the single
market was the UK plunged into recession on both occasions
In 1974 it was the oil and banking crisis that affected much of the
west. Not the EECís fault, but the EEC offered us no respite from it.
In 1993 it was a recession created by European policy
Our period shadowing the DM and then as a member of the Exchange Rate
Mechanism gave us a nasty boom and bust
Our early experience of the completed single market was a 5% loss of
national output and income.
We were told then that creating currency stability was a crucial part of
a single market.
The only problem was the policy to achieve it did the opposite.
The EU itself has sought to study the impact of the single market
They concluded that the UK got the least benefit of all the states out
of the process
They said we experienced a single gain of just 1% over the whole time we
have been in the single market.
It is difficult to find even as much as that that in the figures.
Instead the UKís entry into the EECís so called common market of the
1970s speeded painful losses of industrial business in the UK
The lop sided freeing of trade, removing barriers where France and
Germany were strong but not doing the same where we were strong
hastened large closures and output losses in steel, cars and other basic
In 1972 the UK made 1.92 million cars. Ten years later in the EEC that
had fallen to a low of just 888,000.
We lost Austin and Morris, Wolseley and Riley, Vanden Plas and Hillman,
Sunbeam and Triumph, Jensen and Rover
It is true there were home made problems with the way the industry was
managed, but no-one can say we got a boost from EEC membership.
In 1972 the UK steel industry had 323,000 employees and the UK was the
worldís fifth largest producer
Today we have 35,000 and are in twenty first place
The large coal industry that produced 147 m tonnes in 1970 has seen all
the deep mines closed
with just a small residual of surface mining left
The German steel and coal industries flourished and the German car
industry exported large volumes to the UK replacing our output
EU regulations have played a part in the demise of parts of our energy
EU energy policy is turning the UK into a net importer despite being a
country rich with energy resources
In chemicals and textiles too the UK lost out to continental competition
Under Labour and Conservative governments there was a remorseless
decline of important parts of our industry throughout the period of our
It is difficult to see why people think there will be any additional a
loss of output when we leave the single market when there was no gain
from joining it
The argument seems to be based on the dubious idea that our exports to
the continent will suffer because we will find the EU impedes our access
to their market
This assumption too needs examination
Given the way the rest of the EU exports to us much more than we export
to them imposing barriers could be a more costly choice for them
I assume the UK will retaliate should the rest of the EU impose tariff
and non tariff barriers, and would match any such restrictions
Tariffs will be strictly limited under WTO rules which bind both us and
We should not exaggerate the impact moving to World Trade terms would
Many countries have increased their exports to the EU at a faster rate
from outside the customs union than we have from inside
Non tariff barriers too have to conform with the Facilitation of Trade
Agreement which the WTO brought into effect last year.
It is just possible the rest of the EU will want to punish us and punish
themselves more by imposing what barriers they can
The UK economy would have several ways of adjusting
It could import cheaper goods from the rest of the world, removing
tariffs on imports in return for free trade agreements with other
The UK could reimburse consumers and companies that had to pay the
additional tariff by giving them offsetting tax cuts out of the
substantial tariff revenue the UK state would collect
The UK Treasury would collect about £16bn in tariff revenue on EU
exports to us, giving plenty of scope to compensate. Meanwhile the rest
of the EU would collect just £6bn on our exports to them. All of that
money of course would go to the EU, not to member states governments.
UK business could divert some production from export to the EU to the
Our farms could greatly expand production behind the substantial tariff
wall that is allowed under WTO rules for food
so that we all enjoy more home produced food as we used before entry
into the EEC.
The one non farm tariff that does cause some to worry is the 10% tariff
Here you would expect the combined impact of the stronger Euro and a 10%
tariff to cause more UK car buyers to switch to domestic suppliers
Helping offset any impact on export volumes to the continent.
The UK does run too high a balance of payments deficit.
It has been persistent for many years of our membership of the EU
It is heavily influenced both by the substantial budget contributions we
have to make
and by the large deficit in goods we run with the EU
On exit we will be able to cut the deficit by no longer making payments
We will be able to rebuild our agricultural industry.
Posted: 22 Feb 2018 09:09
Why we will be better off out of the EU
Prosperity, not austerity.
That must be our aim.
Prosperity will be easier won once we are out of the European Union.
Restoring the freedoms of a once sovereign people.
That is the overriding task we face.
On June 24 2016 17.4 million voters gave a great mandate to Parliament
To take back control.
During the referendum campaign I was asked one of the questions designed
by Remain to damage the cause of freedom.
Would you, the media avidly asked, accept being poorer in order to
regain lost freedoms?
I replied that fortune meant there was no so such choice before us.
The very right to govern ourselves that we wished to reclaim will allow
us to follow policies that made us richer, not poorer As an optimist I
anticipate we will do better out than in.
No-one can be sure what
loss there might be in store if we remain in the EU
Or how many gains we will seize out of the EU.
