THE EU

David Davis gives a speech making the case for Brexit

                                                        

The Economic Case for Brexit – 26 May 2016 – One Great George Street


It is now exactly four weeks until the British people make the most momentous decision of modern times.
I rather wish that the standard of argument from the other side had lived up to the occasion.
In the past few weeks, the British people have been accused not only by the EU but by their own leaders here, shockingly, of being small-minded, ignorant, economically illiterate, and even ‘horrible racists’ for wanting to leave the EU.
They, we, have been bombarded with a plethora of scare tactics, and with myth after myth about the many miracles the European Union brings about and the disasters that will allegedly rain down on us if we leave.
Many of those supposed disasters have in fact been extraordinarily unsubtle threats, in which European countries threaten to act against their own interest to take revenge on us for the terrible sin of resigning from their club.
To parody Groucho Marx, I wouldn’t want to be a member of any club who threatened to ruin me if I left it.
Particularly when those threats have been so petulant and implausible.
I do not know what the collective noun for the international elite is, but we have had a whole gravy train of them in the last few weeks, all making assertions that do not quite stand up.
We have had the President of the EU, the President of the USA, the head of the IMF, the ex-head of the WTO, the Governor of the Bank of England, the current Chancellor of the Exchequer, the previous Chancellor of the Exchequer, and of course the Prime Minister.
If the tyranny of conventional wisdom has a Praetorian Guard, this is it. Except it is the tyranny of conventional unwisdom.
It seems to me that many of them have been relying on their status, and the pace of events, to protect them from forensic challenge.
The entire Remain case has been, if I may mimic Boris, one big ‘argumentum ad verecundiam’.
They are hoping, in short, that the British people will do what they are told, unquestioning. That they will doff their caps and defer to their betters.
But the British people are made of sterner stuff, and they want to be given the full facts – not just a pro-EU edited version – so they can see through the myths, and decide for themselves whether ever closer European Union integration is a good idea.
More than anything this campaign is emerging as a battle between The Establishment and the people.
The International, the European, and the London Establishment standing up for its view of the world versus the British people, standing up for their rights, their country, their democracy, their freedom.
Today I want to unpick some of those arguments and expose them to factual analysis.
Let us start with a tiny bit of history.
The British, and indeed the international establishment, do not have a great track record when it comes to the great questions of their era.
Brexit was famously described as a “leap in the dark”.
That phrase was first used in politics by Lord Derby to describe the 1867 Reform Act. For the Establishment it was a leap in the dark.
For the ordinary working Briton the relaxation of the property qualification gave them their first chance at voting in our burgeoning democracy, their first crack at controlling their own destiny.
That so-called leap in the dark was actually a breakthrough into the sunlit uplands of modern democracy. Just as Brexit will be.
It was not the last time that the Establishment made massively flawed judgements.
The Gold Standard. Appeasement. The craven “management of decline” in the 60s and 70s. The ERM. On the continent, the Euro. Globally, the 2008 Crash. And we haven’t heard from Chilcot yet…
Time after time the elite have got it wrong, and the ordinary people, whose wisdom was derided, have paid.
The Establishment groupthink on the central issues of the day has too often got it not just wrong, but spectacularly wrong.
So this time we should test their arguments more carefully.
Both the Treasury, and the IMF in the form of Christine Lagarde, claim that Brexit will cost Britain economic growth.
Because a gullible British commentariat swallowed that whole, the Prime Minister and Chancellor have doubled down on that claim this week with the assertion that it will now cause a recession.
However, remember that neither the IMF nor the Treasury have a very good track record on forecasting.
Last Autumn the Treasury found £27 billion down the back of the sofa, only to be strapped for cash by the Spring.
It cannot accurately forecast 6 months. Why should we believe they can forecast 15 years?
The IMF on its own admission famously got the Asian crisis wrong, got the Greek crisis wrong, and attacked Britain’s economic performance mere months before the UK recovery.
And of course from 2005 until 2007 both the Chancellor and the Prime Minister were blithely telling us that Britain could spend at Labour levels of excess. Just before they told us the exact opposite.
So their forecasts, their models, their black boxes, are not very reliable.
But even if their black boxes were accurate and reliable forecasting machines, they are dependent on the assumptions that you put in. Economic models are the perfect example of the phrase “Garbage in, Garbage out”.
There is a phrase for people who blindly believe what economic models tell them, and pace the Chancellor, that phrase is not “economically literate.”
The assumptions that the Treasury and the IMF have plugged into their models are essentially that we will lose trade in Europe and not gain any in global markets.
Neither, in my view, are remotely plausible. All their calculations are doing is putting an implausibly precise number on an entirely improbable scenario.
Just look at the Chancellor’s latest claim that Brexit will plunge us into recession later in the year.
By predicting what is the absolute bare minimum for a technical recession, this forecast is a victory for precision over accuracy, and for politics over economics. A forecast designed to deliver the maximum scary headlines with minimum justification.
As with the last Treasury forecast, dubious assumptions have led to the required outcome.
The Chancellor has been given a result which allows him to link a potential recession, the main cause of which is actually that ‘dangerous cocktail’ of global risk that he so recently warned us of, to Brexit.
So the Treasury forecast is not an economic forecast, in the normal sense. It is a political forecast, with a political purpose.
The benefits and disadvantages of the Single Market
If the Remain campaign’s claim is that we are going to be damaged by losing all the benefits of EU membership, let us start by assessing how sizeable those benefits are.
We should not be ungracious. The European Community has been useful to us.
When we joined it was undoubtedly to our advantage. We were a tottering industrial economy, and the European Community was a modern, go ahead, trade bloc.
To coin an old phrase, they were the future once.
Before we joined, our share of the European market was pathetic, at about 4%. After we joined, over about a decade and a half, it doubled, to 8%. That was the Common Market period.
But since then, during the Single Market period, it has halved again to less than the 4% we started with.
After 40 years in Europe we are no better off than when we started.
During the ‘90s tariff barriers around the world came down, after the Uruguay Round, including around the EU, so we lost the protection of those tariffs against global competition.
The burdens of the Single Market regulations handicapped us as well, and general competition from developing countries eroded market share.
The consequence is also clear.
The benefit of being within the the EU Single Market, whilst not zero, is much much, much less than it was under the Common Market period.
It’s a bad deal – a huge trade deficit with the EU and a net £10 billion subscription on top.
That is why we are losing our advantage over countries from outside the EU in markets within the EU; that is why the share of our exports going to the EU has dropped from over 60% to about 42%.
And this share is predicted to fall even further in the future.
This also has implications for employment in the UK.
The easiest way to look at this is to take the years since 2010.
In that period about two and a half million jobs have been created in the UK.
In that same time exports to Europe have been essentially static, whilst exports to the rest of the world have grown by £57bn, or 25%.
And almost all the jobs that have been created are in sectors that have grown in line with the UK’s internal market, and with our trade with non-EU countries.
So trade with the EU almost certainly generated no job growth in that time – the entire growth in jobs came from either the trade with rest of the world, or internally driven growth within the UK domestic economy.
Add to that the fact that a significant proportion, one million of the two and a half million jobs created in the UK economy, were taken by EU migrants.
And there is significant evidence, from the Bank of England among others, that migration pressure has depressed the lowest wages.
It is clear that the impact of EU membership in the last 5 years has been deleterious to the poorest workers. Their job prospects and their wages have both been reduced.
This is much of the answer to the conundrum of the last few years: economic growth but with low productivity and low wage increases.
It is also a stark reminder that it is not absolute growth that matters, it is growth per capita.
The Government’s reliance on GDP as a measure of prosperity has been misleading, especially when considering the high immigration which Britain has experienced in recent years.
Since 2010, GDP per capita, a far better measure of people’s living standards than raw GDP, has grown at only just over half as quickly (or 6.5% over that period) as the economy as a whole because of immigration.
This matters.
It is increases in GDP per capita that support growth in jobs, in people’s wages, allows the country to invest in the future, and helps us to pay for public services.
That is what matters for the people of Britain.
To summarise, the Treasury and other establishment claims that Britain’s prosperity, trade and jobs pivot on our membership of the EU is pure propaganda.
The facts suggest something quite different.
In the last five years membership of the EU has not increased net employment at all in Britain. But we have been creating jobs for EU citizens – around one million of them.
Britain, not the EU, is the job creation machine. The EU is in fact a job transfer machine – switching employment from British workers to those from the Continent.
If Gordon Brown really wanted “British jobs for British workers”, as he once said, he would support leaving the EU.
Of course large scale immigration is one of the reasons that that other establishment group, the CBI, are firmly in favour of EU membership.
A virtually limitless, low cost, ready trained workforce is understandably attractive to big business.
It is also why, in a moment of frankness, Stuart Rose admitted that leaving the EU would lead to an increase in average wages – this would particularly be true of the least well paid.
The other reason for the CBI stance is the fear that its members would lose their existing market position.
Nearly all big companies have marketing, distribution, or supply networks in the EU.
They have entrenched regulatory positions which protect their particular products.
It is also important to remember that big companies are not particularly good at innovation or job creation. Accordingly, they do not see enormous upsides, but they are acutely conscious of risks.
Pascal Lamy, an ex-EU Commissioner and ex-World Trade Organisation head, is as much an international gravy trainer as Christine Lagarde.
He threatened Britain with loss of European markets, and did not mince words about it.
He made it plain it was a threat of punishment for leaving, not a rational act.
Ironically, he phrased the threat in terms that made it clear that continental politicians fear that the UK will make too much of a success of being outside the EU – this undermines the Remain case and rather gives the game away.
Of course this is to be expected, particularly from the French. It does not mean this is how they will behave after the decision.
People behave in ways that fit the circumstances they are trying to deal with.
Think back to the 2010 election.
David Cameron and Nick Clegg did their best to knock 7 bells out of each other in the election campaign.
Then, within a week, they were sharing a photo call in the Rose Garden of 10 Downing Street.
Circumstances had changed, and with it their behaviour.
Similarly after Brexit, the pressures on the countries that make up the EU will be different.
Free trade with Britain is in all their interests.
This is particularly true of the most powerful leader in Europe, Angela Merkel.
Her economy is dependent on exports, particularly of manufacturers, and especially of cars. Britain is the second largest and fastest growing car market in Europe.
Audi, BMW, Mercedes, and Volkswagen alone are over 25% of the British market, with the UK buying one million cars from Germany every year.
They cannot afford the threat being levelled at Britain, so called “WTO terms”, because they would involve a 10% levy on all car imports.
A German Chancellor would have to avoid this, particularly in an election year. In Europe, what a German Chancellor wants, a German Chancellor generally gets.
