Robert Colvile: Here’s what the Chancellor should do if there’s No Deal

There is room in the Budget to allow Hammond a fair amount of leeway to act. Here’s our plan.

Robert Colvile is Director of the Centre for Policy Studies.

Over the past few months, we’ve been bombarded with predictions about the consequences of “No Deal” – most ranging from the alarming to the apocalyptic.

Yet most of these analyses have focused either on the very short term or the very long: on the immediate potential for disruption at Calais and Dover, or the impact on GDP in a decade’s time.

There has, by contrast, been much less analysis of what the Government can and should do in the immediate wake of No Deal to stabilise, and ultimately strengthen, the wider economy – to maintain consumer confidence, safeguard business investment, and prevent the supply shock of No Deal turning into a demand shock, with far more debilitating consequences.

It’s true that MPs may well vote on Wednesday to “take No Deal off the table”. But they will in practice be doing no such thing. Until a deal is actually signed and sealed, No Deal will remain a possibility – unless we decide to abandon Brexit altogether, with all the calamitous consequences for our democracy, self-respect and standing in the world that would entail.

Even if Parliament delays our departure, it is unlikely the EU will permit endless extensions of Article 50 while the British political class reaches consensus among itself.

So it would be positively negligent not to think about, and prepare for, No Deal. Hence our new Centre for Policy Studies report – A Budget for No Deal. It sets out the decisions that we believe should be taken by the Chancellor, in the wake of a no-deal departure, to safeguard the economy and promote growth.

Safeguarding the economy

In that scenario, there will obviously be a major role to play for monetary policy.

What most people miss about the most apocalyptic No Deal forecasts is that they assume that the Bank of England will not respond. The ultra-pessimistic “disorderly” exit scenario devised by the Bank to stress-test the financial sector – which featured GDP plummeting by 8 per cent, unemployment rising to 7.5 per cent, and inflation hitting 6.5 per cent – actually involved tightening rather than loosening monetary policy: an act of kamikaze economics.

Given that the Bank acted to stabilise the economy in the wake of the original vote to Leave, it is safe to assume it would do the same after No Deall. But the Chancellor will also need to take decisive action in terms of fiscal policy, to maintain confidence and create the most attractive possible economic environment.

So what should he do?

In our view, the key task after No Deal is to limit the impact of any supply shock – the sudden change in how we trade and with whom – and in particular to prevent it from turning into a demand shock, in which a falling pound drives up prices and inflation, and confidence among consumers and businesses falls alongside their willingness to spend. That means coming up with ways to blunt the impact of the most widely predicted economic dangers.

Thanks to the Government’s focus on bringing down the deficit, the public finances are in remarkably good order. We suggest that this leaves room for a stimulus of £44 billion, amounting to an extra 2 per cent of GDP, to keep the economy moving without moving the deficit back into the danger zone. (Our own proposals only come to £35 billion, leaving significant cash to deploy towards a further stimulus, or other post-no-deal firefighting.)

But where should the money go?

We argue that there should be three priorities. First, supporting consumer spending – making sure voters feel they have money in their pockets even if prices rise. Second, incentivising business investment – making sure companies, and especially small and family firms, feel like they’ve got a reason to hire and invest. Third, keeping Britain open – cutting tariffs and attracting talent and trade.

Supporting consumer spending

To ensure voters have a buffer against rising prices, and feel able to keep spending, we would urge the Government to give every worker a £465 tax cut by implementing the Universal Working Income. Our head of tax, Tom Clougherty, explained the idea on ConservativeHome back in November – raising the National Insurance threshold to match the income tax allowance. This would not only compensate for any rise in prices, but act as an incentive to everyone to work.

We also need to help those who aren’t working – it would be callous, and politically disastrous, to do otherwise. That’s why we suggest ending the benefits freeze a year early, topping up the state pension, and freezing council tax. (We also argue that a temporary VAT cut, deployed in the wake of the financial crisis, would be a worse and more expensive solution – not least since many of the products most vulnerable to any post-Brexit price rises are VAT-exempt.)

Incentivising business

Britain’s economy has defied many of the gloomy pre-Brexit predictions. But the slowdown in business investment has certainly been a drag on growth. After No Deal, we need to make sure we do everything we can to keep firms here and attract new ones – and make it as easy as possible to hire and invest.

The most obvious move is to bring forward the scheduled cut in corporation tax to 17 per cent. A more lasting change would be to adopt “full expensing” – effectively, to allow companies to write off all investment in plant and machinery against tax. All the evidence is that this would have a galvanising effect on growth.

Small and family businesses, especially exporters, are the most vulnerable to No Deal shocks – but also the most important as an engine of job creation. So we suggest a temporary 25 per cent cut in both business rates, that perennial bugbear, and employers’ National Insurance Contributions.

But it’s not just about money. We need to make it clear to businesses that the business environment will be as friendly as possible. That means imposing an 18-month moratorium on any new regulations that increase the business burden – and pausing “Making Tax Digital”, the latest headache imposed on small firms by HMRC.

It also means an urgent review of existing regulation, especially that imposed by Europe, and listening to businesses large and small about what is causing the most problems. The think tank Open Europe has outlined “politically feasible” deregulation that could save firms nearly £13 billion a year post-Brexit, or 0.6 per cent of GDP.

The Government should also bring forward cost-effective infrastructure projects – those small-scale, easily deliverable projects that offer maximum bang for its buck – and support housebuilding and construction, not least because we desperately need the homes anyway.

Keeping Britain open

The early reports on the Government’s customs plans in the event of No Deal are along exactly the right lines – a bold ambition to reduce or eliminate tariffs in order that consumers feel the benefits. Of course, there will be sectors and regions, such as agriculture, where immediate unilateral reduction would cause significant damage – so they need to be supported as we move towards a zero-tariff norm.

To keep things moving at the border, we should wave through low-risk imports from the EU. But we should also invest in developing the most efficient customs infrastructure in the world, and establish systems to help our firms export (especially SMEs).

We should also rapidly establish a new generation of free ports – a brilliant post-Brexit project first outlined by Rishi Sunak MP for the CPS.

We should make it far easier for the highest-skilled workers to come to the UK. And we should copy the Netherlands by offering the best workers, and the best firms, significant tax breaks if they relocate to the UK.

