Philip Hammond needs to ditch his caution and embrace the benefits of trading under WTO rules
The Chancellor, Philip Hammond, finds himself at a unique moment in time to influence Britain’s future prosperity, given that his latitude for action is on a higher plain than Chancellors have enjoyed for the last forty years in the context of the scope which Brexit affords.
Hammond is notoriously cautious and appears wedded to salvaging as much as what we have at present as possible from what he perceives to be the wreckage of the referendum vote. This is the same prism as organisations like the CBI and the Bank of England are viewing Brexit.
For them and the Treasury, the UK would be insane to adopt WTO rules of trade. After all, WTO would condemn us to the freedom of making our own trade arrangements around the world, where 90% of future growth will take place. Of course, most of the world operates on these rules but they would argue that we mustn’t allow this to influence us.
We would also have the dangerous ability to be able to unilaterally do away with EU-imposed tariffs, thus reducing the cost of food, clothing and footwear by an average of around 20%. This would have the terrible danger of boosting the economy by 2% of GDP all in one go, far too heady a brew, and also of helping the poor, which can never be a good thing.
On top of all this, we might get carried away with deregulation, which would be like a tax cut on business, equivalent to a further boost of 2% of GDP. Far too rich for our fragile (but robustly growing) economy.
And then we would have the danger of a fish glut as we get back our fisheries and, horror upon horrors, we might be able to cut tax for business using our repatriated net contribution.
We are led to believe that the Chancellor believes the alternative would be much more sensible. Delay all this by having an interim period for as long as possible, while paying for the privilege – possibly as much as £65 billion by some accounts (£1,000 for every person in Britain) – and have no say in decision-making and inferior relations with the EU. In other words, be worse off. All much more acceptable: try to maintain the status quo, it stands to reason!
But surely not. Perhaps those seeking WTO are not so crazy after all? Unfortunately, I fear the Chancellor is still counting beans.
November 20th, 2017: BrexitCentral