The announcements Philip Hammond should make to prepare the country for a no-deal Brexit

With deadline day only weeks away, the possibility of the UK leaving without a deal cannot be ignored. It would be irresponsible not to think seriously about what the impact of that would be, and what the appropriate response should be from government. If we really did leave without a deal, the Government would need […]

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With deadline day only weeks away, the possibility of the UK leaving without a deal cannot be ignored.

It would be irresponsible not to think seriously about what the impact of that would be, and what the appropriate response should be from government. If we really did leave without a deal, the Government would need to take immediate action to maintain confidence and steady the ship.

With that in mind, the Centre for Policy Studies has published a new paper, A Budget for No Deal, setting out some ideas for how best to manage that scenario and make the most of No Deal. This is not to play down the potential shock the economy could face in such circumstances, or to suggest that there would not still be significant challenges even if the Government responded with sensible measures. But government policy can play a significant role in cushioning the impact for businesses and consumers, and smoothing the transition to life outside the EU. As Philip Hammond has made clear, the progress the Government has made in reducing the deficit means he has fiscal policy levers at his disposal if a deal is not forthcoming.

The first important issue to address would be the need to maintain business confidence and support investment. While the economy has in some ways defied expectations since the 2016 referendum – especially on employment – investment has been noticeably slow. In the event of no deal, the danger is that many of those businesses which have been putting off investment decisions may opt to put their money elsewhere. In order to combat this, the Government will need to send a decisive message that Britain is the best place in the world to do business.

One of the key proposals from the CPS paper is to make the Annual Investment Allowance unlimited, allowing companies to write off all investment in plant and machinery for tax purposes. That provides a significant incentive for businesses to boost their capital expenditure and make the sorts of improvements the UK economy needs if it is to solve its perennial productivity problem. Alongside this, bringing forward the planned reduction in Corporation Tax by a year, plus a one-year 25% cut in business rates and employer’s NICs bills for small businesses, would help companies through a difficult period following a no-deal exit. The Government could also take steps to boost construction, fast-tracking key infrastructure projects and planning permission for new housing.

Sterling depreciation would also push up prices in the near term, hurting the real incomes of working families. To cushion that, the Government should raise the National Insurance threshold for employees to £12,500 per annum, the same level to which the Income Tax personal allowance is due to rise. This idea of a combined ‘Universal Working Income’ was proposed by my colleague Tom Clougherty in a paper in November, Make Work Pay. It would mean the average worker paying £620 less in tax next year compared to today.

Of course, higher inflation would not only hit working families, so welfare benefits and pensions should also be taken into account. In particular, it would not be fair to maintain the freeze on working-age benefits if inflation is running substantially above the level that was expected when the policy was initiated. In addition, the Government should make the funds available to councils to allow all Council Tax bills to be frozen for 2019-20.

Finally, the Government should also look to make the British economy as open and global as possible, and support trade flows. The first step should be a well-funded and easily accessible ‘one stop shop’ to help exporting businesses deal with new trading arrangements post-Brexit, plus a £2,000 voucher which firms could spend on legal and professional advice related to Brexit.

The Government should take the opportunity to abolish as many tariffs as possible, to deliver lower prices for UK consumers and businesses, while recognising the needs and unique circumstances of some domestic producers who might face problems if all protection was suddenly removed. The Government should also look at establishing a new generation of ‘free ports’, providing targeted incentives to boost trade, investment and job creation, including in some of the most deprived areas of the UK.

Many other ideas, along with lots more detail, can be found in the report itself.

Most ministers are crossing all of their fingers and toes that a no-deal Brexit can be avoided. But as things stand, it is only right to start thinking about what to do if things don’t go to plan.

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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.

6 March 2019 – yesterday’s press releases

PM fails to stand up for rural communities over bank closures Cable: Catastrophic no-deal would push economy into recession Davey: Britain must be far more ambitious on offshore wind Lib Dems: Yet another embarrassing rejection of May’s Brexit PM fails to stand up for rural communities over bank closures Liberal Democrat MP Tim Farron today […]

  • PM fails to stand up for rural communities over bank closures
  • Cable: Catastrophic no-deal would push economy into recession
  • Davey: Britain must be far more ambitious on offshore wind
  • Lib Dems: Yet another embarrassing rejection of May’s Brexit

PM fails to stand up for rural communities over bank closures

Liberal Democrat MP Tim Farron today used Prime Minister’s Questions to urge the Prime Minister to properly compensate communities that have been abandoned by the banks and forced to use online banking instead.