Making the best of Brexit

In a recent ComRes survey, the public agreed by 65 per cent to 13 per cent that “After Brexit, the UK should position itself as the lowest-tax, business-friendliest country in Europe, focused on building strong international trade links”. This was backed not just by Leave voters but by Remain voters, Labour voters, and across all age groups, regions, and class statuses.

The ideas outlined here fit that brief – and there are plenty more in the paper itself. Many of them, we believe, are good things to do whatever the eventual form of Brexit.

Yes, our report is a plan for No Deal. But it is one that involves doubling down on the best and most entrepreneurial aspects of the British economy. Whatever the nature of the final Brexit outcome, it is the extent to which we embrace those values that will determine whether we succeed or fail.

MPs handed the Brexit decision to the people – they must not now be allowed to overrule us

We live in febrile times, but in many ways it is just the calm before the next storm, each one battering at the very foundations of the edifice we know of as the United Kingdom. We as Britons are very fortunate to have managed to build a system of government envied by many in the […]

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We live in febrile times, but in many ways it is just the calm before the next storm, each one battering at the very foundations of the edifice we know of as the United Kingdom. We as Britons are very fortunate to have managed to build a system of government envied by many in the rest of the world for its stability; a stability given to it by the careful balance between the power of the individual and the state.

We owe this to Magna Carta, the Glorious Revolution, the Common Law, the Acts of Union, Simon de Montfort, John Wilkes, suffragettes and many other events and people in our history. However, over the last 45 years the EU has come like a bull through this and has not just upset it, but as we try to leave is threatening to destroy it.

We, the people, elect representatives to Parliament to run the country on our behalf, yet over the last 45 years they have increasingly delegated this responsibility to Brussels without declaring in many cases that this is the case. They have in many areas been reduced simply to ciphers for the Commission in Brussels. Nearly four years ago Parliament voted to put this situation to a referendum and give the people the decision as to whether the UK and its institutions should be fully independent of the EU. Three years ago it was decided quite clearly that this was so and all decision-making that had moved to the organs of the EU should return to the UK.

Now, nearly three years later, due to EU intransigence – with, one can only assume, a certain complicity on the UK side – a Withdrawal Agreement and Political Declaration have been proposed that is not Brexit. It is Remain with a Brexit wrapper, converting our membership to that of a colony that can be asset stripped with impunity by the EU without repercussions. It is a disgrace and epitomises a deep low point in British statecraft.

We have got to this point because MPs and the Government have consistently taken the easiest option. They voted for a referendum, thinking it would be won by Remain, and then backed the triggering of Article 50 because they knew they could not look the voters in the eye if they didn’t. In voting through Article 50 and then the EU Withdrawal Act they set a deadline of 29th March to leave with or without a deal with the EU.

Now that the choice is between a No Deal exit on WTO terms or the Prime Minister’s flawed deal, many MPs and ministers are trying to backslide on their previous commitments. They quote business as being the reason, the need to avoid chaos or the devastation that will be caused by No Deal etc. I write this as someone in business importing assemblies and components from all over the world and exporting more than two-thirds of our turnover to more than 120 countries around world. Whenever I ask who it is that is going to cause all these problems, no one can tell me; initially it was going to be due to delays at the Channel ports due to extra checks, but the port operators, Border Force and HMRC all say “Not us, Guv”!

With any changes, such as applying new procedures to almost anything, there is always an element of disruption – but it will be small in the overall context and in a few months’ time we will look back and wonder what all the fuss was about. However, what we are witnessing is a groupthink bubble that has been inflated to such a size that those propagating it have to keep inflating it, because if we do leave on WTO terms and it is as I expect a relatively straightforward change, they will be shown to have been crying wolf.

I can understand that ministers and MPs are continually buffeted by the professional lobbyists of the CBI and others who are looking at any way of preserving the status quo. For them the fear of sudden change is paramount; they can happily cope with the drip drip draining of sovereignty and they may whinge about bad regulation, but they find it hard to handle change that might adversely affect their vested interests and the status quo.

However, ministers and MPs have been charged by the electorate, who under our system are ultimately sovereign, to take back control. They seem reluctant to take on the extra responsibility that this entails; they appear to think that they are not able to do it. How do the other 165 non-EU countries of the world cope? Instead they wriggle and fidget in every way possible to try and thwart the wishes of the people, using every sort of excuse from the downright arrogant – that Leave voters are stupid – to telling us that if we had known it was so complicated, we would not have voted Leave. It is only complicated because they have chosen to make it complicated. Instead of carping, they all need to concentrate on making departure under WTO on 29th March as smooth as possible. The irony is that because it is the only option we in business can plan for, it is the only one we are prepared for.

It is worth remembering that these are the same MPs who say that we must increase voter participation at elections. Yet when we had the highest turnout in a generation for the EU referendum, they attempt to ignore it!

There is considerably more at stake here than just leaving the EU, there is the whole fabric of what makes Britain what it is and that is worth more than a possible temporary shortage of lettuce. The problem is that at each stage the Government and Parliament have made the mistake of never seriously addressing our relationship with the EU – in part because our membership is based on a lie, that it would not affect sovereignty, over which politicians have always been in denial. An ever-increasing proportion of the population, meanwhile, have smelt a rat especially as whatever the politicians say we have seen more and more areas of policy drift out of our control.

Now in theory in the departure lounge, we see the same pressures coming into play because what has been presented as a Withdrawal Treaty plainly is not, so the only escape is to leave on WTO terms. As the date for departure was set two years ago, this has become a totem from which any slippage will be seen by the voters as betrayal.

The time for kicking the can down the road has come to an end and MPs – especially in the governing party – have to look over the edge at the train of events that they are going to set off if they don’t hold out for No Deal and leaving on 29th March.

The first thing is that the Conservative Party would be finished for at least a generation, if not ever; and secondly, the UK would probably be finished: the SNP-run Scottish Government say they will call a referendum in the event of a No Deal. They are looking for any excuse, but the likelihood of them winning it is probably higher in the event of No Brexit, a delayed Brexit or even under the terms of the proposed treaty. Thirdly, society would become ever more polarised between Leavers and Remainers. Fourthly, the very roots of British democracy, envied around the world, would have been cast aside, and the votes of 17.4 million people disregarded by an arrogant elite.

