No Big Impact From No Deal

With the Brexit negotiations in an absolute mess, the wonks at Open Europe have helpfully modelled the potential impact of a no deal scenario in a new report and found that the medium-term impact of no deal on the UK’s economic growth would be small and could largely be mitigated by unilateral action. Their modelling finds a drag on growth of only 0.17% per annum up to 2030, which could be reduced to a mere 0.04% p.a. if the UK adopted unilateral trade liberalisation measures. GDP will still be over 30% higher than today. Not the doomsday scenario Remainers like to talk about…

The bottom line is that the terms of Brexit are “very unlikely to be the determining factor for the UK economy’s medium-term and long-term growth prospects” – there are many other economic and political factors that are likely to have a far bigger impact over the next few years. Like the introduction of Venezuelan-style socialism…

If the UK wants no deal to be a credible negotiating position it needs a plan to turbocharge the economy, not simply to talk about averting catastrophe. That is what the EU really fears…

Open Europe Report Rejects Hammond’s Services Sellout

A report published by the Open Europe think tank this morning rejects Philip Hammond’s plan to sell out the City and keep close ties with the EU for financial services. Hammond is embroiled in a row with the Bank of England after attempts by the Treasury to give up control of regulations and make the City a rule-taker. Open Europe rightly argue:

“The UK is strongly services dominated (around 80% of our economy) – we cannot simply be a rule-taker in key industries such as financial services. The approach on services therefore should be about managing divergence.”

The second section of the report calls for Brexiters to compromise on goods:

“The Single Market in goods is far more developed than services and was a significant achievement of British EU membership. We believe it makes sense broadly to maintain alignment with its rules. The EU is our most important goods’ market and the most highly-regulated sectors – electrical, automobiles, and chemicals – are the areas which we trade most with the EU and are growing the fastest. Although there might be some benefit from regulatory divergence, we judge that the Government should commit to maintaining the acquis on goods.”

Making the case for more compromise from Brexiteers, Open Europe director Henry Newman, a former Gove adviser, argues: “Open Europe’s blueprint recognises that the UK is too big an economy to be a rule-taker in areas like financial services, while accepting that we can get a very good degree of access in goods by giving up a limited amount control.” To Guido this almost seems a compromise too far. Brexiters have already demonstrated huge pragmatism over the last two years. They do not need to give up more control…

Mogg: Number 10’s Customs Partnership Is a ‘Cretinous Betrayal of Good Sense’

Jacob Rees-Mogg has denounced Number 10’s customs partnership as a “betrayal of good sense” at an Open Europe event in the Commons this afternoon. The Mogg was clear May’s hybrid model was not acceptable to Brexiters:

“It’s completely cretinous… it’s a betrayal of good sense, I cannot understand why government is faffing around with this system. I’m on the same side as Mr Barnier on this, god bless him.”

He insisted there was “no prospect” that Number 10 could u-turn on its customs union red line:

“No deal is a pretty good deal… things like staying in the customs union would be a bad deal… [it] would not be delivering the result of the referendum. David Cameron spent taxpayers money delivering a leaflet saying we would be leaving the single market and the customs union… There are two parts of the customs union, common external tariff means you cannot offer lower tariffs to trading partners in rest of the world, then there is the regulatory side… being in the customs union means you become a tariff taker and rule taker and you end up worse off than you would be as a member of the EU.”

And says if they did cave on the customs union the Tories would lose the next election:

“Say this government took leave of its senses and decided to keep us effectively in EU by staying in the customs union… who would vote for us?… I don’t see how politically this is going to work… I don’t think it will happen in the first place but if it did it would be put right through ballot box.”

He made the point that those seeking to force Number 10 to cave on the customs union are Remainers trying to overturn the result:

“The reason people want to keep us in the single market and the customs union is that they never wanted us to leave and don’t like the result of the referendum.”

He said that Theresa May is a “very enigmatic figure” about Brexit and that “it is hard to know what level of enthusiasm” she has for her government’s main policy.

Have Number 10 got the message about their fudge yet?

Gove SpAd Henry Newman New Open Europe Director

Guido understands former Michael Gove SpAd Henry Newman has been appointed as the new Director of the Open Europe think tank. He replaces acting directors Raoul Ruparel, who left last year to work for David Davis, and Stephen Booth, who becomes Director of Research. Brainbox Newman is a sound hire, he has a very strong knowledge of Whitehall and is respected in the Lobby. Before advising Gove he worked for Francis Maude at the Cabinet Office during the reform of trade union Pilgrims. Open Europe is drying out, under Newman expect them to embrace leaving the EU and promote a liberal, outwardly-looking Brexit. Congratulations…

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