The Civil Service and their allies in the CBI, the IFS and so forth – all of them united against Brexit – are determined to convince this Government that Brexit will be a disaster, in effect inaugurating another period of austerity. This is a disgraceful conspiracy against our democracy, and our analysis at Economists for Free Trade has already shown that these gloomy projections are based on false, indeed absurd, assumptions.
The facts already betray the truth: that our public finances are improving sharply and will continue to do so increasingly as the opportunities presented by Brexit are grasped. Public debt as a percentage of GDP peaked at 82 per cent at the end of 2015 and is already down to 76 per cent. The gloomy projections of the Office of Budget Responsibility that it would rise in the past year with borrowing of £49.9 billion have been proven wrong – in fact borrowing was, as we predicted, only £39.5 billion, so the OBR overestimated it by a quarter.
Looking ahead, Brexit will bring free trade for us with the world outside the EU and it will allow us to set our own pragmatic and beneficial regulations for the 88 per cent of the economy that does not trade with the EU. We will also stop subsidising a huge inflow of unskilled EU workers with our state benefits, and we will not be sending money to Brussels. Between all these shifts in policy, our economy will be boosted over the next decade and a half by 7 per cent, equivalent to 0.5 per cent extra growth on average each year, consumer prices will come down by 8 per cent and our Treasury revenues will rise 10 per cent.
We would plainly like, as common sense dictates, to do a free trade deal with the EU as well – that would be best for the EU and we would welcome it too. Provided Mrs May plays her cards toughly and sensibly, as she surely will, that deal should emerge blinking from the Brussels negotiating chambers, even if only at the eleventh hour. However, our analysis again shows that we will be as well off with no EU deal under WTO laws, under which the much-chattered-about ‘cliff edge’ is simply and totally illegal. The ones who would suffer would be the EU as they would get no money from us on departure and would face punitive UK tariffs.
All this means that the steady improvement in our public finances will accelerate in the coming years, enabling us to get to a safe debt percentage of 60 per cent within eight years and still end austerity with a bang.
In our recently updated Budget for Brexit, Economists for Free Trade projected that by 2026 public debt would have fallen to 51 per cent of GDP with no extra spending or tax cuts, well below that safe target. It means the Government can safely spend £25 billion extra a year from 2020 and another £40 billion a year extra from 2025 – and still meet that 60 per cent target by 2026.
Look at what this means. Mrs May has announced a £20 billion rise in the NHS budget. This still leaves £5 billion for other spending rises or for tax cuts from 2020. But there is scope for more in years beyond. £40 billion a year more by 2025, or a slightly smaller boost sooner.
Cabinet ministers should be blessing, not fighting, this projected turn of events. Austerity can be halted and we can return to an economy where necessary projects can be funded – whether it is the NHS, defence, the police, or anywhere else in the public services – and where we can also cut taxes to ensure that we remain the most competitive place in Europe to do business.
I say to Cabinet ministers: don’t fight, rejoice!
To read Patrick Minford’s piece for BrexitCentral in full, click here.