The EU has behaved just as Yanis Varoufakis predicted and in turn the UK has fallen into the traps he predicted. There is only one way out and that is to go WTO on 29th March, otherwise the conversation between MPs and voters is going to go something like: “Sorry old boy, I am afraid your vote didn’t count but mine did so we are staying in”. That would set off a chain of events over which politicians of all parties would have little control.

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Michael Josem: Company regulation. Westminster has no right to legislate for the Isle of Man.

It is neo-colonialist for MPs to attempt to do otherwise in relation to Crown Dependencies – and the attempt should be resisted.

Michael Josem is a marketing & communications professional.  He is a resident of the Isle of Man who formerly worked for members of the Liberal Party in the Australian Parliament.

Today, the legitimacy of parliaments to make laws comes not from their divine rights but, rather, from the consent of the governed. The Westminster Parliament has a legitimacy to make laws for the UK, because the people of the UK give their consent through a free and fair democratic process. The US congress has a similar legitimacy – just as the parliaments of Canada, Australia, France and elsewhere do. They have a right and duty to make laws for their own people – but not for others. This principle should not be controversial in 2019.

In a bygone era, parliaments (most obviously Westminster, but other European parliaments, too) did not accept such constraints on their power. In colonial times, Westminster created laws for its overseas colonies of North America, Australasia, Africa and elsewhere. This practice substantially ended in the twentieth century, because our civilisation recognised that the parliament of one people has no moral right to rule over another people. The United Kingdom was a key leader in recognising that its parliamentary “children” should be allowed to mature and make their own decisions.

Despite the obvious moral illegitimacy of one parliament making laws for another people, there is today a group of Westminster MPs who appear to recognise no such constraint on their power. Led by Andrew Mitchell and Margaret Hodge, these neo-colonialists are seeking to change company regulation in the Crown Dependencies of the Isle of Man and Channel Islands without the consent of the peoples who live there.

With the support of much of Labour and the minor parties, they appear to have been able to construct a parliamentary majority to amend the Government’s Financial Services Bill to impose these new rules upon the Crown Dependencies.  A vote has been postponed but is none the less likely to happen.

There are good arguments in favour of the legislation that they propose, and good arguments against it, too. But those arguments should not be heard in Westminster, because Westminster has no moral legitimacy to force its rule upon the Crown Dependencies on this issue. The people of the Crown Dependencies do not vote in Westminster elections, and so their view is not represented Westminster. Because the people of the Crown Dependencies have no say in Westminster, there is no legitimacy for Westminster to say what happens in the Crown Dependencies.

Of course there are some areas in which Westminster can legitimately legislate for the Crown Dependencies. The governments of the Crown Dependencies have consented to various British regulatory and legislative instruments over the years. Most obviously, this includes assenting to Westminster administering foreign affairs and defence.

Similarly, with the consent of the Crown Dependencies, Westminster legislated earlier this year to form a post-Brexit Customs Union with the Isle of Man (despite unhelpful, troublemaking votes from f the Labour Party and the Liberal Democrats to oppose this move). This empowerment of Westminster to make trade deals on behalf of the Isle of Man with foreign nations was legitimate because it has the approval of the Manx people, as represented by our own democratically elected government at Tynwald.

The modern political world is witnessing many challenges to established norms of behaviour – mostly from the executives of various countries. While it is unusual to see a legislature break its own behavioural norms, these are clearly interesting times. Rather than try to expand their jurisdiction in an undemocratic manner, Westminster MPs should continue to have some humility about the moral limits to their powers.

Today, the public is demanding more than ever before that political office holders should recognise that they are servants of their people. In that vein, Westminster MPs should remember that they are the representatives of the British people, not their rulers – and when it comes to the Isle of Man, Westminster MPs are neither their rulers nor their representatives. These Westminster neo-colonialists should stop trying to leverage ancient suzerainties to achieve their short-term political goals.

MPs supporting this move covet the power to rule over the Isle of Man and the Channel Islands, despite never being elected by the people of the Isle of Man or the Channel Islands. If they want to make laws for the Isle of Man, they are welcome to seek election to the Manx parliament at Tynwald. Their legislative power grab will only be legitimate if they have nothing less than the approval of the Manx people.

Businesses are screaming out for certainty – which is why delaying Brexit would be so alarming

Lost amongst all the drama and excitement expressed in the coverage over the last fortnight of defections from Labour and the Conservatives to The Independent Group (TIG), has been the voice of British business. The overwhelming majority of British businesses just want the Government to get on with delivering Brexit, and finally get back some […]

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Lost amongst all the drama and excitement expressed in the coverage over the last fortnight of defections from Labour and the Conservatives to The Independent Group (TIG), has been the voice of British business.

The overwhelming majority of British businesses just want the Government to get on with delivering Brexit, and finally get back some certainty as to what rules are going to apply to them. But unless the Government is able to provide this certainty, investment decisions for this country will be held back until the picture becomes clearer. That makes all of us poorer.

For the Prime Minister to now give MPs the opportunity to frustrate our exit should cause every real business in the country real alarm. Achieving certainty, clarity and finality must be the priority.

This is why the Alliance of British Entrepreneurs is making the case for exiting the EU on WTO terms, rather than signing up to the Prime Minister’s Withdrawal Agreement with its dangerous backstop. We now have over 450 businesses who have signed up to publicly support our various campaigns against the prevailing myths about where business stands on the deal. Despite operating purely on word of mouth, we represent more businesses (from more sectors and regions) than the CBI or Number 10 have been able to generate in all their joint letters seeking to push Project Fear on the British people. This gives an indication of the level of anger and frustration amongst the business community about political dithering.

Unless the backstop is replaced, the deal won’t bring any sense of finality to Brexit. It will have the UK cascading through possible delays, possible extensions to implementation periods, possible participation in a customs union (via the backstop or otherwise) and possible reversal of the decision to leave, in its entirety, throughout the process. There will be no certainty about the direction of travel for the UK at any point ahead of the next general election in 2022, at least. That is not satisfactory for the British people or its business community.