Indeed the first calling point of the UK’s negotiator in the time immediately after Brexit will not be Brussels, it will be Berlin, to strike the deal: absolute access for German cars and industrial goods, in exchange for a sensible deal on everything else.
Similar deals would be reached with other key EU nations.
France would want to protect the £3bn of food and wine it exports to the UK. We have seen the sort of political pressure French farmers are willing to bring to bear when their livelihoods are threatened, and France will also be holding a general election in 2017.
Italy will deal to protect its billion-pound fashion exports. And Poland its multi-billion pound manufacturing and electronics exports.
So there is almost certainly going to be a deal, one that maintains a free market between the EU and the UK.
However, let us assume for a second that everybody behaves irrationally, and we are forced back onto WTO terms.
Let us be clear – I do not believe for a moment that that will happen, but let us humour the Treasury fantasy.
In that eventuality people seem to forget that the British government will be in receipt of over £2 billion of levies on EU cars alone.
There is nothing to stop us supporting our indigenous car industry to make it more competitive if we so chose.
WTO rules would not allow us to explicitly offset the levies charged, but we could do a great deal to support the industry if we wanted to. Research support, investment tax breaks, lower vehicle taxes, there are a whole range of possibilities to protect the industry, and if need be, the consumer.
Such a package would naturally be designed to favour British consumers and British industry.
Which of course is another reason that the EU will not force this outcome.
The other bogus element of the Treasury forecast is the presumption that the UK will do badly in global trade negotiations.
Trade negotiations are exercises in mutual self-interest. They are not power plays, or coercions, particularly now the WTO default rules are in place.
Without the emotional politics of the EU in play, there is no reason whatsoever to expect that most countries in the world would not actively want a free trade agreement with the UK.
This makes the claim by the Remain Campaign that we would have to “renegotiate 50 trade deals after Brexit” look particularly silly, indeed almost hysterical.
The simple truth is that under state succession rules all existing trade deals with non-EU countries would stay in place until either side wanted to renegotiate them. Why on earth would any non-EU country behave differently?
Of our top 10 non-EU trading partners only Switzerland and South Korea have FTAs with the EU at the moment.
Is Remain really asserting that South Korea or Switzerland would repudiate an existing trade arrangement with us? Would South Africa or Singapore? Whatever they might say, they won’t.
Which brings us to the next international grandee that the Remain team trotted out, namely Barack Obama. He was wheeled onstage by the government to try to undermine the argument that we will be able to negotiate our own trade deals outside the EU.
It is not necessary to imagine any anti-British sentiment to explain Obama’s comments about “going to the back of the queue.” Indeed, he was clearly doing the British Prime Minister a favour, as demonstrated by the choice of language.
More importantly he was simply serving what he saw as America’s best interest, trying to keep the UK within the EU. Nor is this the first time that a US president has misconstrued their national interest.
Americans have a very poor comprehension of the EU, and they see having Britain within it as a useful benefit for them.
They have no concept of the cost in lost sovereignty that this entails.
If they did they would be a little more shamefaced in suggesting something that they would never themselves countenance.
But none of this makes Obama’s comments true.
Firstly, he will not be there at the appropriate time, so he won’t make the decision.
Secondly and more importantly, there is no queue. These matters are handled in parallel.
The USA signed 8 FTAs in 3 years recently.
They have a well-established and often used ‘fast-track’ process.
It is highly likely that we would manage to negotiate an FTA with the US in about 3 years, well before TTIP is completed, and one which is far more tailored to our interests than TTIP will ever be.
Outside of the EU, there are two major potential benefits for the UK.
One, the ability to pursue lighter and better tailored regulation not possible under EU membership; and Two, the ability to strike new trade deals with the rest of the world, not possible in a club of 28 members.
Those aren’t my words, that’s according to Open Europe, who are no supporters of Brexit and whose ex-director, Mats Persson, is now the Prime Minister’s EU adviser.
I agree. Britain would negotiate a lot more trade deals, a hell of a lot quicker, if we weren’t leashed to 27 other countries in every negotiation.
EU poor at negotiating trade deals
Negotiations to reach a trade deal between the EU and Singapore, for example, lasted nearly six years.
It took nine years to come up with a free trade deal with Canada – which may well founder after Romania indicated they may exercise their veto in a row over visas.
The negotiations between the EU bloc and India went on so long they gave up.
The EU, can you believe this, does not have trade agreements with China, or India, or Russia or the US.
The reality is that the EU’s track record on trade is very poor.
And yet, the Prime Minister claims that, “we sign better trade deals, and more quickly, in the EU.” This is simply not supported by the facts.
The claimed benefits from the EU bloc are completely outweighed by the complexity and dilution of dealing for 28 members. Just compare the EU’s performance to that of single countries.
For example, look at Chile, which has a third of our population and a tenth of our economy.
Chile has managed to get trade deals with the biggest economies around the world, including the US, China, India, Japan, Australia, Canada and South Korea.
The EU has trade deals with economies which have a total GDP of just £4.7 trillion. Chile has trade deals with £40 trillion-worth of countries. Almost ten times more.
Not only has Chile got these deals, it has negotiated most of them a hell of a lot faster than the EU.
It took Chile, without all the supposed influence of being a member of the EU, just 10 months to negotiate a deal with China. 10 months.
They took just 9 months to negotiate a deal with Australia, 10 with Canada, 12 months with Japan and 24 months with the US.
Can the Remain campaign seriously continue to argue that we would not be able to open up new trade opportunities if we voted to Leave?
And before Remain do their normal banal trick when faced with hard facts, and try to claim that we are now going for the “Chilean model”, it isn’t just Chile.
Singapore, Switzerland and South Korea, negotiating their own trade deals and without the so-called ‘clout’ of the EU, each have FTAs with over £27 trillion-worth of countries.
They also negotiate their deals far faster than the EU does.
And 90% of their trade deals include services, critical to the British economy, as opposed to only 2 out of 3 of EU deals.
Only six EU members have a significant trade surplus in services, and the UK’s surplus is twice that of any other nation.
And the UK exports more in services to the rest of the world than any other EU nation.
For the EU, trade in services is simply not as much a priority as it is for Britain – just look at how the completion of the Single Market in services has been stalled for years.
This is why the EU’s trade deals often don’t include services.
This is why the EU’s trade deals are with countries that offer few trade opportunities for Britain.
So a lot of the EU’s so-called Free Trade Deals don’t cover the areas we care most about.  And the result is that in two thirds of them our growth rate in exports to the relevant country goes down, not up!
Of course, the importance of trade deals can be overstated, particularly in the new globalized, internet world. After all, it is not politicians who trade, it is businessmen.
We do as much trade with countries without any sort of deal as we do with the whole EU. And those countries tend to be the fastest growing.
But there is no doubt that we are missing out on huge trade opportunities around the world. The EU’s dysfunctional trade policies make it harder for UK businesses to trade with those parts of the world that are growing fastest.
So given how poor the EU is at negotiating deals on our behalf, is it any surprise that 90% of the EU’s trade deals account for just 2% of our exports?
Never mind Little Englander, being stuck in Fortress Europe ignoring the exciting economies in the rest of the world is being a Little European. A myopic, introspective and troubled Little European.
One of the other supposed advantages claimed for being in the EU is more inward investment. Actually the highest investment per capita in Europe is not in the EU at all.
It is in Norway and Switzerland – even if you take out all the FDI that is based on oil, gas and financial services.
Those countries also have the lowest unemployment, highest wages, and rather lower levels of inequality, which rather takes the edge off the claims for economic benefits in the EU.
And before anybody on the Remain side jumps to their usual conclusion, no I am not arguing for a Swiss or Norwegian option, I am arguing for something considerably better.
Finally, in economic terms we have to consider the impact of the Eurozone.
I will not dwell on this because it deserves a whole speech in its own right.
Being in Europe but not the Eurozone in many ways gives us exactly the opposite of what the Prime Minister claims – the worst of both worlds, with little say in fundamental financial issues, but eventual responsibility for many of the costs when it stumbles.
Only last year we were dragged into the eurozone’s efforts to rescue Greece, when the EU used the European Financial Stability Mechanism to bail out the debt-stricken country, against the Prime Minister’s protests – another example of just how vulnerable the UK has become in Brussels.
The Euro has been devastating for Greece and Southern Europe, but very comfortable for Germany and what might be termed the old Deutschmark zone, which now trades with the rest of the EU and with the world on a 30-40% currency discount.
The huge trade imbalances in the Eurozone make it financially unstable, and as we know from recent history we end up paying for that no matter what we think we have negotiated in the rules.
Greater separation from this financially unstable structure will not give us perfect protection, but it will be better than being shackled to it.
Of course, none of this risk is reflected in the Treasury model.
So if we leave the EU we will be free to negotiate our own deals faster, and they will be better tailored to our economy than the EU’s deals are.
Our trade will almost certainly continue with the EU on similar to current circumstances.
In the highly improbable event that it will not, we can accommodate that with domestic policies using the money released by Brexit, the ‘Independence Dividend’.
So both the major premises upon which the Treasury model is based are flawed.
And the Treasury did not even attempt a calculation of the EEA option – actually by no means the best option – presumably because it looked too good, and didn’t offer the Chancellor the headlines he was looking for.
The Remain campaign has strained every sinew in painting as relentlessly pessimistic a picture of the UK after Brexit as is possible. And in doing so, their predictions and forecasts have lost credibility.
They have claimed that hundreds of thousands, if not millions of jobs rely on our membership. The reality is that the EU has been a destroyer of jobs across the continent, and has created next to no jobs for British people in the UK in recent years.
They have claimed that our economic interaction with the continent will all but cease, and in the case of one over-excited Minister, that it would fall to absolute zero, should we leave the EU.
The reality is that the hard-headed, pragmatic businessmen on the continent will do everything to ensure that trade with Britain continues uninterrupted.
They have claimed that we will be unable to forge new trade links across the world, that we will have no influence, that we will be sent to the ‘back of the queue’.
Well I’m sorry, but this is nonsense.
Chile, Switzerland, South Korea and Singapore – all smaller than us – prove that this is untrue.
We are members of the G7 and G20. We are on the UN Security Council, belong to Nato, the OECD, the Commonwealth and the World Trade Organisation.
We have a global tradition and speak the most important global language. Our influence and reputation are greater than any nation of 60 million has a right to expect. We are the nation of Darwin and Dickens, of Shakespeare and Shelley, of Newton and Nelson.
How can Remain possibly suggest that we cannot flourish should we decide to govern ourselves?
Britain has always prospered when we have been at our most daring, our most adventurous, when we have raised our eyes to global horizons.
That is what this referendum is all about – do we want to accept decline, as many did in the ‘60s and ‘70s, as part of a regional bloc with limited potential?
Or do we want to take back control of our destiny, and show the world how great Britain can be.

