For the best part of a decade the Tory mantra has been that they’re the only party we can trust with the public finances. No longer. Sajid Javid has announced that the government’s prized fiscal rules are being torn up to accommodate a £20 billion post-Brexit spending splurge.
Under the old rules, the government set three targets for itself. First, it would balance the budget by 2025 or so. Second, it would get borrowing under 2% of GDP. And third, it would get the national debt falling as a percentage of our economy. Sticking to these targets was the centrepiece of Tory economic policy – until Brexit threatened to derail the whole business.
Faced with a shrinking economy, the prospect of missing their targets, and an electorate to please, the Tories have decided to junk these rules and draw up new ones. Now they’ll aim to balance part of public spending and revenue, but borrow up to 3% of GDP for investment – and they’ll run up public debt into the bargain.
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It may be a little embarrassing for a party that’s spent 9 years telling us the deficit is a national emergency to change tack and declare that austerity was a political choice, but it isn’t beyond reason: there are plenty of economists who think the original targets were too strict.
What’s harder to understand is why, if the Tories wanted to be known as sensible guardians of the economy, they haven’t scrapped Brexit instead. That would boost growth straight away – and give the government room for spending under the existing rules.
How much room? Let’s put together a rough estimate. In the long run, the economy will be 3.5% larger if we stay in the EU, according to the National Institute for Economic Research. That lets the government borrow more because the economy is larger, and also increases tax revenue. Together, that would let the government spend an extra £28 billion without having to worry about their old 2% deficit target – an even more generous increase in funding for infrastructure and schools, and one that’s better for the country as a whole.
If you want to improve public finances, don’t vote for the Tories to scrap the rulebook. Vote to scrap Brexit instead.
Calculations for the spending figure
Revenue is approximately equal to 37% of GDP. The government’s old rule is that the deficit must be at most 2% of GDP. Therefore the maximum allowable spending – unless taxes are increased – is 39% of GDP.
GDP is expected to 3.5% higher if we stay in the EU. GDP is £2.061 trillion. Multiply this by 3.5% and 39%, and you get £28 billion.
Edited by Hugo Dixon
There is of course no sensible argument economic benefit to Brexit. I have talked to many Brexiteers over the last 3 years and so far not met one (out of dozens) who could tell me what they pay personally for EU membership, or name a tangible economic benefit of leaving. So no way did 17.4 Million people know what they were voting for. It is the biggest bullshit project ever foisted on the British Public with nearly every country that has anything to do with us seeing it as a sign of collective madness. Trump wants it because he likes the idea of us being a weakened negotiator (watch the Channel 4 ‘Dispatches’ program from last week if you doubt this) and Putin likes it because he just wants to see the EU handicapped. Johnson is quick to point out Labour’s socialist agenda, but he is sitting on report about Russian interference in UK Referendums and Elections, and his party is happy to take money from wealthy Russian Donors.
I fear Javid’s so called spending spree is only an attempt to convince the public what a success Brexit is. Of course in the long run its you and I that pick up the tab for this whitewashing game, but the Conservatives have played tricks like this for more elections than I care to remember. Our current interest payment on national debt is about 4 times our EU contribution, but you can bet they will not be highlighting that. They work on the assumption that the average voter is barely numerate and has the memory of a goldfish and therefore think can get away with it. The biggest threat to the Hard Right is people who can think for themselves without the help of the Daily Mail.
Tony, you need to understand that the desire to leave the EU has been driven primarily by the useless progressive politics that has infected this country and across western society. Ordinary working people throughout society no longer feel in control of their lives but feel it has all been hijacked by unaccountable administrators. Politicians for years (turbo charged during the Blair/Brown years) have been able to put the blame for unpopular policies at the door of the EU when in fact they are the ones that helped to create such policies. If the EU was all about trade and cooperation and completely respecting national democracy then I would be in full support of its existence but it is now cover for those who do not want to be accountable to their electorate. This is why they are now abusing the law and the judiciary to try to overturn what was a fantastic exercise in true democracy – the 2016 referendum. Unfortunately we are seeing the same old same old at this election where all mainstream politicians are throwing money at everything to buy votes instead of addressing the real issues.
You say 17.4 million people did not know what they were voting for – I beg to differ.
Dear Peter,
I have seen your different statements over the months indicating your sincere belief that the 2016 Referendum was a democratic success and the 17.4 million voters who voted Leave knew what they were doing. Would it be possible for you to indicate very specifically what your reasons were for your vote, given that Brexit will affect virtually every field of government policy, involving a reversal of these policies which have been followed by every government in the UK since the 1960’s ? What for you are the real issues?
And do think that that such mega changes can be justified when only 37% of eligible voters voted for that result as against the 35% who voted Remain and 28% did not vote?
Simple – return of sovereign democracy.