The TIGger plan is even more troubling for business. To re-run the referendum and have a second vote now cannot be taken seriously as a suggestion for how to bring finality to the issue of our relationship with the EU. Even in the event of a Remain win (this time), there is little if any reason to believe that voters would buy that outcome as more legitimate than the result the first time round. Businesses don’t need more divisive debates. We need to move on, however hard that is for some to come to terms with at present.

The public seem to agree too. If you check out the polling when the public are asked about support for a second referendum, they have pretty consistently rejected it – it only gets supported where people aren’t sure whether that would be a referendum on Leave or Remain, or Leave or May’s Deal, or even all three. When those questions are asked instead, support for it falls away.

However, one thing the public are clear on is their desire for by-elections when MPs opt to resign from their manifesto commitments! Both Survation and YouGov ran polls last week, where a clear majority supported TIG MPs going back to their voters to see whether they agreed with their decision to defect. The polled support for this is far higher than has been achieved in any of the “People’s Vote” polls for supporting a second referendum.

The case for business certainty, and the ability to make long-term plans, would favour this too. If MPs want to walk away from their commitments – to honour the referendum and have the UK leave the EU – the people and the business community should be able to hold them accountable at the ballot box. Bizarrely, though, the TIGgers are arguing themselves that now is not the time for elections or by-elections – because of the uncertainty they think that would be thrown up by them! This while explicitly calling for a hugely divisive national plebiscite. The fact they can say this publicly without widespread ridicule shows we live in truly extraordinary times.

While all the attention last week was on the TIGgers, businesses are at least reassured to see other Members of Parliament, including one-time die-hard Remainers, reconciling with where we are, being prepared to do the hard work and make compromise across their party, including with those with whom they previously openly strongly disagreed. Sensible-minded business people are relieved to see MPs like Nicky Morgan embrace pragmatism, and genuinely act in the national interest. These MPs deserve our vocal support. They have accepted the result and are now seeking genuine, grown-up solutions alongside their eurosceptic colleagues. That is how good outcomes are achieved in the greater interests of the country, not through breakaway-party ego-trips.

The reality is that the typical British business is not represented by the CBI or the variety of pro-EU talking-heads constantly popping up on our TV screens. These are groups with a vested interest in remaining bound to Brussels rules, because it works in their favour. Multinationals spend millions upon millions lobbying that system to rig the rules so they can keep out competitors. Fortunes are spent on professional lobbying each year to prevent disruptive start-ups and SMEs from encroaching on established industry groupings, at the expense of the consumer. The policy-making machine in Brussels has been totally captured by these groups, with no real say or control for voters, or indeed British business. Want an example? There are two and a half times as many financial services lobbyists in Brussels alone as there are MEPs.

Only one in twenty UK businesses even trades with the EU – the idea that all business people want to keep everything up in the air to have their rules set by Brussels is for the birds. They certainly don’t want to do it at the cost of being able to get on doing business in the interim.

What’s needed now is certainty. Talk to any business, in any sector, and they will tell you the same. Nothing is more damaging to jobs, investment and innovation than this hopeless, endless malaise; this death by a thousand cuts as drip by drip confidence trickles away. Certainty can only be achieved by ditching any ideas of referendum re-runs or reversal or delay. We need to just get on with it, and take back control.

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Mark Harper: The reforms we need to make to the Apprenticeship Levy, Further Education and student funding

Shifting the focus to FE is not only the right thing to do, but would send a powerful message. We should ensure that the most disadvantaged have the skills to enter the workforce.

Mark Harper is a former Chief Whip, and MP for the Forest of Dean.

The EU referendum was a vote for change, and it is for politicians to listen and act accordingly. Some of the research into the result has shown that many Leave voters felt that globalisation had not delivered good outcomes and opportunities for them – and that they wanted to see change.

One policy area we should look at is how to equip young people and adults, in every part of our country, to respond to the modern world of work and keep their skills up to date. This will enable them to get and retain good, well-paying jobs and ensure they reach their full potential.

The introduction of T-Levels (a technical alternative to A-Levels) is an important step in providing young people with high quality routes beyond university. I am pleased that the Government is sticking to 2020 as the start date for delivering T-Levels. The success of these qualifications will depend on whether employers value them.

I hope that the Government will work with employer organisations, such as the Confederation of British Industry, British Chambers of Commerce and the Federation of Small Businesses to advise the business community about the value of T-Levels. Small and medium enterprises should be properly engaged through their trusted advisors such as accountants, solicitors and business bank managers to ensure the message reaches everyone.

Apprenticeships are the gold standard in technical education. The Government has rightly reformed apprenticeships in order both to increase the quality and quantity available. Recent data showed that almost half of apprenticeships were of the ‘standards’ type, compared to just five per cent the year before. Apprenticeship standards are seen to be better than frameworks because they are employer-designed.

However, since the apprenticeship levy was introduced, the number of apprenticeship starts has fallen. Therefore, we need to change how the levy operates. Many businesses have said they plan to treat the levy as a ‘tax’, which defeats the purpose of the policy. There should be greater flexibility for levy account holders in how they use their funds, including the ability to pass on levy funds down a supply chain, and also for companies to collaborate with other levy payers to plug local skills gaps. There would also be merit in using dormant levy account funds to support the roll-out in T-Levels.

According to the House of Commons Library, the new national funding formula for schools includes a minimum funding level per secondary school student of £4,600 in 2018-19 and £4,800 in 2019-20. The maximum university tuition fee for 2018-19 is £9,250. By comparison, the national per student funding rate in the 16-19 funding formula is set to remain at £4,000 until at least 2019-20.

The Institute for Fiscal Studies has concluded that “16-18 education in England has been the big loser from education spending changes over the last 25 years”. The introduction of T-Levels and the reform of apprenticeships will ensure that technical education is held in the same esteem as more academic courses of study. Increasing Further Education (FE) funding would tell employers and students that the FE route is neither second class nor just a ‘second chance’ but a viable and valuable route in itself.

English universities are being sufficiently funded, participation rates keep increasing and more disadvantaged students are going to university in England than ever before. However, there are further reforms which should be made.

First, we should use the CPI measure of inflation, not RPI, to calculate student loan interest rates. The Office for National Statistics says of RPI that ‘we do not think it is a good measure of inflation and discourage its use’. This change would have the benefit of reducing the headline interest rate.