THE EU

In reading the latest pack of inventions and outright lies from George Osborne and The Treasury, the only remarkable thing is how devoid of any credible rationale their 'report', entitled 'HM Treasury analysis: the immediate economic impact of leaving the EU', is. One can only assume that Osborne thinks that the news headlines of an economic recession will be sufficient to influence voters who will not wade through the report themselves. No doubt Osborne has in mind the postal vote forms which are about to be sent out.

There has been a more robust response to this diatribe, compared to earlier bunk. Even so, that response has not been robust enough. Some Tories have threatened to mount a leadership challenge once the referendum is over. They should mount one now rather than demean themselves by being associated with Cameron's and Osborne's brazen dishonesty. Britain's future and even its existence as a country hangs in the balance. 'Dishonest Dave' should be thrown out of office without delay and his lying should be unequivocally made clear.

Once again, Osborne has written the Forward. He starts as he means to go on, with dire allegations that a vote to leave the EU will be apocalyptic not only for relations with the EU but also 'our relationship with the rest of the world' which would be affected by 'instability and uncertainty that would [be] trigger[ed]' as 'a vote to leave would represent an immediate and profound shock to our economy'. According to Osborne, the economy would go into recession, with between 500,000 and 800,000 losing their jobs, with higher inflation and higher government borrowing. Sterling would fall. Even house prices 'would be hit' and there is a danger in his 'more acute scenario' that 'The rise in uncertainty could be amplified, the volatility in financial markets more tumultuous'.

The report claims that there would be three causes of a shock to the economy: a transition effect; an uncertainty effect; and a financial effect. The transition effect supposedly means that the long-term effects (alleged in the Treasury's previous report – see the English Rights Campaign item dated the 12^th May 2016) would take place immediately. The uncertainty effect alleges that 'Businesses and households would respond to this [uncertainty] by putting off spending decisions until the nature of new arrangements with the EU became clearer' and that 'immediately' following the vote 'Businesses would reduce investment spending, such as the purchase of new machinery and moving to new premises. They would also cut jobs, consistent with lower expectations of external demand and financial investment, including from overseas, in the future. Individuals would adjust their purchases of major items, particularly where they involved extra borrowing, on the basis of lower future incomes'.

