Our next PM must deliver on Brexit's promise – and deprive critics of an undemocratic and undeserved victory
Source - Daily Telegraph - 16/07/22
Our next PM must deliver on Brexit's promise – and deprive critics of an undemocratic and undeserved victory
Brexit has hardly featured in the race to become the next Prime Minister, but the Conservative Party is still divided on the best way forward. The new leader will be under great pressure from many quarters to keep the UK economy as close to the EU as possible, rather than pursue the ambition of a truly ‘Global Britain’. This would be a historic mistake.
Unfortunately, ‘Continuity Remain’ is alive and well, and still pushing the line that Brexit has been an economic disaster. This can be refuted simply by comparing the UK’s growth since the 2016 referendum with the big four economies in the EU, namely Germany, France, Italy and Spain. ‘Brexit Britain’ is vying with France for top spot on total growth and is sitting comfortably in mid-table on per capita GDP.
Similarly, UK inflation is little different from the average in the euro area, or the latest rate in the US. Food price inflation in ‘Brexit Britain’ is actually lower.
This leaves the relative weakness in UK trade. Even this has not worked out how the Remainers warned, because imports appear to have been hit harder than exports. This means that Brexit has, if anything, helped to reduce the UK’s trade deficit in goods.
The lack of hard evidence of real economic damage has therefore forced Remainers to rely on a number of dubious tactics. I have counted at least seven.
First, cherry picking data. In the case of prices, the fashion is to focus on ‘core’ measures that strip out food and energy. UK inflation is relatively high on this basis, but this is not unusual. It can also be explained by the relative strength of the UK economy and the UK Government’s decision to support households by topping up incomes rather than intervening to lower prices.
Second, failing to compare apples with apples. In particular, it is misleading to contrast the growth of the UK with the faster rates in the EU as a whole, because the latter includes plenty of poorer countries with more scope to catch up.
Even comparing the UK with the euro area can be deceptive, because the euro area still includes Ireland, where the GDP data are heavily distorted by the activities of multinationals. The Irish do not take too much notice of Irish GDP themselves.
Third, dodgy ‘counterfactuals’, or ‘doppelgangers’. This refers to complicated models which are used to claim that the UK economy is already as much as 5pc smaller than it would have been if we had remained in the EU. But on this basis, the UK would have grown twice as fast as France since 2016. These results fail any reasonable smell test.
Fourth, what I call ‘chart crimes’. For example, you may well have seen a chart comparing the sluggishness of UK business investment since 2016 with the strong upward trend from 2009 to 2015. On this basis, a huge gap has opened up, which is usually pinned on Brexit.
The problem here is that this assumes the period from 2009 to 2015 was normal, and that business investment could have sustained the rapid growth seen as the economy rebounded from the global financial crisis. The reality was that investment was always likely to slow. Taking a longer view, there is still a worrying gap between actual investment and its trend path, but this gap is much smaller.
Fifth, presenting mere forecasts as settled facts. For example, the OECD has projected that the UK will have the worst growth and inflation performance of any major economy (bar Russia) in 2023. But this is only a prediction, not reality. It is also easy to pick holes in the OECD’s forecasts.
The misrepresentation of the OBR’s views here is particularly annoying. The OBR has assumed that Brexit will reduce UK productivity by 4pc over the long term. But this is just an assumption, and is not based on any original work by the OBR itself. Claims that the OBR has said that the UK economy is already 4pc smaller as a result of Brexit are simply false.
Sixth, blaming everything and anything on Brexit. It is almost as if some commentators are contractually obliged to lead with an anti-Brexit angle on any story (perhaps some are). Recent examples include the record UK current account deficit in the first quarter (easily explained by non-Brexit factors), and the fall in the pound against the US dollar (the euro and yen have tumbled too).
Seventh, falling back on the straw man argument that anyone questioning the ‘Brexit catastrophe’ narrative must be denying that there has been any real impact at all. This is surely the last resort of those who know they are losing the argument.
Of course, clearly not everything is going well, and Brexit could be done better. But this does not mean re-joining the EU’s Single Market, or even just shadowing it, as some advocate. This would be “Brexit in name only”, and actually worse, since the UK would have even less say in making the rules.
Here, Remainers often say that the Northern Irish economy has recovered more quickly than the UK average from the pandemic, and that this must be due to the continued membership of the Single Market. But Wales, which also has a large public sector, has performed relatively well too.
Rather than undermining the result of the 2016 referendum and thwarting Brexit, the priorities should be to fix the things that are going wrong, starting with the Northern Ireland Protocol, and resolving the uncertainty about controls on imports from the EU. The next Prime Minister should also accelerate regulatory reform, especially in areas like financial services and biotech, and press ahead with new trade deals.
Until this is done, the battle for Brexit is not yet won. Continuity Remain could still snatch an undemocratic and undeserved victory.
Julian Jessop is an independent economist. He tweets @julianhjessop.
Comments
Post a Comment