Second, the Government should support students who are not supported by their parents to go to university, but are not eligible for the maximum maintenance loan of £8,200. I believe that maintenance loans are designed to contribute to a student’s living costs, and students are expected to supplement them through either employment or parental support. Allowing students to apply for an increased loan if their parents are unwilling to make any financial contribution would empower them to make their own decisions about their education.

Third, the Government should improve the way in which it communicates about student loans. The student loan system is more akin to a graduate tax, and this should be made clear. The IFS estimated that the average loan subsidy per student amounts to just over £17,000, and the lowest-earning 10 per cent of graduates receive a subsidy of 93 per cent (£36,481 on average). A degree is of benefit to the holder and society, which is why the responsibility is currently shared between the individual and the taxpayer.

Shifting the focus to FE is not only the right thing to do, but would send a powerful message. Whilst Labour is pushing for the abolition of tuition fees, which ultimately benefits the most privileged parts of society-graduates, the Conservatives would be ensuring that the most disadvantaged have the skills to enter the workforce and keep their skills up to date, in line with changes in the world of work.

Honda could not be clearer – the closure of its Swindon plant is unrelated to Brexit

Even before Honda had a chance to say a single word, many pundits and politicians rushed to blame Brexit for the car company’s decision to close its Swindon factory. But when it finally came, the official statement failed to make any mention of the UK’s departure from the EU. Score one more for the genuine industry specialists […]

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Even before Honda had a chance to say a single word, many pundits and politicians rushed to blame Brexit for the car company’s decision to close its Swindon factory. But when it finally came, the official statement failed to make any mention of the UK’s departure from the EU. Score one more for the genuine industry specialists and trade journalists who, in my view, have been covering these stories relatively well. 

We’ve been here before. Nissan’s U-turn on building the X-Trail in Sunderland also had little to do with Brexit. Yes, Nissan did say that ‘the continued uncertainty around the UK’s future relationship with the EU is not helping companies like ours to plan for the future’, which is obviously true. But the company also stressed that its decision on the X-Trail was made for other ‘business reasons’, unrelated to Brexit.

In particular, the X-Trail is a large sport utility vehicle, predominantly run on diesel, which has been struggling to comply with new EU emissions targets. Given the deteriorating outlook for European demand, there was simply no longer a strong enough business case for producing this model here, or indeed anywhere else in the EU. Internal politics within the company may have played a part too. Nonetheless, Nissan is pressing ahead with its other investments in Sunderland, including the next-generation Juke and Qashqai, and its best-selling electric car, the LEAF.

These sorts of ‘business reasons’ also lie behind the planned closure of Honda’s Swindon factory. The company itself has said the move was ‘in response to the unprecedented changes in the global automotive industry. The significant challenges of electrification will see Honda revise its global manufacturing operations, and focus activity in regions where it expects to have high production volumes.’ That’s clear enough for me.

The sad reality is that the Swindon plant is operating well below capacity and has never fully recovered from the global recession. Indeed, the auto industry is in crisis across Europe. According to the latest IHS Markit PMI, output and new orders in the European autos and parts sector are now falling at their fastest rate for many years.

While Honda is obviously important to Swindon, Swindon is no longer important enough to Honda. The company’s growth markets are in Asia and the US, not Europe. To the extent that Honda’s decision is telling us anything important about Brexit, perhaps it’s that the UK should also be focusing on new opportunities in the rest of the world.

Some are still pointing to Honda’s earlier warnings that new trade barriers under a ‘no-deal’ scenario might cost it ‘tens of millions of pounds’. However, the company also stressed at the time that it was still ‘committed’ to the Swindon site – despite these concerns. In any event, Honda will continue producing at Swindon until 2022, so it is hard to argue that the uncertainty over what might happen in the next few months is a game-changer here.

The new EU-Japan trade deal might be more significant. This came into force at the start of this month and will gradually phase out EU tariffs on cars imported from Japan. At face value, this undermines the case for continuing to make cars in the UK for export to the remainder of the EU. However, the EU-Japan deal will not eliminate tariffs overnight, and Honda would have known it was coming for a long time. Brexit is only an issue here if there is a significant risk that the UK and EU fail to strike their own free trade agreement over the coming years. It would seem odd, or at least premature, for Honda to make that call now.

In addition, if the Swindon decision is about the new ability to exports cars to the EU from Japan tariff-free, remaining in the EU would not help the UK. Note that Honda is not moving elsewhere in the EU and is also closing its plant in Turkey. So much for the importance of remaining in a customs union with the EU, or producing on the doorstep of Europe.

The UK Government still deserves some flack here. Japanese companies rarely take these decisions lightly, especially when they might involve a loss of face or appear to let valued partners down. Brexit uncertainty is clearly holding back investment across the whole economy and this would not have been as big a problem if the negotiations with the EU had been handled better. But the closure of the Swindon plant was highly likely to happen anyway, regardless of Brexit. Honda itself has just confirmed that.

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Iain Mansfield: We have nothing to fear from No Deal

It would bring with it many compensations, including regulatory freedom, tariff income and £39 billion of cold, hard cash.

Iain Mansfield is a former senior civil servant, winner of the Institute of Economic Affairs Brexit prize and a Conservative councillor candidate. He writes in a personal capacity.

One constant on our journey to leave the EU is that the predictions of Project Fear have repeatedly failed to come true. Despite the predictions of the Treasury, there was no immediate recession, “immediate and profound economic shock”, ten per cent drop in house prices or ‘’Punishment Budget’ as a consequence of the vote to Leave. Instead we’ve seen a growing economy, the highest ever level of employment, growing wages, falling inflation and an £11.8bn increase in exports in 2018.

The new bogeyman is No Deal. The summer of 2018 saw repeated stories of planes being grounded in the event of No Deal, only for, entirely predictably, the EU to make provision in December for flights to continue for twelve months to allow alternative measures to be put in place. More recently, claims that our trade to other countries would grind to a halt are being refuted by the regular drumbeat of mutual recognition agreements signed by the Department of International Trade, including one last week with our largest non-EU trade partner, the USA. I do not say that there will be no short-term impact in the event of No Deal, but it will be vastly less than is being suggested.

