Follow the Bright Star!
Friday 25th November 2016: As the OBR reduces its growth forecast for next year to 1.4 per cent, the economist, Patrick Minford explains that the Chancellor should pursue the economic benefits of Brexit, and not be bound by the failed forecasting of the official bodies, in assessing this week’s Autumn Statement:
The Chancellor’s Autumn Statement was based on a false premise of the muddled economic analysis for Britain’s Brexit economy by the Office for Budget Responsibility. By accepting without question the forecasts of a body which, like most in Whitehall, is hostile to the project, the captain of our economic ship failed to take account of the optimal policies for carrying Brexit through. These are free trade with lower consumer prices and more competition, better (home-based) regulation and intelligent control of immigration to limit costly unskilled immigration.
The OBR trotted out the usual anti-Brexit Remain consensus arguments that Brexit will reduce trade, will reduce immigration generally, and will cause damaging uncertainty. Yet, as we have seen already, the effect of any Brexit ‘uncertainty’ has been minimal: the second and third quarters when it was at its maximum came in strong at 0.7 per cent and 0.5 per cent growth, within the 2-3 per cent annual rate that we were on before Brexit. There is a good reason for that: the ‘uncertainty’ consists of not yet being sure whether we will have a clean Brexit with positive results for growth or a ‘soft’ Brexit which is the status quo – some damaging uncertainty!
Reduce trade? How can opening the UK up to free trade with the whole world, including the EU, reduce trade? Whitehall is unable to grasp the idea of such free trade; somehow it thinks we cannot do it, yet the politics of free trade were demonstrated to be alive and well in the referendum when the 92 per cent of employed households outside the EU-protected sectors of food and manufacturing could see that lower prices and more competition were good for them. The other 8 per cent could also see that more competition would be good for their businesses through rising productivity: note that all the car-making constituencies voted for Leave, with good reason, given that our car industry sells two thirds of its excellent exports outside the EU on world markets.
Last, immigration. Why do latter-day Remainers in Whitehall and elsewhere endlessly bang on about the gains from immigration, which we all accept, and do not grasp that the economic problem of immigration consists exclusively of allowing unskilled immigrants on low wages unfettered access to our welfare state for themselves and also for any dependents they bring in? This problem was flagged up years ago by Milton Friedman and Gary Becker, both strong free market economists. In research that I did with Neil MacKinnon and Paul Ashton we showed on the basis of the best available Labour Force Survey data that each adult EU unskilled immigrant costs the UK taxpayer around £3500 a year; furthermore, this tax burden falls on the poorest communities where these immigrants live and, to add insult to injury, they also drive down local wages. Controlling unskilled immigration while being as liberal as now on skilled immigration that more than pays its way is the optimal policy: why does the Chancellor not assume he will follow it?
In this vital period where we prepare for Brexit, the Chancellor should recognise that he is in charge of the greatest economic office of state. He has the power to bring in the optimal Brexit policies that will spur growth. He is no mere spearhead of the Treasury’s continued campaign to frustrate Brexit, nor should he be bound by the deficient economic modelling with which he is presented. The evidence suggests that Britain’s economic future post Brexit is bright. What is now needed are all hands and minds at the pump – with a determined economic captain at the controls.
* Patrick Minford is Co-Chairman of Economists for Brexit and Professor of Applied Economics at Cardiff University, whose interests include monetary economics, macroeconomic modelling and trade economics. His publications include Breaking Up is Hard to Do: Britain and Europe’s Dysfunctional Relationship and he has also co-authored Should Britain leave the EU? An economic analysis of a troubled relationship. His most recent publication with Politeia is Trading Places: Consumers v Producers in the New Brexit Economy.