There is no reason for this to be true. It is babyish nonsense. Life is full of uncertainty and people have to carry on their lives as best they can. They do not just stop at home because of the uncertainty of the traffic lights being at red rather than green, or that there might be a traffic jam, or roadworks. It is a good job that people in 1939 at the outbreak of WWII, when there clearly was very serious uncertainty, were made of sterner stuff than 'Dishonest Dave' and 'Chinese George' would have us believe people to be. Businesses will take advantage of profitable opportunities come what may.

Regarding the financial effect, the report claims that 'In the immediate aftermath of a vote to leave, financial markets would start to reassess the UK’s economic prospects. The UK would be viewed as a bigger risk to overseas investors, which would immediately lead to an increase in the premium for lending to UK businesses and households'. It claims that personal investments 'would also decline' and that inflation would increase due to a fall in sterling.

These are merely bald assertions. Financial markets always assess speculative potential. It is far more likely that they would conclude that the impending deregulation of the British economy, would make Britain more prosperous and more competitive; in other words, investment might well increase. They might decide to continue as normal given that the process of leaving the EU could take up to two years. The report is merely inventing an apocalyptic scenario without any foundation. As the previous Treasury report admitted 'To allow the UK to access the Single Market without agreeing to the rules of the Single Market would put their own businesses and consumers at a disadvantage'. In other words, Britain would be better off out!

Having made its bald assertions, the report then seeks to extrapolate precise figures for the supposed economic consequences. In this, the report relies upon computer models. Furthermore, Osborne and The Treasury have even devised their own model: 'For this document’s analysis, a comprehensive UK uncertainty indicator was constructed. The Bank of England has also used a similar indicator to evaluate movements in uncertainty'. Given the report's bias and dishonesty, one can imagine how objective the especially constructed 'uncertainty indicator' is designed to be. The report additionally relies upon VAR: 'A vector autoregression (VAR) model is employed to identify the impact of increased uncertainty on overall economic activity'.

The report refers to VAR repeatedly and attaches much importance to it, describing it as an 'approach [that] builds on the method used by the Bank of England to empirically link measures of uncertainty to economic outcomes, based on a growing number of studies by leading economic researchers. Using over 25 years of data, the approach estimates the relationship between the uncertainty indicator, overall economic activity and financial market conditions. This approach makes it possible to isolate the impact of an uncertainty shock on other economic and financial variables'.

VAR has its uses for Osborne, as he can feed in allegations of doom and get the precise figures he wants out in response. He can cite VAR as proving that to continue to run a balance of trade deficit on the current scale is perfectly normal and safe due to the precise numbers produced by the VAR about the risk of leaving the EU. Britain's assets, even power stations, can be sold to the Chinese, and gilts (i.e. government debt) can be sold to the Chinese without reproach as the VAR model condones this. Unpaid bills in the form of underfunded public services and a housing shortage etc. can continue to be run up. The Ponzi Class are hiding their financial dishonesty behind computer models and are not challenged at all to justify their activities. As is well known, if bunkum is fed into a computer model then bunkum is produced. As David Davis recently stated in an excellent speech (that did not receive the coverage it should have and the text of which will be posted here immediately after this item):

'The assumptions that the Treasury and the IMF have plugged into their models are essentially that we will lose trade in Europe and not gain any in global markets. Neither, in my view, are remotely plausible. All their calculations are doing is putting an implausibly precise number on an entirely improbable scenario. Just look at the Chancellor’s latest claim that Brexit will plunge us into recession later in the year. By predicting what is the absolute bare minimum for a technical recession, this forecast is a victory for precision over accuracy, and for politics over economics. A forecast designed to deliver the maximum scary headlines with minimum justification. As with the last Treasury forecast, dubious assumptions have led to the required outcome. The Chancellor has been given a result which allows him to link a potential recession, the main cause of which is actually that ‘dangerous cocktail’ of global risk that he so recently warned us of, to Brexit.'

So the Treasury forecast is not an economic forecast, in the normal sense. It is a political forecast, with a political purpose.

Having contrived its doom-laden prediction, the report then proceeds to try and convince that things could even be worse. It holds out the prospect of 'tipping points', higher inflation, higher unemployment, increased government borrowing, and even a 'sudden stop' of 'financial inflows, reflecting concerns about the size of the current account deficit'. Nor does the report include any allowance for 'a sharp tightening of fiscal and monetary policy to restore credibility'.

By contrast, the report alleges that a vote to Remain 'would see uncertainty fall back rapidly with little lasting impact on the economy'. Presumably, we are to believe that we will all live happily ever after. In fact we will not. Due to Osborne's incompetence and his Ponzi economics, Britain has a massive and growing balance of trade deficit. The report itself states: 'The UK current account deficit of 7.0% of GDP in 2015 Q4 is high by historical and international standards'. The deficit is already causing falling tax revenues, increased borrowing and an escalating debt.

This cannot continue indefinitely. However, the report is predicated on the basis that it can. It states 'the UK’s current account deficit remains reliant on inflows of capital from abroad. Some of these inflows are linked to business related to the UK’s access to the Single Market, including financial services'. Inadvertently, the report does aver that the deficit is a risk 'The extent to which a large current account deficit can be sustained, and the pace at which it adjusts to a more sustainable level, depends on the willingness of foreign investors to hold assets in that country. This in turn would depend on a broad range of factors, including the structural features of the economy (such as how open an economy is), the size and composition of its external liabilities and other external variables'. This waffle abdicates responsibility for the trade deficit to foreigners rather than government policy or the competitiveness of industry. It shifts trade policy and the cause of the deficit away from the Single Market. In fact the scale of the escalating deficit requires leaving the so-called Single Market and the EU in order to implement an economic policy to tackle that deficit and bring trade back into balance. The aim of a responsible policy should be to eliminate the deficit not simply to reduce it to 'a more sustainable level', nor to proceed on the basis that provided foreigners are prepared to continue to provide loans and buy national assets (Osborne treats this as investment) then everything is fine.

Importantly, the various pro-EU (perhaps anti-British might be a better term) reports take no account of the massive increase in population brought about by mass immigration, in particular they take no account of the economic consequences of Turkish accession to the EU (according to a recent survey, around 16% of Turkey's population would consider moving to Britain). The scale of the mass immigration is a real risk that people should take into account before voting. Osborne's various lies and inventions should be ignored.

THE EU

On the 13^th May, Sir John Major, as he now is, made a high-minded speech at the Oxford Union in which he sought to put the case for Brexit in its place. Sir John, has form with the EU. It was he, as prime minister and before he was awarded a knighthood, who took Britain far deeper into the EU than people wanted, than very many in the Tory Party wanted, was prepared to split the party, and even withdrew the whip from those Tory MPs he described as 'bastards'. He wrecked the British economy in pursuit of his vision of making sterling the hardest currency in the ERM (Sir John's ERM exploits are dealt with in The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century, page 191 onwards). Sir John declared that he had 'embarked on an economic strategy designed to see the British pound replace the German mark as the hardest and most trusted currency in the European Community'. Sir John took great pride in his deliberate destruction of a large part of the economy and was more than happy to ruin very many peoples' lives with unemployment, business closures and house repossessions. He was tough.

 

Britain entered a deep recession that continued from 1989 to 1993. Unemployment leapt from less than two million in 1989 to more than three million in 1992. Business failures reached a record high (never equalled) and personal bankruptcies more than quadrupled between 1988 and 1992. Between 1988 and 1993 there was a fifteen-fold increase in the number of mortgages 12 months or more in arrears, and more than a three-fold increase in house repossessions. The negative equity due to the fall in house prices (leaving the home owners with a mortgage greater than the value of their homes) was a consequence that plagued very many throughout the 1990s. The ruination of so many was all water off a duck's back for Sir John. This is the calibre of the man who now dares to intervene in the EU referendum to demand that Britain remains in the EU.

