As published on The Times Red Box:
In politics, timing is everything. Media reports that Sir Mark Sedwill, the cabinet secretary, has escalated secret Whitehall plans to cut taxes and tariffs in the event of a no deal, known as Project After, suggest that at last there is a real appetite by the civil service and their political masters to grasp the huge opportunities afforded by a clean Brexit.
This could include cuts in VAT and corporation tax, a variety of tax reliefs to boost spending, and a wider review of the UK’s regulatory regime after we leave the EU.
Such welcome news contrast with yet another doom-laden growth forecast by Mark Carney and the Bank of England who are downgrading growth projections for this year from 1.7 per cent to 1.2 per cent. This announcement blatantly disregards more positive news on record employment rates, stable inflation and foreign direct investment.
Predictions of a financial exodus from the City of London post-referendum have come to nothing and this weekend London has been named as the top European city for international technology talent for the second consecutive year.
Mr Carney’s mindset exemplifies an Establishment culture of seeing Brexit as a huge problem to be ameliorated rather than a once-in-a-generation opportunity which offers a prize and could reap massive rewards.
With our own sovereign trade policy comes the ability to set our own duties and tariffs. If we must leave without a deal then so be it and we can cut our tariffs to zero to help manage short-term disruption. In the long run, however, we want to be smart by ensuring low duties for a cheap and constant supply of goods to the British consumer but also reserving enough flexibility in our tariff schedule for leverage in worldwide trade negotiations.
So, if we need to leave without a deal next month there is no doubt that the opportunity is there to thrive as Global Britain. I doubt that the same opportunities are available to the EU under its present composition.
There is growing evidence that businesses in individual EU members states are beginning to understand the impact of no deal on their future prospects and economic wellbeing.
In industries as diverse as German car and dairy exports, Irish beef producers, French beverages or Spanish and Italian clothing exporters, preparations are being made. Between them, Belgium and the Netherlands export £60 billion of goods and services to the UK.
After Brexit the UK will have considerably more flexibility to navigate the coming years and take full advantage of our new freedoms and independence in policy making. Unlike the EU we have a floating currency that can fluctuate in line with our economic needs.
Analysts predict that in the event of no deal, sterling could fall by over 20 per cent. Is this such a bad thing? Our goods will become 20 per cent more competitive on the global market and our EU competitors’ goods would be less competitive.
EU goods could face new tariffs when exporting to the UK so allowing for currency fluctuation, a German-made Mercedes might cost 30 per cent more, whilst UK-made vehicles will cost much less in Europe.
We can also help British businesses directly. Companies and, in particular, small businesses are presently holding back billions of pounds of investment until the Brexit landscape becomes clearer.
We could give temporary tax reliefs on capital investment which would release huge amounts for industries to grow and innovate.
This could kick start infrastructure and construction projects especially. In December, my successor as Brexit secretary, Dominic Raab, suggested cutting taxes for UK business post-Brexit. This is a great idea but specifically we could focus help on those companies with integrated EU supply chains.
We can also do much more on raising animal welfare standards, by offering farmers subsidies which go above and beyond EU standards and this would be fully compliant with WTO rules. This would demonstrate our commitment to drive up global standards and would be popular with voters.
This year’s spring financial statement is on March 13 and presents the chancellor with a perfect opportunity to put our tax system on a post-Brexit footing and to give UK businesses the certainty and optimism they need to flourish.
Philip Hammond scrapped spring budgets back in 2016 but perhaps he should think again as we may need one this year.
This is the pro-business, pro-trade, pro-environment Brexit we should be aiming to deliver. Government and business leaders need to focus on the possibilities Brexit presents rather than turning doom-laden talk into a fait accompli. Negotiations and our fate are still in the balance. So let us hold our heads high and deliver the Brexit record numbers of our fellow citizens voted for.