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Telegraph: Stop talking Britain down, Remainers: We hold the aces, and the EU is desperate for a deal

Date: 14 08 2017

Stop talking Britain down, Remainers: We hold the aces, and the EU is desperate for a deal

The recent reassuring words of the Chancellor and the Trade Secretary do not detract from the fact that Project Fear is still going strong. The summer of  scaremongering by Remainers, trying to obstruct Britain’s exit from the European Union, includes the pretence that we must pay a colossal £36bn ‘divorce bill’ to break the deadlock in negotiations.

Our own civil servants have been pushing for this payment, raising the suspicion that the same senior Whitehall officials who campaigned hard against Brexit last year are now trying to derail the talks and scare the government into an undemocratic U-turn.

The plain fact is Britain is under no legal obligation at all to pay anything to the EU and, if we do come to a financial arrangement, it should be a straightforward business transaction.

The whole idea that Brexit involves a “divorce” is a highly dodgy metaphor. We’re not married to our neighbours in Europe. That is wrong-headed nonsense. The countries on the Continent are not our friends, they are our competitors. In the everyday world of business, it would be ludicrous to suggest that we refrain from competition, for fear of damaging rival firms. But that’s what the Remainers are suggesting.

Of course we would like to stay on good terms with the nations closest to us, at least geographically. That makes good business sense. But we should not allow ourselves to be blackmailed into making an exorbitant and uneconomic payment.

There is nothing in Article 50 of the Lisbon Treaty that stipulates we have to pay a fine or settle a “divorce bill”. That is a fiction, a spurious invention. In fact, there would be nothing wrong with walking away without a deal and paying nothing. It would be entirely legal, and it might make the best business sense.

Any payment we do make should be viewed as a transaction. Britain must get its money’s worth, and ignore the bluster from the EU side, claiming that we need to pay a settlement before there can be any deal. On the contrary – as in any good business transaction, there should be no payment until the deal is in place. We pay after delivery, or not at all.

Our negotiators ought to be in a powerful, even dominant position at this stage. The European Commission desperately needs our money, and is ready to buckle to our demands. If we make it plain that we’re willing to walk away without paying a penny, we have enormous leverage.

And there’s absolutely nothing to prevent us from carrying out that threat. We do not need to have a free trade agreement in place with Europe before we leave. The rules of the World Trade Organisation, which cover all aspects of international business, give us ample protection.

A free trade agreement would certainly be valuable – but like anything of value, it has a price, and that price can be calculated. It is worth something, but its worth has a limit.

Cold hard maths suggests that, without any free trade arrangement whatsoever, British businesses would be paying out an extra £4bn a year in tariffs, or perhaps slightly less. Tariffs are the taxes that the EU would impose on our trade, and there is no escaping them: without a trade agreement (which our membership of the EU currently provides), the tariffs must be paid.

But £4bn is a tiny fraction of the £36bn that is being proposed as the price of Brexit. In fact, £4bn is less than half of what Britain currently pays for its EU membership each year.

So it would simply be cheaper for the government to compensate British businesses for any post-Brexit European tariffs, by offering tax breaks, cuts and other support .

Do the calculation another way: our annual EU contribution is currently between £8bn and £10bn. If we were to pay two years’ worth of “membership fees” up front, that’s between £16bn and £20bn… more than we would pay in five whole years of trade tariffs.

Suddenly, the idea of walking away from Europe without a backward glance or a single penny in reparations makes a lot of economic sense. And you can be certain the EU negotiators know this, even if they would never admit it.

Thanks to the fall in sterling since the referendum, British export businesses are able to sell more cheaply to foreign markets. This makes our goods even more competitive, which in turn increases British profits. That could be offset against the cost of the tariffs – the government would not need to fully compensate firms, because the natural laws of economics would be doing that already.

All this adds up to one basic fact: we mustn’t pay more for a free trade arrangement (FTA) than it is worth. And unless the EU is prepared to implement the deal fully before Britain leaves, then we shouldn’t pay at all.

Furthermore, we must remember that an FTA with Europe is not the be-all and end-all of Brexit. There are other, much greater advantages in store.

We must be free to set our own taxes, and reduce them as we choose without hindrance or interference from Brussels. Just as important, we must reclaim the freedom to remove our own tariffs on goods we import from the rest of the world, and to implement free trade deals with new international partners. This will bring down our costs, and raise our standard of living.

We need to reform our agricultural policy, bringing it into line with what’s best for farmers here, not in our competitors’ countries. We have to repatriate our fisheries, and deregulate in other industries where red tape is strangling business. It’s vital to restrict migration, particularly to low paid jobs, which is a cost to the UK taxpayer of around £3,500 a year per migrant.

At a very low estimate, those improvements to our economy could boost GDP by 5 per cent. In one swoop, that achieves the equivalent of improving our rate of growth by an above-average margin across a decade.

Even if we can’t get a free trade agreement into place with the EU, those other benefits add up to far more. In fact, the trade deal pales almost into insignificance. Whatever we lose will be far outweighed by all our new freedoms.

The more we make this clear, the stronger our negotiating position. The Chancellor of the Exchequer, Philip Hammond, has an opportunity to establish this new, more bullish stance in the Autumn Budget.

Disastrously and not withstanding his recent pronouncements, it appears that the Chancellor is trying to salvage a second-rate version of the current EU agreement, and he seems willing to do this at a very high cost. In this he is backed, not by small British businesses, but by the vested interests of the multi-nationals and foreign owned companies.

We can only be richer by leaving the EU if he embraces all the opportunities to enrich us as a nation. To want us to be worse off is deeply unpatriotic. If he is not capable of grasping the opportunities, or prepared to fight for Britain’s best future, he should be sacked as soon as possible and replaced by someone who will. At the moment he is behaving like a knave or a fool – strong words, but hardly an overstatement.

Instead of paying for a divorce, he could actually be demanding cashback. Britain has contributed so much to the EU over the past 40 years, there is an argument that they owe us. Many European assets, after all, were actually paid for partially by UK wealth. 

Bear in mind that a few  key nations – the UK, Germany, the Netherlands and parts of Scandinavia – have made a net contribution in real terms since the mid-Seventies. The majority of the assets of the EU are paid for by those countries.

If you want to talk about Brexit in terms of a divorce, remember that both spouses in a break-up can walk away with part of the proceeds.

The bottom line is that Remainers and Brexit saboteurs keep telling us that Britain is in a weak negotiating position. They are lying. We hold the aces, and the EU is desperate to make a deal with us.

August 14th, 2017: Telegraph