In my 2014 prize-winning paper for the Institute of Economic Affairs, I explicitly considered the possibility of No Deal. No Deal was not the preferred outcome – I would have preferred a Free Trade Agreement, outside both the Single Market and Customs Union, similar to the position set out by Vote Leave in June 2016. It was, however, always a potential outcome, and it was important to consider how to put in place policies to make a success of it. In this article, I set out a high-level set of policies for making a success of No Deal, drawing on that paper and ongoing developments in the four years since.

Making a success of a Managed No Deal

Citizen’s RightsThe welfare of both UK and EU citizens is of the highest priority. As the Prime Minister has already announced, all EU citizens living in the UK should continue to be able to do so, regardless of the outcome of the negotiations. Many EU countries have already put in place equivalent arrangements for UK citizens and similar commitments should be sought from those that have yet to do so.

Visas and Migration: The UK should put in place visa-free arrangements for short-term tourist and business travel, covering up to 90 days in any 180 day period, mirroring the scheme already announced by the EU. Immigration rules for EU nationals should be brought in to line with those for non-EU nationals, ending the current discriminatory arrangements. There should be no cap on the number of EU students, but students arriving after March 2019 should not receive government-funded loans and should pay fees at international rates.

‘Divorce bill’: In the event of No Deal, it is self-evident that no money should be paid to the EU.

Trade and tariffsThe UK should abide by WTO rules and impose the same tariffs on EU importe that are currently faced by imports from outside the EU. Notwithstanding the theoretical positive economic case for unilaterally removing tariff barriers, it is important that shutting the UK out of EU markets is not a cost-free decision for continental business, in order to build the environment for a future deal once the political climate has altered.

Due to the UK’s trade deficit with the EU, estimates suggest we stand to collect up to an extra £13 billion a year from tariffs, while the EU would gain only £5 billion. Some of these funds should be used to help industries most impacted by EU trade barriers adjust and find new markets, in a strictly time-limited and tapering way to prevent them fostering inefficiency and rent-seeking behaviour. The rest should be reinvested into infrastructure and other competitiveness-enhancing investments.

Within six months of leaving, the UK should draw up a list of goods on which the EU has imposed unnecessarily high tariffs. This should prioritise consumer goods that the UK produces little of itself – from oranges to textiles – to directly reduce the cost of living without harming jobs.

Industrial StrategyIn contrast to Project Fear’s claims, EY’s 2018 UK Attractiveness Survey – an annual examination of the performance and perceptions of the UK as an investment destination – confirmed that the UK remains the number one destination for inward investment in Europe, with the number of investment projects up six per cent from the year before. Though Brexit has had an impact, it is small: 79 per cent of businesses say that they’ve increased or not changed their plans to invest since the Brexit vote, with only eight per cent saying they are likely to relocate assets within the next three years.

The UK should capitalise on this investor confidence. With full freedom to set our own regulatory affairs, the UK should rapidly seek to reform business regulation in areas where the EU has imposed unnecessary bureaucracy, particularly in sectors where this has directly targeted UK competitiveness. Existing labour rights and environmental standards should be maintained.

Broader measures to promote business investment should also be brought forward. A step-wise lowering of corporation tax to 15 per cent by 2022, an enhancement of R&D tax credits, the creation of special export zones and increased transport infrastructure, particularly in the Midlands and North, are all ideas that should be considered for fast-track implementation.            

UK-Ireland land border: No physical barriers should be erected on the Irish border. Importers bringing goods across the border should be required to register and pay tariffs on any imports using an online portal, with compliance enforced via spot-checks on industrial and commercial facilities and an enhancement of the existing cross-border arrangements used to combat smuggling. The success of this system should be reviewed 12 months after exit, ideally in partnership with the Republic of Ireland, and limited border checks introduced only if both parties agree it is necessary.

Individuals should be allowed to move freely across the island of Ireland, with eligibility for work, residency and benefits checked only when a person applied for such. A generous allowance for transport of goods for personal consumption should be put in place.

Existing controls would remain in place at airports and ports to monitor travel between the island of Ireland and Great Britain.

If the Republic of Ireland chooses to erect physical barriers on the border, that would be its decision, not the UK’s.

Future EU Relations: The UK should not seek to immediately negotiate a trade deal with the  EU. After the acrimony of the current negotiations, this would be unlikely to lead to a positive outcome. Instead, the UK should increase business certainty by clearly pursuing an economic path that lies outside the EU.

The year immediately following exit should be used to regularise agreements in essential areas, such as air travel, which will initially be covered by emergency arrangements. These should largely be technical affairs modelled on the EU’s and UK’s arrangements with third parties. It may also be possible to negotiate entry into stand-alone, uncontroversial, programmes such as those on scientific cooperation.

It is likely that in three to five years’ time the political situation may have calmed sufficiently to seek to negotiate a stand-alone trade agreement. This should be modelled on the Canada Free Trade Agreement and would take as its status quo the No Deal arrangements, in order to avoid unreasonable expectations on either side.

We have nothing to fear from No Deal

I am not a No Deal fanatic. Last year on this site I advocated support for Chequers, and I still believe that, if the backstop is removed from the Withdrawal Agreement, the deal would be worth signing. We must not, however, accept a deal at any cost. To succeed in any negotiation, one must be prepared to walk away – and the actions of MPs who have effectively announced that they will take any deal, however bad, have undoubtedly hamstrung our negotiations.

The Conservative Manifesto set it out clearly: No Deal is better than a bad deal. I continue to hope that a compromise will be found, and that the EU will agree to remove or place a time-limit on the backstop. However, rather than accept a deal which yokes us indefinitely to the EU, we should embrace a future outside. No Deal would bring with it many compensations, including regulatory freedom, tariff income and £39 billion of cold, hard cash. Britain’s fundamental economic strengths, competitiveness and international relationships, supported by an appropriate set of domestic policies, mean it is abundantly clear that we can have a positive economic future in this scenario.

Andy Street: The West Midlands Local Industrial Strategy ensures we are the workshop of the modern world

From transport tech and data-driven healthcare, to creative enterprises and the services sector, we are forging ahead.