 

Despite all Sir John's bravado in 1992, yet again, Britain's attempt to fix its currency at an overvalue failed. Despite pushing interest rates up to 15% (inflation was only 2%) Britain was forced out of the ERM. After which, despite all the loud proclamations that exit from the ERM would be harmful to the British economy, with talk of high inflation, unemployment and loss of influence etc., the British economy boomed. Lower interest rates and an economic policy geared towards British interests rather than those of the EU proved a success. The ERM collapsed.

 

Sir John, unlike his contemporaries such as Lord Lamont and Lord Lawson, has learned nothing. His fascination with the EU remains undimmed. He is proud to be politically correct. In the Genesis of Political Correctness: The Basis of a False Morality, the difference between the factions of the politically correct is defined. Sir John, is firmly in the Wet Liberal faction. He is firmly convinced of his moral superiority.

 

Never should it be forgotten that it was under Sir John's premiership that Britain embraced political correctness. So bad were the activities of the National Lottery Community Fund, which Sir John created, that it had to be abolished. Even the Wet Liberals were unable to defend its politically correct, Loony Left, fanaticism (see Genesis of Political Correctness: The Basis of a False Morality, page 148). It was under Sir John's premiership that Britain lost control of immigration, with organized crime taking control of Britain's immigration policy. Sir John's response to the surging number of claims for so-called asylum seeking was to fiddle the figures. Immigration soared. For example, despite fiddling the figures, in 1988 only 4,000 claimed asylum; by 1991 the claims had increased to 45,000; by 2000 the number had reached 97,000.

 

Then there was the EU débâcle, from which the Tory Party never recovered. A large number of genuine Conservatives left and joined UKIP. The Tories lost the following general election and stayed out of office until 2010, and even then had to form a coalition. They were a hated brand.

 

Now, Sir John, weighs in to the EU referendum campaign. The case he puts is a monologue of clichés. There is little originality. He urges that Britain should not try and 'go it alone' – whatever that is supposed to mean. As a part of the EU, Britain, according to Sir John, has 'serious political and diplomatic clout, as well as economic advantages'. He cites Britain's sanctions against Russia, and against Iran as examples, as well as the EU taking 'nearly half' of Britain's exports. Whereas: 'Outside Europe, we would still have to comply with EU rules and regulations, unless we surrendered all access to the Single Market – which all reputable authorities, not least the IMF, OECD, NIESR and the Bank of England, regard as economically foolish'. These are, of course, all the same organizations who loudly told us that Britain had to remain in the ERM or else economic catastrophe loomed. They were all wrong then and they are all wrong now. What they are arguing for is their own interests. They want Britain to remain in the EU for their own reasons. The interests of ordinary British people count for nothing. Of course Britain's exports would have to comply with the regulations of the EU, just as they have to comply with the regulations of any export market. Those firms that do not export at all, or do not export to the EU, will be freed from EU regulation upon Brexit. However, Sir John dismisses this as being 'nothing other than reckless, imprudent folly'. It is no such thing. It is common sense and a desirable elimination of red tape.

 

Sir John cannot stop name dropping. He says: 'The NIESR warns of a collapse in the value of Sterling. The LSE warns of higher prices. The Bank of England fears higher interest rates and mortgages. All this and more – from independent bodies – is ignored and brushed aside by the “Leave” campaign'. These are not independent bodies, they are all pro-EU bodies. Sir John studiously avoids mentioning the government deficit or the trade deficit. Inconvenient facts are ignored.

 

Sir John is fearful that 'We may end up leaving Europe because absurd falsehoods are widely believed to be true. One absurdity is that, subsumed in Europe, we would lose our traditions, our heritage, our individuality. We won’t: after sixty years of Europe are the French less French or the Germans less German? Of course not: and nor will we be less British'. The de-culturalization of Britain is a matter of fact. The anti-English race quotas, the education system swamped with foreign children, the lower living standards, the visible impact of Islamification (such the number of Burkas, the number of mosques, as well as the extremist rhetoric and terrorism), and the multiculturalization policies all prove that Britain is becoming less British. Very recently, Trevor Phillips, lauded the objective of ethnic minorities making up one-third of Britain's population by 2050. In England the percentage will be far higher as it is England where the immigrants are mostly settling. The policy is to reduce the English into being a minority in England.

 

Sir John claims that the EU has no say over Britain's welfare system, 'none' over our military, 'none' over the police, and 'none' over our economic policy. Given the EU's plans for its own military capability, and that we are told that we have to cooperate with the EU over security, that the proposal to limit welfare payments to immigrants was abandoned due to German disapproval, and that we have had to bail out Greece and are offering all sorts of monies to Turkey – then Sir John's comments are patently wrong.

 

Interestingly, Sir John does say that 'if any new Treaty seeks more power, that Treaty would have to be put to the British nation in a Referendum and if – and only if – it were approved by us would it become law'. Sir John is no longer in power and no longer in a position to make any commitments of this type. He is merely expressing an opinion. What the government actually understands the situation as regards any future need for a referendum on a treaty change is unclear. It might be noted that Sir John fastens the referendum to a treaty change rather than the surrender of power generally.

 

However, the thrust of Sir John's speech, and the part which gained the most coverage, was his attack on those who wanted to control immigration. Sir John describes this issue as 'dangerous territory' and that if it is 'handled carelessly' then 'long-term divisions' in society can be opened up. He accuses that the Brexit leaders 'morph into UKIP'. At least they should be relieved not to be called 'bastards'. Sir John recalls his Brixton childhood and claims that the 'massive West Indian immigration' was motivated by a desire 'to give themselves and their families a better life. But, at the time, fears were fanned by careless statements from political figures. That was a mistake then, and would be a mistake now'. Although Sir John acknowledges that it is 'legitimate' to debate the numbers of immigrants, but 'Not in a manner that can raise fears or fuel prejudice. The “Leave” campaign are crossing that boundary'. He condemns the alleged tendency to 'attribute motives' of immigrants that are 'speculative and, frankly, offensive'. He further takes issue of the prospect of the admission of Turkey into the EU and the likely immigration from that country. He states that Turkey's accession would have to be agreed by every 'Member State'. That might be so, but every country that has started accession negotiations has joined and it is the agreed policy of all three major political parties in Britain that Turkey should join the EU. However, Sir John states that 'when the “Leave” campaign warn of “opening our borders to 88 million” (meaning Turkey and the Western Balkans) they cross the boundaries of responsible comment'. The English Rights Campaign would disagree. It is in fact a key issue, especially given the scale of immigration that occurred after the accession of the eastern European countries, and given the barbarity of the terrorism that is blighting the Middle East. Furthermore, the ruling Ponzi Class's determination to get Turkey into the EU is despite the fact that Turkey is not a European country.

 

Sir John even objects to the argument that tinkering around with the benefits immigrants can get will not deter those immigrants, as the higher wages they can get will still attract them and that the National Living Wage will only make this worse. Sir John dismisses this as a 'red herring' and doubts that they would be prepared to come to Britain 'to receive a few pence a week extra'. In fact, they do not come for a few pence a week extra. Incomes per capita in Eastern Europe are very low. For example, Bulgaria's and Romania's being only a little more than one-third of those of the Britain in 2013, with Hungary's and Poland's being only a little more than half of those in Britain. Combined with very high levels of unemployment due to the eurozone disaster, particularly youth unemployment (more than half of Greeks and Spanish between the ages of 15 and 24 are unemployed), then there is a very strong incentive for large numbers to move to Britain. It should be noted that Sir John does not see any inconsistency with his assertion that immigrants are here 'to give themselves and their families a better life'.