What we do know is our fortune will rest more on our own decisions once
we are free
So let me begin my account of life after Brexit by explaining how we can
be better off.
I appreciate this will be at variance with several modelled forecasts
put out by an establishment afraid of freedom and scared of change.
It is an establishment that has a proven track record of error. They
told us the ERM would bring us a golden scenario of more growth and low
inflation. Instead it brought a deep recession.
They told us if the UK stayed out of the Euro it would be deeply
damaging to our business. Instead our business flourished with the pound
and the Euro area had several years of crises and low or no growth.
They said the big build up in debts prior to 2007 were fine because
banks had found new ways of managing risks. That forecast didnít work
out too well either.
My forecast will be criticised, for it is not backed up with a model nor
expressed in precise figures. It does however come from someone who did
forecast the ERM crisis, the problems in the Eurozone and the banking
I must warn that no-one can deliver a precise and accurate 15 year
economic forecast. I have no intention of trying to deliver one.
Too many things will change.
I can, however, point to the opportunities and the favourable changes
that we can expect in the few years that follow Brexit that will boost
whatever our growth rate then is. I do not expect a sudden fall in
growth or income thanks to Brexit. The Treasuryís short term forecasts
of such an outcome for the year after the vote have already proved wide
of the mark.
In future as in the past the main forces shaping our growth rate will be
the pace of innovation, the monetary and fiscal policies being pursued,
and the state of the world economy.
The most obvious gain that the anti-Brexit forecasters rarely put in to
their models is the chance to spend our tax money on our priorities.
The £12bn we send every year to the EU and do not get back is lost money
to the UK.
Worse still it is a large drag on our balance of payments every year.
To pay that bill we either have to borrow more money from abroad to pay
it or we have to sell more of our assets to overseas buyers, cutting the
investment income we earn on those assets.
Stopping that drag will boost our economy.
Spending the £12bn at home each year will mean more jobs and more items
bought from UK suppliers.
That will boost our economy with extra growth of 0.6% of our total
income. Thatís a one third increase in the current growth rate in the
year we start it, with the same extra output in every year that follows
In the referendum campaign I set out a draft budget to illustrate how we
might spend the money
I recommend it to the government.
I also recommend that we advise the EU that if they do not offer a wide
ranging and sensible free trade agreement anytime soon we should
discontinue payments to them on March 30 2019 and start the benefits for
There is no need for a Transition or Implementation period if there is
no good deal to transit to.
We know we can trade well under WTO rules and with WTO tariffs, as that
is what we do today with most countries outside the EU.
Out of the EU we will be free to fix and levy our own taxes.
We were told by past governments that tax was a red line issue
That we would always be able to decide our own taxes
That proved to be untrue
Out of the EU we can take VAT off feminine hygiene products
We can remove VAT from green items ranging from boiler controls to
Promoting fuel efficiency without the drag of extra VAT will help us
keep warm and be better off. We could do more to combat fuel poverty by
cancelling the VAT on domestic heating.
We can also levy the amount of tax we wish from larger companies.
EU tax judgements on UK corporation tax have made us repay tax we
thought had been fairly and legally levied.
Lowering taxes, spending our own money and boosting industries like
fishing and agriculture which have been damaged by EU membership should
add more than 1% to our output, which is more than belonging the single
market has ever done.
Posted: 23 Feb 2018 09:43
Restoring our fish and farms
Once we leave the EU we can take back control of our fishery.
There have been many EU policies damaging to jobs and incomes for the UK
but none more consistently unhelpful than the Common Fishing Policy.
We have been changed from a country with a rich fishery and a strong net
exporter of fish into a country with a badly damaged fishery lamely
importing our own fish from foreign interests that have taken it.
A UK designed policy can do better at conserving our stocks whilst at
the same time delivering more fish through UK boats to meet our needs as
consumers. The long period of forcing discards of many dead fish at sea
has pillaged our fishery in a bad cause.
If a UK fishing policy requires fishermen to land everything they catch
we will catch less and eat more, a win win for the industry, the country
and the fish.
That too will boost our economy.
Out of the EU we can restore our farms...
We have moved from 95% self sufficiency in temperate products to under
Our local supermarkets now are full of Danish bacon, Dutch salad stuffs,
flowers and vegetables, Spanish fruit and French dairy products. UK
consumers have to pay higher prices than world prices for things we
cannot grow for ourselves.
Common EU policies on beef and milk and much else have proved damaging
to UK farmers.
A UK based policy can help farmers cut the food miles and gain a larger
share of our domestic market. A growth in the UK policy will also boost
Our membership of the EU confronted us in its early days with the
abolition of tariff walls which had protected some of our industry.
Whilst leaving up barriers against services where we had a competitive
Predictably we slumped into large and permanent deficit in our trade
with the rest of the EU.
In the first two decades of our membership the UK lost large amounts of
our industrial capacity. German industry proved to be more competitive
and we turned to huge imports as we saw unemployment in our
manufacturing heartlands mount
Out of the EU we can manage our trade more effectively.