Brexit should make us think big about how the British economy operates

Brexit should make us think big about how the British economy operates

Given the ubiquitous business warnings over a ‘no-deal’ Brexit in the media this summer, I thought it was time to put the alternative point of view. Most of the business leaders talking are from big corporate organisations, with multiple locations and who value the goodwill of the EU. As a result, they put their corporate interest before the UK national interest.

Brexit is a massive opportunity for Britain. Not just to reshape our relations with Europe and the rest of the world, but to embark on a more logical productive economic policy at home too.

So, how important is it to get a special deal with the EU? First and foremost, when we leave the EU we cannot expect to have free access to the Single Market. The EU has very little goodwill for the UK, even though the people of Europe do. The EU will not do a beneficial deal – even if the EU members also benefited. They don’t have a good record on doing the “sensible thing”. They’re totally politically motivated.

Let’s not forget that the Single Market hasn’t worked very well for the UK. We have consistently sold less to other EU countries than we buy from them. Overall it has been negative on trade for us, despite us spending billions each year to be a member.

However, it’s not the fault of the EU that we underperform on the trade front. It’s the fault of successive UK governments of all parties. These governments all have something in common; they were all very passionate that we stay put in the EU. Messrs Cameron, Clegg, Brown, Blair and Major. They believe with a passion that we’re better off being run by Brussels than from Westminster. That tells us a lot about them and it’s not good.

There can be no doubt that the UK underperforms and it is our consistent underperformance that we should address once we’re clear of Brussels’ control. This is far more important than getting a special deal, even if this is possible. Trying to get a special deal is trying to maintain the status quo.

The status quo is not good enough and we can do much better – but we need ambition, vision and leadership.

We need change rather than fiddling about at the edges. We need surgery rather than first-aid, if we want to be fairer to all British citizens.

Change in life and in business always involves some costs, but the benefits far outweigh the costs, and planning will make the process easier. The same applies to changes to a country.

No special deal means tariffs on trade with the EU. We should be negotiating these tariffs today, rather than trying to please the big firms whose main interest in the UK is to make profits from us. Having tariffs is not a big deal and, if anything, favours the UK. We need to forget about all the soundbites and look at the hard facts. We should question phrases such as ‘we need frictionless borders’ or ‘global free trades makes us all better off’ or ‘protectionism is automatically bad’.

A frictionless border sounds nice but it is a border in name only and does nothing. We need borders to protect us from unplanned migration or goods that don’t fit with our trade requirements.

Global free trade has not made the British worker better off and in the long term it will make us all poorer. Unbalanced trade and poor monetary discipline caused the last financial crisis and the next is just around the corner because the same situation continues. What if we were more self-reliant? Paying British workers to make the goods we buy from low-wage economies will cost us less in the long run because that money stays in our economy and means we can balance our books and have a stronger economy. We need an economy not dependent on selling assets and borrowing money that we can never repay. A strong economy comes from as many people as possible adding something useful.

This brings us nicely on to protectionism. It’s right to protect your economy but, of course, it’s wrong to protect inefficiency. If the only reason British goods are more expensive is because we have to pay UK wages and give UK conditions of employment then we should buy them. The total value of a country is what we collectively produce – goods and services – and everyone, whatever their ability, should be allowed to contribute. This will not happen if we have uncontrolled global free trade.

A wise man told me many years ago that we get what we inspect, not what we expect. If we measure it, it grows, so make sure you measure the right thing. Growth in GDP and the number of people in work are the government’s primary measure of our economic success. These two measures have never been higher and yet we still consume more than we produce and spend more than we earn.

The explanation is simple but ignored. We measure input and effort rather than output and value.

GDP and employment goes up when we build something or do something, regardless of the value of the output. There are a significant number of people in the UK working hard but whose output has little real value. We need to start valuing output rather than input.

The government, ably abetted by the Bank of England, has been excellent at protecting us from our poor performance and encouraging us to live beyond our means. It is worth pointing out that the Governor of the Bank of England is another passionate advocate of staying in the European Union, which must question his judgement and ability to see and understand the big picture.

We’re consuming more than we produce and the Bank of England want us to consume more. 100% wrong. They do this by printing money. If only it was this simple, we could all stop working and just print money. They also keep interest rates at ridiculously low levels.

The biggest concern, but not a surprise, is that they haven’t figured out that after many, many years it isn’t working. However, the economic reality chickens will always come home to roost. Spending more might make us feel good but will not make our economy strong. More output will. Covering our current account shortfall by inward investment (selling our assets) or endless borrowing makes the short term comfortable but the long term miserable. It’s time to face reality and live within our mediocre performance or, better still, improve our performance.

In the meantime we need to complete Brexit, which seems to be taking almost all of the Cabinet’s time. ‘Falling off a cliff’ and ‘crashing out of the EU’ are widely used terms. More accurate descriptions are that there will be a blip on the road and then smooth going rather than falling off a cliff; and rather than crashing out, we’re walking away to self-government.

One thing not often understood about tariffs is that the money charged goes to our government. We, the consumers, pay the tariffs and the government gets the cash so the overall cost to the country is minimal. Furthermore, it will result in more manufacturing in the UK to avoid the tariffs. This, in turn, will strengthen our economy, reducing the need to borrow or sell assets.

Tariffs between the UK and the EU will make little difference to trade and in any event, there is nothing we import from the EU that we cannot either supply ourselves or buy somewhere else in the world.

Take cars as an example. If the tariff is, say, 10%, it makes British cars more attractive than EU-manufactured cars. On balance the same volume of vehicles will be produced but they’ll stay in the country of manufacture, good for our carbon footprint. If we export more cars than we import, overall production may reduce but we should use the available capacity to manufacture something else we currently import and there’s lots to pick from. Our aim should be to end up with more manufacturing output than today, focusing first on supplying our home market – which is very big – and then exporting to countries in exchange for something we can’t produce, such as certain minerals or food products.

The other problem with the UK is the number of manufacturing resources that are owned by foreign companies, which only aim to make profits. The cash they invest does help our current account shortage due to our deficit, but this would not be required if we had a sound economy. The fact that their loyalties lie elsewhere can be a problem.

Brexit opens up the opportunity to think big about how our economy operates. But we need to leave first, and the heat generated by the current arguments in the media shouldn’t be allowed to distract the Government from implementing the real ‘people’s vote’, which took place on 23rd June 2016.