According to the consumer group Which? around 3,000 bank branches have closed over the past three years.

Meanwhile over the same time period, innocent customers have lost an extra £2billion in online and financial fraud.

Speaking during Prime Ministers Questions, Tim Farron asked:

Will she agree that the banks have taken without giving for too long?

Will she meet with me to force the banks to compensate victims of fraud, to compensate the communities they have abandoned and to prevent banks closing the last branch in town?

In response, the Prime Minister refused to help abandoned communities and victims of financial fraud, instead saying that banks are “commercial organisations and those are decisions that they take.”

Following the exchange, Liberal Democrat MP Tim Farron said:

It’s absolutely staggering and hugely disappointing that the Prime Minister has decided to turn her back on communities like Grange in my constituency that have been abandoned by the banks.

People who have been victims of financial fraud and those who have been let down by the banks deserve better than the Prime Minister shrugging her shoulders.

Cable: Catastrophic no-deal would push economy into recession

Commenting on the Organisation for Economic Cooperation and Development’s report into the implications for economic growth as a consequence of Brexit, Leader of the Liberal Democrats Vince Cable said:

The economy has been bumping along the bottom in the wake of Brexit uncertainty. This analysis by the OECD, while focused on a slowing global economy, picks out the UK as one of the worst performers among developed countries due to our weakening economic growth and falling business investment.

Not only have our growth forecasts for 2019 and 2020 been severely downgraded, but the OECD expects our economy to suffer even if the Conservative Government gets its Brexit deal through, undermining claims of a so-called “deal dividend”. A catastrophic no-deal would push our economy into recession, inflicting great damage on jobs and living standards.

Davey: Britain must be far more ambitious on offshore wind

Commenting on the Government’s announcement of a new Offshore Wind Sector deal, Ed Davey, former Liberal Democrat Secretary of State for Energy and Climate Change said:

Britain must be far more ambitious on offshore wind, and build on the huge breakthroughs Liberal Democrats achieved on renewable power.

The UK is now the world leader in offshore wind, and the green power auctions Liberal Democrats pioneered have seen the cost of offshore wind tumble.

With renewable power costs now way below nuclear, it must be right to capitalise on this fabulous British success story – so we can tackle climate change faster and see more green jobs created.

Lib Dems: Yet another embarrassing rejection of May’s Brexit

Following further Brexit-related defeats for the Government in the House of Lords this evening, on parliamentary scrutiny of trade deals and membership of a customs union, Liberal Democrat Leader in the Lords, Dick Newby said:

The Conservative Government’s defeats this evening are yet another embarrassing rejection of Theresa May’s Brexit. The Lords has insisted on parliamentary scrutiny on future trade deals rather than letting Liam Fox decide what’s in our national interest.

We have also insisted on remaining in a customs union because we will not accept a Tory Brexit deal that wrecks supply chains, causes chaos at UK borders and leads to massive jobs losses.

Being inside a customs union but outside the EU would however still leave the UK poorer and deprive us of any say over the rules that govern the way we trade.

Both Theresa May’s and Jeremy Corbyn’s Brexit plans have now been resoundingly defeated. The only real alternative and way out of this chaos is a people’s vote, with the option to stay in the EU.

EU economic policy has held the UK back and cost us £82 billion over two decades

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how. Almost every aspect of […]

The post EU economic policy has held the UK back and cost us £82 billion over two decades appeared first on BrexitCentral.

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how.

Almost every aspect of the EU’s economic performance – not least UK trade with it – has been dismal, underperforming regularly against every corner of the globe – be it advanced or developing nations – for a very long period of time.

For many countries across the European continent, EU-induced policy – primarily designed to hold the euro together – has directly led to economic hardship, socially damaging levels of unemployment and a questioning of the very fabric of their societies. The result has been a rise in more radical politics and people leaving their countries of birth to seek better economic opportunity elsewhere. This is the antithesis of what the EU was founded to achieve.

