Labour’s plans for growing the UK economy have been highlighted as being based on fresh air by a group of prominent Remainers and Rejoiners:
Their argument is that Labour’s plans for growth are unachievable without a shot-in-the-arm from somewhere. That we can agree on. They contend that rejoining the EU is this definite and required shot-in-the-arm. That statement is a little more tenuous, as its basis is merely the repetition of an estimate of the UK’s GDP issued some years ago by the Office for Budget Responsibility, our quango whose strapline is ‘Never known to have issued an accurate number’. The OBR assumed that leaving the EU would ‘reduce our long run GDP by around 4%’:
‘Long run’ appears to mean out to 2040 or so, so if the UK’s GDP at the start of the period, say in 2018, was 100, then if by 2040 it had reached 134 and we were outside the EU, Rejoiners and Remainers would claim that it would have been 138 if we had remained within the EU.
This is the kind of comparison which it is impossible to test, as we cannot run a control experiment with the UK economy both in the EU and outside, although, with the Northern Ireland Protocol and the Windsor Framework, a ham-fisted attempt is being made to do this to a part of the UK. Perhaps running the control experiment is what the Northern Ireland Protocol and the Windsor Framework are for.
The OBR’s kind of estimate is of great usefulness to Remainers, because at every point in time it enables them to say that the UK economy would be 4% bigger had we stayed in the EU, however big the UK economy is and regardless of how the EU economy has performed in the meantime.
In fact the UK’s performance has held up well against that of the EU since the OBR made its estimate, and we have garnered benefits from leaving as well as opened up major economic opportunities for ourselves that have a good chance of matching and surpassing the supposed lost benefits of exiting the EU. The team of economic experts working to Global Britain on the Brexit Benefits project has delivered a well-researched and supported list of 50 benefits, both delivering now and opening up significant opportunities for the future:
Perhaps the question can best be reduced to where one would place one’s bets for the UK for the next 15-25 years: on a high-regulation, high-compliance, high-cost economic area run under Napoleonic Law and of greatest benefit to incumbent EU-based suppliers, or on an area based on free exchanges of goods and services under Common Law (the English model) without a political agenda but with the market discipline of offering value to buyers for what they buy? Choosing the second option is perfectly rational and not an indication of some mental incapacity as Remainers like to claim.
One can agree with the Remainers on one important point, though: Labour’s manifesto contains no reason why the UK should enjoy better economic growth with Labour in power. Simply using those words and other related euphemisms like ‘dynamic’, ‘strategic’ and ‘focussed’ does not deliver one penny more of economic activity. Something more is needed than what is in the Labour manifesto.
Remainers seem to have blindsided themselves in this case by making their claim of Labour vacuity based solely on Labour’s lightweight manifesto. Labour’s other babble (i.e. the 2024 Mais lecture as unpicked in Global Britain’s ‘De-coding Rachel Reeves’) contains an answer and one that ought to be to Remainers’ taste: copying EU methods, given that rejoining may not be possible and certainly will not be quick.
You can download ‘De-coding Rachel Reeves’ here.
The boost would firstly involve a re-run of New Labour’s love affair with Private Finance Initiative (PFI), the scheme whereby £50 billion of new schools, hospitals and university buildings contracted by the time New Labour left power in 2010 will have cost the UK £278 billion by the end of 2053.
But secondly, and surely much to Remainer rejoicing, it promises an aping of the EU’s version of PFI – their InvestEU scheme for achieving Net Zero. InvestEU manufactures bogus economic growth and purports to deliver Net Zero at the same time: two birds with one stone! All the money is borrowed by a private company and spent to build a source of green energy. The spending of the borrowed money boosts GDP, without the debt featuring in national accounts: a member state’s GDP rises, its national debt stays the same, meaning its Debt-to-GDP ratio falls. Fantastic impact on the statistics!
The green energy, though, is expensive due to the cost of the debt and the number of hungry mouths to be fed amongst the companies involved in this complex scheme: consumers pay over-the-top energy prices, and the consumers’ payments add to GDP as well. The scheme is a statistical triumph but an economic outrage: the consumer is being compelled to buy this green energy, there is no free market in which the consumer can purchase other forms of energy that are cheaper, and the consumer is in effect being subjected to another form of tax. That tax diminishes their spending power, which negatively impacts other sectors of the economy over time, and results in stagnation.
Labour are offering a swift and substantial ‘sugar rush’ of borrowing-and-spending with highly negative impacts in the longer term – the exact impact on the UK now of their past love affair with PFI. Enacting a PFI Mark 2 for Net Zero is a proper copying of the type of EU construct that Brexit gave the UK a chance to break away from.
Remainers should be comforted by the knowledge that Labour can achieve the ‘highest sustained economic growth of any G7 country while keeping within tight fiscal rules’, because the ‘fiscal rules’ apply to the national debt, and not to the shadow borrowing that occurs within schemes like PFI and InvestEU. Labour will copy EU methods, increase borrowing and expense for consumers and businesses, and drop the UK back into the orbit of stagnation into which the EU is already descending.
This will squander the opportunities of Brexit, whilst at the same time continuing to permit Remainers to claim that the UK economy is, was and always will be 4% smaller than if we had stayed in.