 

Nevertheless, Sir John admits that Britain could keep out EU immigrants on leaving, 'such as the 54,000 EU migrants now working as Doctors, or Nurses or Ancilliaries in our Health Service, or the nearly 80,000 working in Social Care. We could exclude skilled workers like builders and plumbers – or unskilled labour that takes jobs that are unappealing to the British. In short, the people we could most easily keep out are the very people we most need'. According to Sir John, without immigrants 'the Health Service would not be able to cope – nor would our public transport system; and our hotels, restaurants and shops would be without staff to serve their customers. We would have a shortage of many skills for industry. This is the reality of what lies beneath the emotive language of those who seek to raise the drawbridge on our country. And, in any event, a short term migrancy flow should not be the issue that drives the UK out of an economic union that already benefits our country immensely – and will continue to do so in the future.'

 

Despite his attempted high-mindedness and moral superiority, Sir John's rationale is humbug. The reason why there are so many foreign doctors and nurses etc. in the NHS is because of the restrictions placed on the training of British applicants, the majority of whom are turned away. For example, between 2010 and 2014 the numbers of nurses trained was cut by 10,000. The number applying to train as nurses was 100,000 and there were only 20,000 places. Even older nurses wishing to return to work have been unable to do so. Thus having created a shortage, the NHS happily fills that shortage by encouraging immigration and dumps a large part of the costs of that immigration (the strain on public services, the housing shortage, etc.) onto the general public. What Sir John has glossed over is the destruction of the proper functioning of the national labour market. To say that Britain cannot train its own builders and plumbers etc. is nonsense. He, being politically correct, is strongly in favour of open-ended ongoing mass immigration for its own sake.

 

Despite Sir John's attempt to moralize at the Brexit leaders and condemn them for comments that 'raise fears or fuel prejudice' having crossed 'the boundaries of responsible comment', it is Sir John who is guilty of that which he accuses others. He is peddling race war politics. Regarding the accession of Turkey and other countries, he asserts: 'It is unlikely in the extreme that – I quote – “another 88 million people will soon be eligible for NHS care and school places for their children”. I assume this distortion of reality was intended to lead the British people into believing that almost the entire population of possible new entrants will wish to relocate to the UK. If so, this is pure demagoguery'. The key terms are 'I assume' and 'If so'. In fact he assigns to the quoted text a meaning that is not stated (no one alleged that the 'entire' population would move to Britain). It is he who is peddling a meaning that he describes as 'pure demagoguery'. It is Sir John who is trying to stir up division. This is the true face of political correctness.

QUOTE OF THE MONTH (bonus)

'The first person I come to is a horrible racist. I'm never coming back to wherever this is.'

 

 

Pat Glass, the Labour Party MP and Europe spokesman, sneering at someone in Sawley who had dared to voice concerns about immigration.

THE EU

In the Forward of the recent report entitled 'HM Treasury analysis: the long-term economic impact of EU membership and the alternatives', paid for with English taxpayers' money and circumventing the referendum spending limits, George Osborne, the Chancellor, asks 'Does Britain want to continue to be a country that faces out to the world? Do we want to be promoting our case at the top table of the world’s institutions? Is our national security best served by retreating from the world?' Osborne states that 'Using detailed analysis and rigorous economic modelling, this document sets out the Treasury’s assessment of the long-term economic impact of staying in the EU compared to the alternatives'.

The 'analysis' re-hashes some of the earlier arguments contained in an earlier document peddling pro-EU propaganda (see the English Rights Campaign item dated the 19^th March 2016). By basing the 'analysis' on the alternatives to which they have confined themselves, the Treasury's latest report is, by definition, biased. Osborne is aggressive about this: 'No country has been able to negotiate any other sort of deal, and it would not be in the EU’s interest to agree one.' Osborne insists that membership of a 'reformed EU' is necessary and that 'to put it simply, families would be substantially worse off if Britain leaves the EU'. In fact, the EU has not been reformed and the allegation is a lie.

Even a casual glance at this 200 page document reveals it to lack any semblance of objectivity. It is shameful that the referendum is being corrupted by the use of taxpayers' money to fund such garbage and those Brexit members of the Tory government would have been better off resigning their posts en bloc in response. We are even promised yet another report in the near future ('The short-term economic impact will be assessed in a future government publication'). One can hardly wait.

Osborne concludes the Forward by asserting that 'I hope that armed with these facts, the people of Britain will feel better informed and able to make this historic choice with confidence'. Indeed we should have the confidence to make an informed decision in the light of Osborne's 'analysis'. We should have the confidence to vote Leave.

The report kicks off with an Executive Summary, which quickly asserts that 'Much of the UK’s economic success is built on its long history as an open trading nation. Openness to trade and investment will be a key driver of the UK’s future economic security'. Consequently, 'The key economic criteria for judging the UK’s membership of the EU against the alternatives are therefore what it would mean for the UK’s economic openness and interconnectedness. This needs to be considered alongside the obligations that come with securing that access and the influence the UK has over those obligations'. From the outset, the report defines the issue in a way that facilitates the conclusions it wants to give. We are told that in order to achieve the openness (e.g. allow foreign firms to buy up the best of Britain's assets) we must be prepared to accept the 'obligations' (such as mass immigration) that the EU is forcing upon us.

The 3 models seen as an alternative to the EU are: 'membership of the European Economic Area (EEA), like Norway; [or] a negotiated bilateral agreement, such as that between the EU and Switzerland, Turkey or Canada; [or] World Trade Organization (WTO) membership without any form of specific agreement with the EU, like Russia or Brazil'.

In comparing EU membership with its alternative models, the report states: 'The analysis in this document shows that under all 3 models, the UK’s economic openness and interconnectedness would be reduced. Trade and investment flows would be lower. The UK would be permanently poorer if it left the EU and adopted any of these models. Productivity and GDP per person would be lower in all these alternative scenarios, as the costs substantially outweigh any potential benefit of leaving the EU'. We are told that there will be 'substantially weaker tax receipts' and 'higher government borrowing and debt, large tax rises or major cuts in public spending'.

But the pro-EU vision does not end there. The report goes so far as to claim: 'The total cost of leaving is likely to be higher. The new settlement for the UK negotiated by the Prime Minister in February 2016 included an ambitious agenda of economic reform in the EU. This will include the next stage of development of the Single Market, with a focus on bringing down the remaining barriers to trade in services, energy and digital, alongside completing major ongoing trade deals. If the economic benefits of reform are realised this could increase UK GDP by up to a further 4%'. It further alleges that if Britain were to leave then these reforms would be 'less likely to happen'. This is, of course, all pie in the sky.

The report continues with repeated assertions that the EU has increased the 'openness' of the British economy as a result of the Single Market and the EU's trade deals with other countries. It alleges that the benefits are greater than the costs of EU membership. It alleges that: 'Trade as a share of national income has risen to over 60% in the past decade, compared to under 30% in the years before the UK joined the EU' (this specious allegation is dealt with below), and that Britain should accept that 'EU membership means accepting the regulatory framework associated with it'.

The report is adamant that membership of the Single Market is a must, and that the terms of that membership are obligatory, including the need 'to accept the free movement of people and continue to make financial contributions to the EU'. Outside the EU, Britain would have to implement rules decided by others, whereas inside the EU Britain 'has significant influence over EU decision-making and the rules associated with the Single Market. This includes veto rights in the European Council'. This allegation is dishonest as Britain does not have a veto, and is dependent upon support from other countries to try and stop unwanted measures. Moreover, on leaving, Britain would not have to implement the Free Market rules; only those few firms that export to the EU would need to abide by EU rules, in the same way that exporters have to abide by the rules of any export market. The overwhelming majority of firms and organizations that do not export to the EU will be freed from having to comply with EU red tape (see the English Rights Campaign item dated the 7^th May 2016).