The failure of EU economic policy has not only impacted EU nations but also cost the UK £82bn over the twenty years to 2017 due to lost economic opportunity, as weak demand has impacted negatively on UK exports to the Eurozone.

To understand the failure of the Eurozone, we need to go back to a time when it did not yet exist. In 1994 the economies of the US and the future Eurozone were of broadly similar size – worth 24.9% and 24.5% of global GDP respectively. Today the US economy is 30% larger than the Eurozone. Simply put, had the Eurozone grown at the same rate as the US, the UK could have expected to have sold £82bn more in exports due to greater economic demand. The unfortunate truth is that EU economic performance has been the global laggard over the short and long term.

By comparison, since the financial crisis, the UK economy has outperformed all the major EU economies including Germany. Overall it has grown 19% over that period compared with a 13% rise in the Eurozone. That 6% differential is worth £120bn, or to illustrate what that sum represents, just less than the entire NHS budget.

For the British people, the beneficial result of the country’s performance has been more jobs. The UK has materially outperformed the EU in both job creation and reduction of unemployment. UK unemployment is at its lowest level since 1974. French unemployment is 2.5 times the UK level, Spain 4 times and Greece 5 times higher. Since the EU referendum, 750,000 more people are in work in the UK. This contrasts with HM Treasury forecast of 500,000 job losses following a Leave vote – meaning its prediction was an embarrassing 1.2 million out.

Despite misplaced criticisms, job growth has been across the board and not just in the ‘gig economy’. More people work in manufacturing, construction, utilities, IT, health, education and the arts sectors than before the referendum. UK wage growth has started to pick up too and is growing in real terms, while the UK’s minimum wage is the second most generous in the EU.

The underperformance of the Eurozone can be laid firmly at the EU’s own door. Fundamentally, the Eurozone is not an optimal currency area; it lacks fiscal transfers and is weakly controlled with no central Treasury. The structural weakness and disequilibrium of the euro has led to sub-optimal firefighting policy choices to prop the currency up. The lack of political will and democratic accountability make it near impossible to rectify its flaws. These are structural issues that will not be easily rectified, leading to continuing divergent performance, socially damaging unemployment levels in the south and a loss of competitiveness. The problem is the euro’s construction and there is no easy fix. Underperformance is baked in.

Imbalances are growing, not reducing, be they employment levels, migration trends, fiscal strength, competitiveness and Target2 liabilities (intra-country balances).

The big myth remains that the Single Market is central to UK prosperity. It is not. Over the last 20 years, UK trade has grown 12 times with China, 3.1 times with the rest of the world ex-EU, 2.6 times with the US and just 2 times with the EU. Moreover, the UK trades with a modest surplus with the world ex-EU but has a £96bn deficit with the EU. Does it not strike you odd that UK trade not only is growing faster where it trades generally under WTO rules rather than within the EU Single Market – and is in surplus, not enduring a huge deficit?

EU citizens are voting with their feet. An estimated 3.5 million have moved to the UK over the last 20 years. Economic failure has directly led to widespread migration away from Italy, Spain, Portugal and most of Eastern Europe. People follow the opportunity and it has generally not been in the Eurozone. Again, despite claims, net EU migration has remained positive to the UK since the EU referendum.

The EU’s problems are structural and not cyclical. They are largely self-inflicted. The euro’s structure is the root cause of the problem, together with increasingly costly one-size-fits-all regulation that simply does not work for such a disparate Union. The price of preserving the euro is likely to continue to lead to low growth and poor employment prospects. Italy, as an example, has a smaller economy than 15 years ago. Such dreadful performance is fuelling economic and political dissatisfaction in Italy itself and across the EU.

The question should be: why can our policy makers not see that while we must remain friends with our European neighbours, the EU project has failed Europe? The answer is for Britain is to re-emerge as a true global trading nation.

The post EU economic policy has held the UK back and cost us £82 billion over two decades appeared first on BrexitCentral.

EU economic policy has held the UK back and cost us £82 million over two decades

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how. Almost every aspect of […]

The post EU economic policy has held the UK back and cost us £82 million over two decades appeared first on BrexitCentral.

