Brexit myths debunked: Why leaving could be good for GDP
Conventional commentariat wisdom has it that the EU referendum pits those concerned about economics versus those concerned about immigration. But a quick perusal of the leading intellectual voices supporting Leave shows this is nonsense. Many have long thought the UK outside the EU would not only be more free and democratic, but more prosperous too.
That’s why a group of eight economists (including professor Patrick Minford, Capital Economics’s Roger Bootle, Dr Gerard Lyons and me) have got together to launch “Economists for Brexit”. Each of us has our own views on the short-term implications of leaving. Where we all agree is that, provided the UK adopts sensible policies outside the EU, there is no reason why we cannot enjoy more robust growth than if we remain in. This positive economic case for Brexit is not currently being heard.
In the Treasury’s official forecasts published last week, George Osborne just assumed away any benefits of leaving. In the scenario where we had a Norway-style relationship and could sign our own free trade agreements, he assumed we’d sign none. We’d fail to harness opportunities for deregulating under Canadian or World Trade Organization arrangements. If we did not agree a trade deal with the EU, Osborne assumed we’d increase protection rather than go for unilateral free trade. And the government assumed the EU remained the same – ruling out the possibility of the UK being subservient in an EU dominated by Eurozone interests with deepening integration.
Perhaps under an Osborne-led Britain, we would not be able to reap Brexit benefits. But just because the chancellor wouldn’t do the right things, it doesn’t mean the options are not there. We will put forward the case for an open and globalist Britain – with free trade as wide as possible and sensible economic regulation. We’ll also seek to debunk myths peddled by the Remain campaign.
The first is that the EU is “good for jobs”. Given three of the four European countries with the highest employment rates – Iceland, Switzerland and Norway – are not actually in the EU, and Greece and Spain have unemployment rates over 20 per cent, EU membership is clearly neither necessary nor sufficient for a healthy labour market. What really matters is domestic policy. And what is clear is that a vote to Remain will give the green light to further harmonisation of social, employment, tax and regulatory policy – risking abandonment of more liberal policies that have facilitated robust job creation in the UK.
Perhaps the most laughable claim is that the EU delivers “lower prices”. The EU by its nature is a customs union – creating a protective wall around the Single Market which, coupled with other non-trade barriers against non-EU countries, substantially raises prices for agricultural and manufactured goods. Estimates by Patrick Minford suggest electrical machinery is 24 per cent above world prices, cars 22 per cent and furniture 54 per cent. Paddy Ashdown let the cat out of the bag last week by moaning that Brexit would deliver “cheap food”. Heaven forfend! And add to this the economically disastrous renewables and biofuels mandates which drive up energy and food costs further.
A third myth is that the EU has been good at delivering free trade deals. Managing the competing interests of 28 member states means we shamefully still do not have free trade with obvious allies and mature economies, such as Japan, Canada, Australia and the US. These have been delayed by objections from countries elsewhere in the EU, not us. And despite all we hear about the importance of being in a big bloc, smaller independent countries such as Iceland (China) and Switzerland (Canada, China, Japan) have signed important FTAs that we do not have.
A final myth, that the mere existence of our group should debunk, is that there are no economists or economic studies favouring Brexit. Many important studies, from the mayor of London’s economics team, Capital Economics, Open Europe, the Centre for Economics and Business Research and the IEA, have suggested that there would be no long-term material losses from Brexit, and in some cases gains. Well-known figures, such as former Bank of England governor Lord (Mervyn) King, have said that our leaving the EU is not primarily an economic question, with the impact of leaving greatly exaggerated.
The Leave campaign, therefore, should not be afraid of taking on Remain on the economy.