Jacob Rees-Mogg MP will deliver the keynote speech at the Economists for Free Trade ‘Budget for Brexit’ report launch tomorrow (11am, Tuesday November 14th at 10-11 Carlton House Terrace, London, SW1Y 5AH).
Mr Rees-Mogg will draw on the Economists for Free Trade report to set out how he thinks the Chancellor should use the Budget next week to prepare for Brexit.
In an extract from the speech, Mr Rees-Mogg will say:
“The Chancellor generously asked for ideas for his Budget, so with the help of Patrick Minford, I am delighted to offer some suggestions that are positive and will contribute to a bold Brexit.
Post-Brexit Fiscal Freedom
“At the heart of these forecasts is the fiscal reality that by taking a more optimistic view of the growth consequence of Brexit, based on the static and dynamic stimulus from classic free trade and combine this with continued restraint in public spending, then when post-Brexit fiscal freedom opens up public spending net borrowing (PSNB) moves into steadily increasing surplus from 2021 and a public sector debt to GDP ratio of 60% by 2025.
“These forecasts quantify what we call post-Brexit fiscal freedom of £135 billion between 2020-2025 and a further £40 billion per annum between from 2025 onwards. This includes the £10 billion a year saved by not having to make contributions to the EU budget.
“These forecasts provide head room for fundamental change in fiscal policy and the first thing to do as a matter of prudence is to allocate sufficient funds to prepare us to leave the EU without a trade deal. The Chancellor has so far made £250 million available this ought to be increased to £500 million with a contingency fund of £2 billion for other matters that may arise. This will probably not be needed and can be added back to sums already referred to.
“This Budget marks a real opportunity for a turning point in the conduct of fiscal policy in the UK. Brexit provides the chance to signal to the world that Britain is open for business and that this Government is going to make the UK one of the most competitive economies in the world.
“Most importantly, from the 29th March, 2019 all tariffs on goods imported from anywhere in the world will be zero rated immediately if the UK has no domestic production on any significant scale or if the tariff rate is below 15%, in which case domestic producers have already benefited through the fall in the pound to compensate them for the removal of tariffs. Many of the tariffs in the customs union protect inefficient continental manufacturing or agriculture that has no benefit for the UK consumers or businesses. In the long-term, protections harms the businesses it purports to help so other tariffs will be phased out.
“This will help the poorest consumers most as the highest levies are applied to food, clothing and footwear which take a larger percentage of the lowest income. The revenue cost is low, in the region of £3-4 billion, leaving most of the £135 billion available in 2020-2025 and the £40 billion thereafter intact as well as providing a major boost to the economy.
“This group believes that Brexit will be overwhelmingly positive for the UK economy providing we do the right things. The most important are: to bring down trade barriers with the rest of the world; to reduce excessive regulation of the economy and to refashion the regulatory system imposed on us because of EU membership into a system better suited for the UK; and to reduce the burden of taxation on both businesses and individuals.
“This is a free trade approach that focuses on consumers not producers; one that will generate gains to consumers seven times the cost to producers. This is a classical view of the world that has economic history and the latest economic modelling on its side. This is a free trade approach to Government which believes Britain’s greatest days lies before it and not behind it.
“The results of these ideas will be an intensification of competition in the UK economy which will improve the UK’s productive performance. I confidently believe, therefore, that over the medium term the UK’s fiscal prospects are much better than those that will be revealed to you soon in the OBR’s short-term projections. It does its work worthily and reputably, but on the basis of false assumptions given to it by the Treasury.”