Those campaigning to reverse the EU referendum result talk of the EU as if it is the very basis of British and European prosperity. When viewed against the evidence, such an analysis is simply untenable. A new report from Global Britain, £82bn reasons the EU held back the UK, shows how.

Almost every aspect of the EU’s economic performance – not least UK trade with it – has been dismal, underperforming regularly against every corner of the globe – be it advanced or developing nations – for a very long period of time.

For many countries across the European continent, EU-induced policy – primarily designed to hold the euro together – has directly led to economic hardship, socially damaging levels of unemployment and a questioning of the very fabric of their societies. The result has been a rise in more radical politics and people leaving their countries of birth to seek better economic opportunity elsewhere. This is the antithesis of what the EU was founded to achieve.

The failure of EU economic policy has not only impacted EU nations but also cost the UK £82bn over the twenty years to 2017 due to lost economic opportunity, as weak demand has impacted negatively on UK exports to the Eurozone.

To understand the failure of the Eurozone, we need to go back to a time when it did not yet exist. In 1994 the economies of the US and the future Eurozone were of broadly similar size – worth 24.9% and 24.5% of global GDP respectively. Today the US economy is 30% larger than the Eurozone. Simply put, had the Eurozone grown at the same rate as the US, the UK could have expected to have sold £82bn more in exports due to greater economic demand. The unfortunate truth is that EU economic performance has been the global laggard over the short and long term.

By comparison, since the financial crisis, the UK economy has outperformed all the major EU economies including Germany. Overall it has grown 19% over that period compared with a 13% rise in the Eurozone. That 6% differential is worth £120bn, or to illustrate what that sum represents, just less than the entire NHS budget.

For the British people, the beneficial result of the country’s performance has been more jobs. The UK has materially outperformed the EU in both job creation and reduction of unemployment. UK unemployment is at its lowest level since 1974. French unemployment is 2.5 times the UK level, Spain 4 times and Greece 5 times higher. Since the EU referendum, 750,000 more people are in work in the UK. This contrasts with HM Treasury forecast of 500,000 job losses following a Leave vote – meaning its prediction was an embarrassing 1.2 million out.

Despite misplaced criticisms, job growth has been across the board and not just in the ‘gig economy’. More people work in manufacturing, construction, utilities, IT, health, education and the arts sectors than before the referendum. UK wage growth has started to pick up too and is growing in real terms, while the UK’s minimum wage is the second most generous in the EU.

The underperformance of the Eurozone can be laid firmly at the EU’s own door. Fundamentally, the Eurozone is not an optimal currency area; it lacks fiscal transfers and is weakly controlled with no central Treasury. The structural weakness and disequilibrium of the euro has led to sub-optimal firefighting policy choices to prop the currency up. The lack of political will and democratic accountability make it near impossible to rectify its flaws. These are structural issues that will not be easily rectified, leading to continuing divergent performance, socially damaging unemployment levels in the south and a loss of competitiveness. The problem is the euro’s construction and there is no easy fix. Underperformance is baked in.

Imbalances are growing, not reducing, be they employment levels, migration trends, fiscal strength, competitiveness and Target2 liabilities (intra-country balances).

The big myth remains that the Single Market is central to UK prosperity. It is not. Over the last 20 years, UK trade has grown 12 times with China, 3.1 times with the rest of the world ex-EU, 2.6 times with the US and just 2 times with the EU. Moreover, the UK trades with a modest surplus with the world ex-EU but has a £96bn deficit with the EU. Does it not strike you odd that UK trade not only is growing faster where it trades generally under WTO rules rather than within the EU Single Market – and is in surplus, not enduring a huge deficit?

EU citizens are voting with their feet. An estimated 3.5 million have moved to the UK over the last 20 years. Economic failure has directly led to widespread migration away from Italy, Spain, Portugal and most of Eastern Europe. People follow the opportunity and it has generally not been in the Eurozone. Again, despite claims, net EU migration has remained positive to the UK since the EU referendum.

The EU’s problems are structural and not cyclical. They are largely self-inflicted. The euro’s structure is the root cause of the problem, together with increasingly costly one-size-fits-all regulation that simply does not work for such a disparate Union. The price of preserving the euro is likely to continue to lead to low growth and poor employment prospects. Italy, as an example, has a smaller economy than 15 years ago. Such dreadful performance is fuelling economic and political dissatisfaction in Italy itself and across the EU.