The report repeats that 'only the WTO alternative would free the UK from all the formal obligations that come with access to the Single Market'. This is true, but the report is totally unimaginative as to the freedom that regaining control of our own trade policy would bring and the advantages of that. Under the WTO rules we would be free to enter into bilateral trade arrangements to our own advantage. Nor would we have to tolerate hostile protectionist actions of others, such as the Chinese dumping of steel at below cost of production. We would be free to salvage our steel industry irrespective of EU procedures.

At one point the report comes close to admitting that Britain would be better off out of the EU when it states: 'To allow the UK to access the Single Market without agreeing to the rules of the Single Market would put their own businesses and consumers at a disadvantage'! In other words, were Britain to leave and yet be allowed to trade freely with the Single Market, then British businesses would be better off. The Osborne pitch is completely dependent upon his assertion that the EU will refuse to make a free trade deal, and that such a deal is the only thing that matters.

The report makes a mystifying comment that openness 'underpinned' Britain's 'economic revival following 3 decades of relative decline after 1945'. This ignores the positive impact of North Sea oil in the 1980s, or the benefits of selling off the nationalized industries, ignores the ERM calamity as well as the slump following the credit crunch and subprime mortgages fiasco. This is truly an astonishing rewriting of history.

This analysis has now only reached page 13 of the 200 page report and has yet to delve beyond the Executive Summary. To spare boring people, The English Rights Campaign will focus on certain 'highlights' of the remainder of the report.

Firstly, the report repeatedly stresses the importance of the service sector and of the importance of trying to persuade the EU to extend the Single Market to services. To be clear, although there are other services, it is the City about which the report is concerned: 'The financial services industry is crucial to the success of the UK economy. EU financial integration have helped UK financial firms grow both in size and in the breadth of services they offer. Financial services exports have increased from 1.6% of GDP in 1991 to 3.5% of GDP in 2015'. Bankers can make more money if Britain remains in the EU. As with the ruinous return to the Gold Standard after World War One, the interests of the City are considered more important than the interests of manufacturing. It cannot be stressed too much, the reason why the service sector is supposedly so successful compared to manufacturing is because manufacturing has been decimated by foreign competition, including by unfair trade practices of other countries (e.g. Chinese counterfeiting; N.B. see The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century, chapter 11 – available from Amazon, Kindle and CreateSpace).

Secondly, the report lauds trade with other countries as being the only thing that matters. For example it states: 'The key economic criterion for judging the UK’s membership of the EU against the alternatives is, therefore, what it would mean for the UK’s economic openness, access to global markets and its ability to trade with the EU and the rest of the world.' To be clear, by trade the report adds both imports and exports: 'openness to trade, defined as total trade (exports and imports) as a share of UK GDP, has increased significantly over the past 5 decades – rising from 23% of GDP in 1965 to 64% in 2015'. This is a nonsense argument. On this 'logic' the more Britain imports, and the bigger the trade deficit, the better. The report does not treat the trade deficit as a problem at all. In fact, it is a massive problem that is making Britain poorer each year and the scale of the deficit with the EU demonstrates the disaster that EU membership has been for Britain. The report itself sets out a table showing that Britain has a trade surplus with the rest of the world (despite the huge trade deficit with China), whereas there is a massive trade deficit with the EU.

Thirdly, the report argues that funding the deficit is a reason to vote to remain in the EU: 'The UK ran a trade deficit of £67.8 billion with the EU (3.6% of GDP) in 2015. This was comprised of a deficit in goods of £88.7 billion (4.8% of GDP), but a surplus in services of £20.9 billion (1.1% of GDP)', and that: 'The UK’s current account deficit means it is also a net borrower from the rest of the world. In turn, this implies the UK is exposed to changes in the perceived riskiness of lending to the UK. This exposure has been noted by the Governor of the Bank of England, who has said “the possibility of a risk premium being attached to UK assets because of certain developments exists, and that plays into the riskiness of the situation”. In other words, if concerns about lending to the UK increase, investors will require a return – or premium – for bearing that risk, making it more expensive for the UK to fund its current account deficit', and that: 'there might be a sudden stop in the UK’s ability to finance its large current account deficit outside the EU'.

Thus, rather than pay for imported goods by successfully exporting goods, under the Tories, Britain is content to run a massive balance of trade deficit and to sell off assets and borrow to fund that deficit. China, for example, is to be allowed to manipulate its currency, hack into computers, counterfeit, exploit other protectionist measures, and then spend the money it gets for its exports to Britain not on British goods, but lend that money back so that we pay them interest on it. This is not an economic model but a national bankruptcy model. The EU is little better, exploiting the one-size-fits-all euro to push down the prices of the manufactures from northern Europe and hence leave Britain with a substantial balance of trade deficit with them. Meanwhile, mass immigration continues uninterrupted, with the government pocketing any extra tax revenues paid but doing little if anything to meet the costs of that immigration, such as the strains on hospitals, schools, roads, housing, etc. and assumes that yet more immigrants will come to meet future costs. This is Ponzi economics (see The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century, chapter 12).

Osborne's assertion that Britain should remain in the EU to allow this state of affairs to continue is precisely why we need to vote to leave. Osborne has to be stopped.

It should be noted that Osborne's forecasts are based upon continuing very high levels of immigration (contrary to stated government immigration policy) and the ONS has recently estimated that the population of Britain might even reach 80 million by 2039 (being around 65 million now).

Fourthly, the report perversely tries to turn the trade deficit into a pro-EU factor: 'The UK’s current account deficit is identified by many of the studies as a risk. The decline in investor confidence could be amplified should overseas investors reassess the sustainability of the UK current account, leading to a sharp fall in sterling. A sterling depreciation is a common feature of the external analysis, with a trade-weighted fall of 15% to 20% anticipated by Citi, Goldman Sachs and HSBC. Most analyses recognise the potential for higher inflation caused by the exchange rate depreciation to reduce household real incomes and further depress consumer spending. Citi estimate Consumer Price Index (CPI) inflation at 3% to 4% year-on-year for several years, and HSBC see inflation increasing by up to 5 percentage points in the near term depending on how far import price rises are passed on to consumers.'

To describe the deficit as a 'risk' is an understatement. It is deeply damaging. It is unsustainable. Either trade is brought back into balance or ultimately, when the assets that can be sold have run out and the indebtedness reaches a ceiling of credibility, then there will be a sharp collapse in the value of sterling and a sharp economic contraction similar to that experienced by Greece. Yet Osborne, as a Ponzi economist, thinks Britain can keep running the deficit and that membership of the EU will facilitate this. Once again, this is a reason to leave the EU. Britain needs to bring its trade back into balance and thereby eliminate the risks associated with the deficit, as well as substantially increase the national prosperity and growth rate.

Fifthly, the report tries to dazzle with a number of equations and talk of the 'gravity modelling approach'. It does not matter whether it be described as 'the gravity modelling approach', or 'the back of the envelope approach', or 'the we will say anything we think we can get away with approach'. The fact is that the report is a sham. It is devoid of common sense. It is divorced from reality. It is a pretentious mishmash of excuses to remain in the EU regardless of the true merits.

The report, in particular with respect to its inability to tackle the trade deficit, constitutes a very good reason to vote to leave for the very reasons the report asserts Britain should remain. We need to leave to stop Osborne and his fellow Ponzi economists from their chosen economic path – their national bankruptcy model. We need to leave to enable Britain to bring its trade back into balance. We need to leave to stop mass immigration and all its accompanying costs, financial and otherwise. We need to leave the Single Market.

A Britain independent of the EU is a far more viable and appealing prospect.

QUOTE OF THE MONTH

'We especially do not like it when people who have never lived in Hungary try to give us lectures on how we should cope with our own problems. Calling us racists or xenophobes is the cheapest argument. It's used just to dodge the issues.'