Peter, they didn’t and they don’t but don’t take my word for it. I am sure I have said this before, but if you are up to the challenge ask your mates, colleagues, people in the street if they know what EU membership actually costs them personally or what a 9% hit in the economy look like. These are basic facts which should have had a bearing on a decision about EU membership. Why? Because the difference is so stark and as voters we are making decisions for our fellow citizens who will be severely affected if we make a thoughtless choice. For you the facts around this may not matter, but no can honestly claim to speak for such a broad group of people. I would be equally sceptical of someone trying to speak on behalf of all Remain voters. But most people know about the £350 million pounds a week claim and it certainly had traction or else Vote Leave would not have played it for all it was worth. The fact that this admittedly significant sum represents only 0.7 % of national expenditure, and had has a bearing on £200 billion business a year and several million UK jobs was totally omitted . So an out of context number was used to great affect and demonstrates the problem very clearly. Whatever happens, it was, and is a dishonest vote engineered by dishonest people. It might be the outcome that you want, but that has blinded you to what seems to many of us the perfectly reasonable request for a confirmatory vote, now we can see what it means rather than the fantasy. I am confident if the propoganda was removed Brexit would be toast.
Peter rereading your post you appear to be acknowledging that the EU has been used as a scapegoat by dishonest UK politicians. If so that’s so its hardly the fault of the EU and returning sovereignty to said dishonest politicians is unlikely to be the remedy. And we are of course under no obligation to vote for dishonest politicians. Don’t think that will be good news for many of the Conservatives that are left.
Tony, there you go again!
a 9% hit to the economy is not a fact it is purely a forecast by some.
And with regards to our politicians using the EU as a scapegoat, you are quite correct. Unfortunately for the last few decades we have seen a careerist political elite immerse us further and further into the EU project without seeking consent from the people of this country. In my opinion constitutional changes should only happen through the democratic process and when the whole political class is more focused on ever closer union than it is with the best interests of its own country then referendums are the only solution. The beauty of the leave vote is it has lifted the stone to expose the dead wood and creepy crawlies beneath and when we have actually left those politicians will have nowhere left to hide.
Certainly in the years to come if the EU has changed into something more palatable to the British people then a new referendum could be held to re-join.
Nice evasion Peter. You certainly haven’t carried out my challenge over night! 9% is indeed a forecast, because you can’t do anything else, but forecasts in the region of 5-9% are not thought unreasonable by the vast majority of economists. So we have maybe a 100% margin of error. Before you get to be excited though, for that to be more of an issue than our membership fee and any possible increase you would have to go a very long way before you could compare the numbers. I repeat my challenge; go and do some research with real people, look at your tax breakdown and check for yourself. If you can come back and convince me that, yes, people understood the implications of the vote I am listening .Other than that all we have to go is your own personal view, though whilst valid, is all it is.
Tony – a waste time trying to convince you
I might say the same. There is no point coming back with one liner quips with me, get some evidence and then we have something to talk about. At least I have talked to other people, literally dozens, and found they actually knew didly squat about the real issues, and found the evidence which I am afraid to say you are probably rather hesitant to do since it would probably shatter your confidence. The careerist politicians are people like Johnson himself, who was sacked from the Telegraph by Max Hastings for lying when he was a news correspondent for Europe. He was in effect, just making stuff up then, just as he does now. Leaving the EU won’t fix lying British politicians, in fact it will be all the more easy for them to hide with their stranglehold on the press. You are entitled to your view of the workings of the EU, but from my point of view they are one sided and omit many of the benefits. So if you want to make grand claims about what 17.4 Million people think, back it up with some evidence, otherwise you are indeed wasting everyone’s time.
Last one on this…promise!
It does seem strange to mock someone for making grand claims for 17.4 million people when that is exactly what you are doing. These dozens you claim to have spoken too are probably just fed up with your ranting and one sided opinion so end up agreeing just to get rid of you – funny enough I have had quite a few conversations with fanatical remainers who generally end up claiming I must be thick and racist because I don’t agree with them!
I am not mocking you, I am just challenging to back up your assertions. You can speculate as to how people have reacted towards me if you wish, but most are just plain shocked that we have been put through this grief for what is in real terms not a great deal of their own personal expense. Brexit economics don’t stand up to serious scrutiny and you probably know it.
I think Johnson and Co are hoping that traditional working class Labour voters will come to his rescue, and sadly, there is alot of evidence that many think Brexit will solve their economic problems. These people are probably the most deluded of all.
Whilst the wealthier backers of Brexit, traditional old-fashioned conservatives, may have enough financial assets and capital to ride out the inevitable economic downturn, its the poorer working class, in places like the industrial Midlands and North who will have to bear the brunt of it.
Many export orientated sectors will be badly hit, car making being a prominent example, so jobs will be shed in those sectors and the ancillary industries supported by them.
Then, as the size of the economy will shrink, money for public services and social benefits will become tighter. Even Corbyn’s Labour, won’t be able to achieve much in the way of economic re-distribution, as the economy will be smaller.
It is difficult to see what the economic have-nots in places like industrial communities in the North and Midlands, think they will gain from Brexit.
It is quite disgraceful how they have been spun false promises by Tory MPs and Farage, aided and abetted by their accomplices in the tabloid press. Some may think they can try life outside the EU, and then re-enter if it doesn’t work, except the EU will not be in the mood to offer the UK an easy route back after their experiences over the last 3.5 years.