The question should be: why can our policy makers not see that while we must remain friends with our European neighbours, the EU project has failed Europe? The answer is for Britain is to re-emerge as a true global trading nation.

The post EU economic policy has held the UK back and cost us £82 million over two decades appeared first on BrexitCentral.

Interview. Sharma – “Every foreign investor I met thought leaving the EU would present significantly more opportunities for bilateral trade.”

The Employment Minister embodies two reasons why the Government is still afloat – its jobs creation record and under-reported Ministerial loyalty.

It can be hard to understand, from the news coverage, why this Government has not actually fallen to bits.

Alok Sharma, Minister of State for Employment, discusses in this interview two factors in its survival which are easy to underestimate or overlook. One is the creation since 2010 of an additional 3.75 million jobs.

The other is the loyalty which he and other highly competent, upwardly mobile, not widely known ministers demonstrate towards Theresa May. Sharma says here that  “history will judge her very kindly”.

When asked at the end of the interview whether his departmental head, Amber Rudd, should be sacked for blackmailing the Prime Minister, Sharma replies that everyone’s focus should be on getting the Prime Minister’s deal over the line, after which the party must come back together and concentrate on things which matter more than Brexit to the voters.

The interview took place in idyllic weather yesterday afternoon on the Terrace of the House of Commons, with Sharma offering not just tea but cake.

ConHome: “The late, great Gerry Fitt, drinking gin and tonic here in the evening, used to shout to the boatloads of passing tourists, “It’s all free, you know.”

Sharma: “You can’t imagine anyone doing that now.”

ConHome: “No. A very brave man, Gerry Fitt. On the employment side, why is employment so high? No one can quite understand it. It’s been going on for quite a long time.”

Sharma: “I think it is actually down to the policies we’ve been pursuing since 2010. Britain is one of the most business-friendly places in the world.

“And if you look at the jobs that have been created, in the private sector there are 3.75 million more people in work now than in 2010, which is pretty remarkable.

“And I think the policies we’ve followed in terms of low corporation tax, R&D tax credits, there’s a whole range of these business-friendly policies that have been followed that I think have helped with this.

“And I think there is this underlying belief in the British economy as well.

“And there’s always this discussion about what kind of jobs these are. Since 2010, of all the jobs that have been created, 75 per cent of them are full-time, they’re permanent and in higher-level occupations.

“And then the question is what does that mean in terms of higher level occupations. The median level of people who are considered to be in higher level occupations, they will have salaries between 30 and 40,000 pounds a year, or indeed higher.

“That, I think, says quite a lot about the strength of the economy and the confidence of employers to go on employing people and investing.

“It’s interesting that this particular trend has now been continuing for a long period of time. I’d like to think it’s only since I became Minister for Employment.”

ConHome: “Just over a year, you’ve done?”

Sharma: “Just over a year, yes.”

ConHome: “What have you managed to contribute to this, then?”

Sharma: “There’s this realisation that we’ve got very high levels of employment. The discussion then turns to wages. What I think has been very encouraging is that for the last 11 months in a row wages have been outpacing inflation.

“I hope what we’ve now seen is this fundamental shift where wages will continue to outpace inflation.”

ConHome: “Why are vacancies also high? But perhaps that’s a different way of asking the same question.”

Sharma: “One way of looking at it is there is a huge amount of confidence in the economy. Employers are willing to create those jobs.

“I think the key thing for us as a Government is that we continue to provide training and support for people in the workplace. Youth unemployment is a really interesting stat.”

A member of his staff arrived with two cups of tea.

“And the cake?” Sharma said.

Staff member: “I thought that was a joke.”

Sharma: “No it wasn’t a joke. Would you like some cake? I think we could do with some cake.”

ConHome: “I wouldn’t mind some cake, actually. Unless you feel I’m the kind of person who’s had far too much cake lately.”

Sharma: “Some chocolate cake would be nice. It’s teatime.”

Staff member: “Any allergies?”

ConHome: “You’re trying to protect us from ourselves.”