-  Zoltán Kovács, spokesman for Hungary's Prime Minister Viktor Orban

THE EU

THE ECONOMY AFTER BREXIT – ECONOMISTS FOR BREXIT

 

In their recent report, 'The Economy after Brexit – Economists for Brexit', eight economists set out a number of arguments allegedly showing how well Britain would do after leaving the EU. Unlike the recent report from Osborne and the Treasury (to which the English Rights Campaign will be responding in the near future), the Brexit economists believe that the British economy will be larger due to Brexit.

 

Importantly, the Brexit economists base their case on a policy of unilateral free trade. In practice, this is a policy only of tariff free imports with other countries imposing whatever tariffs they like on British exports. Patrick Minford, one of the eight economists, told the BBC: 'Whereas what we are assuming is that we take advantage of leaving the EU to have free trade with the rest of the world unilaterally – we simply say to the rest of the world sell to us at your prices. That brings down the costs to the consumer and transforms the economy in our modelling because consumers have lower prices, wages fall for employers because they are still better off with lower wages because the prices are falling. So there's this dynamic unleashed into the economy, that's completely absent from these other analyses because they just assume we stay with the EU tariffs.'

 

The English Rights Campaign does not support a policy of unilateral free trade. This was the policy that allowed Britain to fall behind its competitors and rivals at the end of the 19^th century. Nor is this a policy that is likely to win voter support in the oncoming EU referendum. The assumption that there will be a fall in wages should be noted.

 

However, the Brexit report does make some useful points. It does not panic over the prospect of a fall in sterling: 'swings are routine in economies undergoing change and are self-stabilising. In a low inflation, low interest rate environment, where financial markets are potentially volatile, a fall in sterling will help stabilise the economy. Post Brexit, short-term growth will be little different from now and long-term growth better'. It acknowledges that certain firms will be strongly in favour of remaining in the EU: 'In any industry there may be firms that think they will benefit from Remain. But their interests, as with other vested interests, are theirs, not the UK’s. Therefore, the views of business are likely to vary by size of firm, by the sector they are in, and by their business model'.

 

This is a key point. There are a number of vested interests that need to be confronted. Simply because, for example, a multinational organization is benefiting from paying reduced wages to EU immigrants and has a cosy relationship with the EU, perhaps with a favourable export regime, does not constitute the same as the national interest. The Ponzi Class (see The Ponzi Class: Ponzi Economics, Globalization and Class Oppression in the 21^st Century) may benefit from the EU, but that is their benefit and not that of the ordinary people. The interests of the Ponzi Class and the national interest are not one and the same. The Ponzi Class are a greedy, self-serving vested interest and they need to be confronted.

 

The Brexit report highlights the failure of the EU's economic performance: 'Over the last two decades, the EU’s record has been poor against that of other developed countries, such as the US, Australia and Canada. Within Europe, it has done badly compared to Norway and the UK … it has performed even more poorly against the emerging markets'. The reasons for this are cited as being 'excessive regulatory zeal' ('the so-called acquis communautaire, a body of law or quasi-law ... is now 170,000 pages long'), 'misuse and misdirection of the EU’s funds' and, most importantly, 'the absorption of time and attention of politicians, officials and business leaders obsessed with barmy and unnecessary plans for the harmonisation, integration and Europeanisation of something or another', whereas other countries focused on economic growth. In addition, there is the calamity of the euro.

 

The report is dismissive of the fixation with the EU's Single Market:

 

People talk about Britain “having access” to the Single Market, as though it were some sort of a room, with a door through which you may or may not be admitted, depending upon your EU membership. But this is nonsense. All countries in the world have access to the EU Single Market. It is simply that, in order to sell goods into it, they have to agree to meet its standards.  But that is true wherever you try to sell goods. As it happens, plenty of countries around the world have had great success selling into the Single Market without themselves being members of it. The United States is the largest exporter to the EU (exporting more to the EU than does the UK), followed by China.  As for the importance of being able to influence EU rules, neither of these other countries has any influence on them. Nor do they have a single Member of the European Parliament (MEP) or a representative at any European meeting.

By contrast, the downside of belonging to the Single Market is you must apply all its rules and regulations throughout the whole economy. In the UK’s case, only 12% of our GDP is directly accounted for by exports to the EU. But this means that 88% is not. Yet that 88% also must obey all the EU’s rules.

 

The scale of the burden of regulation is demonstrated by an estimate from Open Europe which 'estimated in 2011 that EU social legislation by itself made the UK worse off by £15 billion, about 1 per cent of national output'. Leaving the EU means that only those companies which wish to export to the EU need to take account of EU legislation. Other organizations will be liberated from the EU's regulatory oppression. This is a major reason to leave that would bring a transformation of the economy.

 

Patrick Minford himself writes an item on the matter of trade. He sums up EU trade policy as being confined to establishing a customs union for agriculture and manufacturing. He alleges that the effect of tariff and non-tariff barriers are to increase prices for both sectors by around 20%. He then states that in the event that Britain simply leaves the EU, with no trade arrangement with it or anyone else, and does not erect any tariffs of its own, then there would be a fall in consumer prices of around 8% and 'a welfare gain of 4% of GDP'. He is adamant that Britain does not need anything more than WTO rules, which govern around 70% of exports already and that most of the 'EU’s much vaunted trade agreements' are with small countries and ex-colonies and therefore are of little importance. He believes that these preferential agreements should not be extended to either the USA or China and 'Why bother?' as they increase import prices: 'Thus, the best outcome for us as a nation is trading on the basis of WTO free market prices without so-called free trade agreements negotiated with any country'; and that 'One thing we do not have to do, and should not do, is enter into any other trade agreements. The WTO rules are there to police the world market in which the UK can best thrive'.

 

The report draws attention to the downward pressure exerted on wages by mass immigration, although it does not deal with all the other costs such as the pressure on public services, housing and the impact on social cohesion.

 

The report concludes: 'It is interesting to see, after Brexit, the UK becomes a more “normal” economy, with growth reviving, monetary policy “normalising” and inflation getting back on track. The fall in the exchange rate and the direct improvement in the current account largely correct the recently persistent current account deficit. The PSBR, as a share of GDP, continues to fall towards balance at the end of the decade, with faster growth of nominal GDP'. In fact the PSBR, according to the report, continues virtually unchanged from the Treasury forecast, and the balance of trade deficit continues at a very high level indefinitely into the future.

 

A flaw in the campaign to leave the EU is that many of those supportive of Brexit are Tories, and are therefore understandably reluctant to attack the Tory government economic policy. Osborne, the Chancellor of the Exchequer, is a Ponzi economist. His handling of the economy is a disaster. For all the chatter about austerity, he has doubled the national debt, the government continues to borrow large sums each year, manufacturing is in recession, and the balance of trade deficit is enormous. Osborne is keen for mass immigration to continue. He is happy to pocket whatever extra tax revenues are paid by immigrants, but makes little if any provision for the extra schools, hospitals, housing etc. needed for those immigrants. He could not care less about the lower wages forced on the English. He, along with the rest of the Tories, is content to continue to borrow and sell assets to fund the trade deficit.

 

The Brexit report ignores all this. It confines itself to offering a unilateral free trade theoretical alternative to EU free trade. It ignores entirely the adverse consequences of protectionist measures used by others, in particular China, and the consequences if the EU pulls the same tricks. It does not even see the trade deficit as a problem.

 

The English Rights Campaign has already responded to an earlier Remain effort (see the English Rights Campaign item dated the 19^th March 2016) in which the need and benefits of bringing the balance of trade back into balance were set out.

 

The Brexit report makes some useful points, and is correct to treat the WTO option as the default position. It is not an unattractive one. Where the English Rights Campaign would differ profoundly is that Britain should not allow foreign countries to use protectionist measures against Britain. Unilateral free trade is not the true alternative to membership of the EU. Britain should impose tariffs, if needs be, to bring the trade back into balance, which would transform our economy for the better just as it did in the 1930s (a detailed examination of which is contained in The Ponzi Class, including Joseph Chamberlain's case for Tariff Reform).