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The Treasury’s Brexit forecast is ludicrous. We’re better off out of the EU

4 June 2016

8:30 AM

4 June 2016

8:30 AM

Leaving the EU should boost pay and create more jobs. Spending our own money on our own priorities ensures that is true from the first post Brexit budget onwards. The dreary gloomy predictions of Remain are all based on the absurd idea that the rest of the EU will want to impose new barriers on their trade with us, and will be able to do so. As we are more the customer than the supplier and as we and they live under World Trade Organisation rules this is pure fantasy.

There is one feature of the Treasury’s ludicrous forecasts for 2030 that I agree with. They reckon the UK will be better off in 2030 than today whether we are in or out of the EU. Given the rate of technological change and the ability to work smarter and better in the years ahead, it would be surprising if we were not better off.

The issue in dispute is will we be even better off if we leave or stay? 2030 is too far ahead to be sure. Whichever route we choose, we will never be able to answer that question definitively, as the country can only live one of the two options. I do think it more likely we will be better off out, as I think the UK following an independent and outward looking global policy we will be able to adapt more quickly and positively to events. In the EU, we are being slowed down and enchained by having to agree any response with 27 other differing and bickering countries. Our trade will naturally gravitate more and more towards Asia and the Americas as the EU share of world trade continues to decline. The UK will be better able to negotiate trade deals with India, China and the others that the EU has failed to do for us during our 43 years of membership.

It is easier forecasting the next two or three years than trying to guess the longer term. Forecasting the next fifteen as the Treasury claims to do is just about impossible. Will China be the world’s largest economy in 2030, still growing well, or will there have been a China crisis as some fear? Will there be major new breakthroughs in technology, or will we still be adapting and using the main internet, materials and biotechnologies we already know about? Will the Euro be a large and more successful currency by then, or will it have collapsed completely? Will Germany being paying the bills for Greece and Portugal, or will there still be enforced EU austerity? Will the world comfortably absorb the huge supply of potential labour from the poorer countries, or will there be difficulties in spreading wealth and incomes more widely? Will political tensions in the Middle East, in the China Sea and elsewhere remain contained? These huge questions are difficult to forecast. Changing your assumptions about any of them can make a big difference to the results of the analysis.

It seems likely that if we leave the EU we can look forward to a better pay rise at the bottom end of the income scale than if we stay in. Lord Rose, the Chairman of Remain, said as much in a rare honest forecast from that campaign. Assuming a post Brexit government does take control of our borders and impose sensible and effective controls on EU migrants wanting to come to take low paid jobs, we will remove some of the downwards pressure on wages.

We will also have £10bn a year to spend at home that we have to give way to EU in contributions we don’t get back. This will enable us to hire more people for the NHS and schools who will tend to be better paid people with more skill. This also helps boost UK family incomes as we train more nurses, doctors and teachers and get them into employment.

There is also the stimulus effect of the first post Brexit budget, spending that money and removing VAT on fuel to boost people’s spending power. That too will boost incomes and help create more jobs as the money circulates through our economy instead of being paid away. The left has often called for more so called fiscal stimulus. They want the state to spend more to create activity and jobs. That is exactly what we can do if we reclaim our own money to spend on our priorities.

Large companies who say they would rather we stay in have also usually said they will continue to invest here either way. Nissan, Toyota and Land Rover have no plans to pull out if we leave. On the contrary they are committed to 5 year investment plans and to bringing new models here regardless of the vote of UK electors. HSBC announced its decision to stay in London before the vote. Anyway it was not thinking of going to a continental city, but assessing London against Hong Kong. EU regulation could become an issue making us less competitive against other non EU world cities and centres.

The UK is likely to enjoy a modest pay rise from leaving. Leaving will also cut some of the pressures on housing and public service. If house prices went up less or even got a bit cheaper, that would be great news for all those people under 40 who cannot afford a home of their own but would like one. I am sure we will be a bit better off this decade from leaving. I have little idea how much better we will be by 2030. Nor can the Treasury, who had to make large revisions to this year’s forecasts between November and March publications.


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