Andy Street is Mayor of the West Midlands, and is a former Managing Director of John Lewis.

As the cradle of the industrial revolution, the West Midlands left its mark on the globe. In the 19th and 20th centuries the factories and furnaces of Birmingham, Coventry and the Black Country forged much of the modern world, exporting goods from ACME whistles to BSA motorcycles, from Cadbury’s chocolate to Bird’s Custard.

Even the ships that carried produce and people to far-flung new markets were anchored by huge chains wrought in our land-locked furnaces.

Now, as the first UK region to finalise a Local Industrial Strategy, we are once again leading the way.

The West Midlands has always been a hotbed of innovation and invention, driving advances in engineering, manufacturing, transport, marketing, social change and more. It was the workshop of the world.

Industrial decline began in the 1960s and, by the end of the last century, our region bore the scars of decay – empty, abandoned factories that once employed thousands. All of that has now started to change.

The West Midlands is undergoing a renaissance of growth and investment. New start-ups are choosing our region as the place to be. Nowhere else outside of London has seen the level of growth witnessed in the West Midlands. Output here has risen by 27 per cent in the last five years. Our productivity growth was twice the rate of the rest of the UK in 2017-18. The innovation and invention that once made us the workshop of the world is back.

Like other post-industrial regions in the UK, we must carve out a new strategy for the West Midlands in an increasingly global 21st century. With the uncertainty around Brexit, we need to think about how we build a globally-competitive economy.

That’s why the West Midlands agreed to be a trailblazer, creating the UK’s first Regional Industrial Strategy, leading the way for others to follow.

This strategy sets out the priorities we believe will enable local growth to continue, as well as ensuring that the success of our region is felt by all the communities within it. This success must be inclusive and accessible to all.

With this ground-breaking document now agreed within the region, we are awaiting the endorsement of Government so that, together, we can start turning strategy into action. With the uncertainty over Brexit, that endorsement would mean we can begin this important work soon – and share our message of confidence.

The West Midlands Combined Authority worked with our universities and the region’s three Local Enterprise Partnerships, from Greater Birmingham, the Black Country and Coventry and Warwickshire, to ensure the strategy not only provides a united vision, but that it also reflects the differing needs of our constituent members.

This spirit of inclusivity also included a wide-spread consultation, which asked regional networks, business groups and 350 different organisations for their input. They wanted a clearer definition of the West Midlands’ ‘unique selling points’, expanded opportunities for a broader cross-section of business sectors and more focus on the huge supply chains that link the conurbation.

Respondents also wanted our strategy to engage with all the different kinds of places where business flourishes in the region, from the big cities to the towns and more rural areas. By fully understanding the successes – and challenges – in our own backyard, we have created a strategy that will help sell the West Midlands to the rest of the world.

This meant identifying four major national and global strategic opportunities:

The UK centre for mobility: From driverless cars to light rail and aerospace, we have the supply chains and transport pedigree to steer huge investment to our region. We have a renowned automotive sector, ranging from world-famous brands like JLR and BMW to innovative smaller development firms. We also have the foundation industries that make the metals and materials that underpin vehicle manufacture at more than 20 sites. With our own transport system becoming more and more integrated, and the West Midlands pioneering the roll-out of the 5G network, mobility could bring billions of pounds.

Creative commerce: We have a wealth of nationally-important gaming, TV, film, VR and design firms. By connecting our universities and creative businesses we can design, develop and deploy new products and services. Evidence shows that Birmingham and Solihull alone have the potential to add nearly 4,000 new creative enterprises and 30,000 new related jobs, with the opportunity to scale this across the West Midlands as a whole.

Business services: As we move more towards a service-based economy, we expect to see large-scale growth across this sector. Business, financial and professional services already employ 400,000 people across the conurbation – with 125,000 more jobs forecast by 2030. Here in the West Midlands we have the full suite of services available, from huge international financial brands such as HSBC to an ambitious construction sector that is well placed to grow in strength with the building boom.

Data-driven healthcare: With our diverse and growing population, there are huge opportunities here for biomedical research, linking NHS patient records through 5G and enabling real-life testing of innovative new treatments. Our expertise and ability to work with patient data in an inclusive, collaborative way is a major UK and West Midlands strength. We have a growing cluster of both large and small firms and an associated supply chain, raising at least £35 million of investment in the last 12 months. Crucially, this innovation will be anchored in partnership with the NHS, translating directly into better health care for our citizens. Our diverse region has the research facilities and expertise. It has the population of Scotland and the genome of the world. It could be a global laboratory for data-driven translational medicine.

These four areas allow us to champion our specialist sectors in a way that will create growth and investment to benefit the entire regional economy.

Of course, all this industrial ambition requires a strong foundation in improved skills, transport, housing and land delivery. We are already making huge strides in all these areas but more remains to be done.

Our strategy lays out ideas to affect real change, from doubling the number of good-quality apprenticeships by 2030 to delivering £3.4 billion of investment in trams, road and rail over the next decade.

In housing, we will increase the rate of housing delivery with a £350 million housing plan, investing £250 million in land remediation and developing the skills required through the National Brownfield Institute in Wolverhampton. This is a great start – but more will be needed to serve our growing population.

The strategy will also push for post-EU growth funding to be targeted on the West Midlands and devolved to local decision makers. We must make the case for continuing to invest in us as a resilient and successful economy.

The former workshop of the world needs a world-class strategy to continue its remarkable economic renaissance. It needs to be distinctive to compete with likes of Berlin, Boston and Barcelona.

But in creating this new strategy, we have confirmed that this diverse, ambitious and inventive place still has an energetic, innovative outlook that makes it a powerhouse on the world stage, just as it did during the Industrial Revolution.

With this confident new vision, the West Midlands wants to lead the way in showing the Government’s Industrial Strategy can make a real difference.

