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Vote Brexit, get Venezuela

by Bill Emmott | 19.06.2017

It is rare to be able to say this, but an article in the anti-EU Daily Telegraph by the always stimulating Roger Bootle has put the issues surrounding “soft” versus “hard” Brexit, as well as the outcome of the general election, in a particularly clear light. Without meaning to, Bootle shows clearly why it is such a mistake for Britain to be leaving the European Union.

A well-known and respected City economist, Bootle is chairman of Capital Economics but also, most relevantly, one of the driving forces of the group now calling itself “Economists for Free Trade”, originally “Economists for Brexit”.

The point of his article, as indeed of his lobby group, is to argue that a compromise arrangement, one that might match Norway’s membership of the EU single market or Turkey’s of the EU’s customs union, would forgo the main benefit of Brexit: the opportunity to eliminate the EU’s remaining tariffs on goods imports (which average 4% but are more than double that on cars and far steeper still on food imports) and to engage in substantial deregulation right across the board.

To put this another way: Bootle is saying, with admirable candour, that if post-Brexit governments do not engage in unilateral free trade (or at least, much freer trade than the EU does) and in widespread deregulation, we might as well stay in. As he writes:

“Brexit is neither the road to perdition nor the road to riches. It presents a series of challenges and opportunities. To make the most of them we need to embark on a path of lower corporate and personal taxes, and deregulation. Philip Hammond, the Chancellor, has dubbed this strategy “Singapore on steroids”. If Labour were in government, however, it would accompany Brexit with increases in corporate and personal taxes, and increased regulation. That would be Venezuela on steroids.”

So there is the choice: Singapore on steroids (but by the way, even without steroids, to match Singapore would require Britain to halve the share of the state in GDP, as The Economist’s Banyan column recently explained) or Venezuela on steroids.

That’s a legitimate debate. With Jeremy Corbyn’s Labour Party now ahead of the Conservatives in opinion polls and a new general election widely expected within the next 12 months, it is a debate the country may be about to have.

So far, in fact, neither party has seriously proposed either of Bootle’s steroid-enhanced options: the Tories, no doubt conscious of the landowners in their own ranks as well as the views of many rural Leave voters, have promised to maintain farm protection after Brexit and have avoided pledging radical deregulation of environmental controls, for example; Labour’s manifesto was deliberately a great deal more moderate than Venezuela’s late President Hugo Chavez would have liked.

This is for two reasons: first, both parties assume that the consensus among the British public is closer to the centre than either of Bootle’s steroid options; second, for the time being Britain remains subject to the EU agreements it has signed on issues such as state aid and competition policy, and thus  subsidisation programmes would be illegal, as would be nationalisations that distorted competition.

When Britain leaves the EU, that will change. We cannot know what a future government led by Corbyn or one of his Momentum followers would try to do. It would, of course, be constrained by international financial markets as well as by more moderate colleagues such as Keir Starmer. But it would not be constrained by membership of the EU.

That is what Roger Bootle and his fellows at the “Economists for Free Trade” group would have achieved, after Brexit. Their well-intentioned arguments depend on Britain being run by people like them: “experts”, as Michael Gove called them. The whole point of a democracy is that governments in fact alternate, reflecting changes in public opinion. Part of the point of EU membership, for all members, has been the constraints it puts on the wild, often damaging swings of opinion and policy.

Vote Brexit, get Venezuela: thank you for that insight, Roger Bootle.

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Edited by Luke Lythgoe