Friday, April 12, 2024
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Why David Gauke is so wrong about No Deal


DAVID Gauke, the former Conservative MP and Lord Chancellor, has been arguing against leaving the EU without a deal. He suggests that ministers should be brave enough to put their popularity to one side to ‘call out’ No Dealfor all the damage it would do. He wrote with the typical ideological bent of people who have worked tirelessly since 2016 to overturn the result of the referendum.  

Let’s be clear about what Gauke is not. 

It is this – as far as traded goods are concerned, the only real economic benefit of a deal would be to avoid tariffs. Nor is there any inherent economic benefit in being tied into EU law on state aid, employment, competition, the environment and tax – the so-called level playing field. There can be no benefit, economic or otherwise, in not controlling our own fishing waters. And it would be tantamount to vassalage not having independent control of our military or empowering the European Court of Justice in our courts.

So Gauke’s main argument rests solely on the avoidance of tariffs. Sadly he did not even attempt to enumerate this benefit. The fact is the UK runs a massive trade deficit with the EU of some £100billion a year. It does so in large part because German exports are cheapened by an artificially weakened euro. If Germany had its own currency, its cars would be much dearer in sterling terms. Our trading relationship with the EU is crying out to be rebalanced. The imposition of tariffs would go some way towards achieving this.

Civitas estimates that, at WTO rates, the UK would collect c£13billion a year in tariffs on EU exports and our manufacturers would only pay £5billion a year. As a country we would run a surplus in tariffs of c£8billion a year, enabling the government easily to smooth the plight of our exporters via grants and other schemes. 

And while there are no inherent benefits in being tied into an EU ‘level playing field’, there are a great many ills.

The EU is a highly regulated entity with a penchant for ever greater regulation. By definition, adherence to regulations is burdensome. These regulations may be tolerable in good economic times but they become unbearable in recessions. Right now we are in the mother of all recessions.

In fact, even before the economic self-harm caused by lockdowns, for the government to give effect to its promise of levelling up the country it would have needed full control of the regulatory agenda. It needs complete latitude to buy-British-first; to set up special economic zones; to use differentials in tax rates to drive industry towards certain outcomes. None of this will be possible if the UK signs itself into a level playing field.

Deregulation would also be vital for our financial services sector to thrive. The EU has so far been extremely cagey about how that sector might be treated in a trade deal. In any event, it would be much better off outside any such deal. Outside the EU’s regulatory framework, the UK could jettison a whole host of financial regulations which fetter our competitiveness. These regulations also create unfair advantages for the EU with preferential lending terms. It makes total economic and prudential sense to do away with these regulations.

Then there are our 186 coastal constituencies. They are largely very poor. Even though fishing constitutes a small part of the UK’s GDP, with full control of our fishing waters under a No Deal the economic fate of these communities could be transformed. Not only would the contribution to GDP materially increase, it would foster a renaissance in a whole load of associated industries in these coastal areas. Those of us old enough to remember them before they were decimated by the Common Fisheries Policy know what they could again become. All we need do is take back full control of our waters.

The truth is that the best deal for the UK is one which allows the UK full legal and regulatory movement. That would be a No Deal. Only through divergence from the EU, not alignment with it, can the UK prosper.

That brings me neatly round to the border in the Irish Sea. Gauke conspicuously fails to mention the vast damage it is forecast to do to the economy of Northern Ireland (leaving aside the damage it would do to the fabric of the union of the United Kingdom). In a no-deal situation the government could and should repudiate the Withdrawal Agreement, thereby removing this border before it can do that damage. There is already a border on the island of Ireland. It is between Northern Ireland and Ireland. It currently represents the border not just between two sovereign states but also two currency zones, two tax zones and two regulatory zones. It is right and proper that it should also act as a customs border. And, contrary to remainer propaganda, recognising this fact would not be a breach of the Good Friday Agreement.

The truth is that Gauke argues for a deal not because it is in the national economic interest but because he is ideologically wed to the EU.

Sadly, I am increasingly of the view that the Prime Minister’s ideology is closer to that of Gauke’s than it is to the will of the British people as expressed in 2016. He is very likely to sign the UK into a deal with the EU and it will almost certainly be a bad deal.

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Ben Habib
Ben Habib
Ben Habib is chairman of Brexit Watch.

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