The Treasury wants to keep the lid on public spending and limit tax giveaways until UK public finances are sound. This is a good aim, since the Government’s debts are about 80pc of our national income when you strip out the effects of the Bank of England’s operations in the money markets and the debt of RBS.
But in March 2019 we formally leave the EU ; and probably by mid 2020 we are out of the transition period. We must have the right policies to make sure the economy thrives. For that the Treasury needs to have a positive mindset. Unfortunately, it seems quite determined to take the gloomiest view possible.
The Treasury has not retracted the assessments of Brexit it made before the referendum: long-term, that GDP would be reduced by any Brexit, most of all (7pc) by a clean Brexit with no EU trade deal, and short-term, that there would be a sharp and immediate recession. The short-term one has already been contradicted by events: the UK is still growing well. The long-term assessment has come under widespread attack; its protectionist assumptions are contrary to the Government’s trade policies, and its empirical work was largely based on non-UK experience. Neither the Treasury nor the Chancellor have replied to these crucial criticisms.
Against this depressing background the Economists for Free Trade group has felt it necessary to do its own assessment of the budget outlook up to and after Brexit. There are four main reasons why we take a much more upbeat view of the future for the economy and the public finances.
To read Patrick Minford’s piece for the Daily Telegraph in full, click here.