The pro-EU establishment are sadly continuing to dismiss the ‘little people’

The Alliance of British Entrepreneurs (ABE) and Leave Means Leave (LML) have issued a joint statement supported by 300 plus business owners –  businesses large and small – asking for a managed no-deal exit from the EU. The reaction to this from Jim Pickard of the FT has reminded me why I chose, at great […]

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The Alliance of British Entrepreneurs (ABE) and Leave Means Leave (LML) have issued a joint statement supported by 300 plus business owners –  businesses large and small – asking for a managed no-deal exit from the EU. The reaction to this from Jim Pickard of the FT has reminded me why I chose, at great personal cost, to campaign to leave the EU – unbelievably a decision I took three years ago and still it goes on. Jim, a sharp and competent journalist, has chosen to belittle sole trader entrepreneurs, who actually make up a substantial proportion of the economy. This reaction is a classic one of our establishment. 

Looking back in fairness, I had always been a eurosceptic, albeit also a regular visitor for over thirty five years to the Brussels bureaucratic machine and actually with some very good friends within the matrix that is the EU. 

As Director General of the British Chambers of Commerce (BCC) and in 2014 anticipating the EU debate, I set about with the researchers and economists at the BCC to find out the facts about the UK economy, politics and the EU in all its aspects: trade, regulation, migration, sovereignty etc. Much of this I knew from forty years in international business, but I was shocked by some of the results in areas with which I was not familiar. For example, our look into migration and population trends pointed towards half of the UK population being migrants or the children of migrants by 2040, a very rapid transition which would no doubt change and challenge the nature, values and culture of British society forever. The lack of official insight was shocking, one might suspect even deliberate, but such as it was, it pointed to a substantial burden on taxpayers arising from migrant workers in low-skilled jobs.

In 2015, when David Cameron declared he would start negotiations with the EU, I wrote to him on behalf of the BCC an open letter, setting out our expectations from this process. When he returned, as I had anticipated, we at the BCC were able to issue a statement in January 2016 indicating that his efforts had fallen far short of our expectations. The scene was set.

My major concern personally (as for the majority of Brexit supporters I have met) was that of sovereignty, which I had seen eroded over the decades to the point where the UK Parliament was appearing to be the equivalent of a county council in relation to the EU. It is ironic that the Parliament that allowed this to happen without any real resistance from the majority of MPs has kicked up such a fuss about leaving – perhaps this is as good a sign as any of a renewed democratic vigour!

But what really turned me into a campaigner, however, was the overwhelming arrogance of our establishment. The start of 2016 witnessed the all-out assault of Project Fear and the bullying by No. 10 of organisations like mine. It demonstrated an absolute desire to treat the “little people” with contempt and that our “more intelligent” “betters” had no compunction in lying grievously, or at least no respect for the facts unless they supported their world vision and vested interests. That is what led me to resign from the BCC to fight the referendum as Chairman of the Vote Leave Business Council. 

The arrogance of the elite was brought home to me when giving a presentation in Brussels in January 2016 to an audience of senior EU officials. To my astonishment, the first question from the floor was to ask how we could possibly contemplate allowing people who are not college-educated to vote in a referendum, which was met by murmurs of approval from around the room. 

In my many lunches with Lord Heseltine in his role within the Business Department, mentoring Greg Clark and directing people, it became clear that he considered democracy to be merely a tool, a rubber stamp for the will of the ruling class, a way of obtaining “buy in” so as to effect a smooth delivery. This I witnessed again and again amongst what is the new establishment of the liberal, metropolitan elite, no longer the noblesse oblige of landed classes of yesteryear.

One of the first pieces I wrote for the press during the referendum campaign was for the Evening Standard. It compared the mutiny of the Brexiteers to the Medieval Peasants’ Revolt. I ended the piece by warning that the establishment are vicious in pursuit of their own vested interests and so it has proved to be.  

I came to mistrust our establishment so much that I continued to campaign even after we won the referendum with Leave means Leave – and a good job it is that we continued our vigilance, since there has been a determined effort by the establishment to reverse Brexit, to ignore democracy, simply because it doesn’t suit them.

The reaction of the FT to the statement by business supporters of the ABE and LML calling for no deal was just such a continuation of the dismissal of “the little people” who inconveniently just happen to be voters.

The statement fits very well with my experience of business, large swathes of which want to leave the EU. Many dare not stick their heads above the parapet, so viscous has been the Remainer backlash. Those that are willing and able tend to be business owners, entrepreneurs large and small. Not, you will note, the salary men who run the corporate multinationals, focused on their bonuses and the three-year cycle before they move on. 

Family-owned or -run businesses make up the vast majority of the UK economy from sole traders to large companies. They trade around the world and domestically. They are the backbone of the economy. They are the innovators and risk takers. They are the future. Watch out establishment, they don’t believe in you anymore.

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LibLink: Vince Cable: Don’t let healthy scepticism about China become paranoia

A tasty breakfast As Business Secretary, Vince Cable was responsible for global trade and had to deal with the growing economic might of China. He writes about this in an article for City AM. He has a stark warning for those seeking a trade deal. It’s not going to be much fun without 27 of […]

A tasty breakfast

As Business Secretary, Vince Cable was responsible for global trade and had to deal with the growing economic might of China. He writes about this in an article for City AM.

He has a stark warning for those seeking a trade deal. It’s not going to be much fun without 27 of your mates to watch your back:

And while the EU with its combined heft is able to be both tough and constructive, Britain on its own will be a largely powerless supplicant. I suspect that the Chinese, seeing Britain desperate for a trade deal of its own, will be looking forward to a tasty breakfast.

The current slowdown in China’s economy will have knock on effects across the world.

Vince has ideas about how the west should engage with China for mutual gain:

Instead, the key question now for us and the rest of Europe is whether to continue close engagement at a time of major tension. There are at present two western responses, and the difference is crucial.

The first is fundamentally hostile, seeing China as a security threat by virtue if its success and size – a viewpoint that is taking hold in the US. That would be a big mistake, since China’s reemergence is inevitable, and in many respects welcome.

The second is to concentrate on getting China to conform to international standards of trading and investment behaviour. It is not a poor developing country anymore, and should not be treated as such. Its model of “state capitalism” will have to adapt if there is to be meaningful cooperation.

Vince also thinks that we shouldn’t exclude Huawei.

There are warnings that, in the brave new world of 5G technology, it is dangerous to allow a Chinese company to become one of our leading suppliers. I am sure that there are legitimate concerns, but I recall that these were aired throughout my five years as business secretary, and yet repeated, careful vetting of the company found no good reason to exclude it on security grounds.

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