Sharma: “Youth unemployment has almost halved since 2010. One of the things that I’ve been very keen on is encouraging the use of mentoring.

“A lot of the people that we had from employers who were doing the mentoring, many of them were from similar backgrounds to those they were mentoring, and actually for a young person to look and say, ‘Well, do you know, I could get there, because this individual did’, I think that’s really, really powerful.”

ConHome: “Is there anything in the accusation that business still prefers cheap labour to automation, which is why our productivity is not as good as it should be”

Sharma: “Well I think automation is something that is part of life these days, and I think what a lot of business will be looking at is doing things more efficiently.

“If you look at the tech sector, I think we’ve seen the highest level of growth of any sector since 2010 in terms of numbers of jobs, and these won’t necessarily be low-paid jobs. Many of them will be well-paid jobs.”

ConHome: “You’ve spoken of this great underlying confidence in the economy, but is the value of the pound also rising because the markets reckon Jeremy Corbyn, because of the considerable problems within the Labour Party, is becoming less likely to become Prime Minister and wreck everything?”

Sharma: “There is no doubt that one of the things that does concern certainly some of the people I talk to in the finance sector, in industry…”

ConHome: “You were a banker for 16 years.”

Sharma: “Yes I was. Before that I qualified as an accountant.”

ConHome: “Before that you were an engineer.”

Sharma: “Well I worked for an outfit called Miles Electronics which was part of the Mars Group. But I think people are pretty concerned about what the impact of a Corbyn government would mean on investment, what it would mean in terms of votes.

“Personally I think it would be an absolute disaster. And I’m not just saying that because I’m a Conservative. I think that’s a widely held view by very many people, that Jeremy Corbyn running the country would be pretty bad news for Britain.”

ConHome: “Would a delay in Brexit be bad news?”

Sharma: “Well the Government policy is pretty clear, and I support it. Which is that we are working to get a deal and we want to have that done by the 29th of March.

“I support that policy, I support the Prime Minister, and I think she’s been very clear that we need to be focussing on that particular issue first and foremost.

“She’s understood clearly from the votes we’ve had here that changes to the backstop are going to be very important for very many colleagues, and that’s what she and other colleagues are working towards bringing back.”

ConHome: “Do you think No Deal should be taken off the table?”

Sharma: “Well we can get into the permutations…”

ConHome: Your colleague David Lidington is dealing with them in the House at the moment, it seems very successfully.

“I spent about an hour in there. There was an incredibly good mood, he’d taken an amazing number of interventions, Oliver Letwin said he was very happy, Yvette Cooper seemed relatively content, the Chief Whip was having a friendly chat with Ken Clarke, Jacob Rees-Mogg was sharing a joke with Simon Hoare.”

Sharma: “What I think all colleagues recognise, whichever wing of the party they are in, is that we need to respect the referendum. I voted and campaigned for Remain very strongly.

“But I also said very clearly at the time that whatever the outcome of the national referendum I would respect it, and that’s what we need to do. And I think that anything else would not be good news for democracy.”

ConHome: “Were you surprised by the result?”

Sharma: “I was surprised by the result. I was disheartened for a period of time. But actually straight after that, when Theresa May became Prime Minister, I became Minister for Asia and the Pacific, and I spent literally every other week getting on a plane to Asia on a Wednesday and coming back on a Sunday.

“The interesting thing was that absolutely every single government and every single foreign investor that I met thought that us leaving the European Union would present significantly more opportunities for bilateral trade and investment.”

ConHome: “Your wife is from Sweden. Was she very worried by the whole thing?”

Sharma: “Well interestingly, no. She has absolute confidence that things will work out. And she has a pretty British way of thinking on these matters.”

ConHome: “By that do you mean phlegmatic? Calm?”

Sharma: “I think calm. Calm and understated.”

ConHome: “You wrote a piece for ConHome during the leadership contest in 2016, saying you thought Theresa May would be very successful because of her judgment and decision-making.”

Sharma: “I think the Prime Minister has done a remarkable job. Let’s be honest, the result in 2017 wasn’t one that any Conservative wanted.

“But I think that the resilience the Prime Minister has shown has really been quite remarkable. And she has faced brickbats from all sides, but she continues. I think actually history will judge her very kindly.

“What we now need to do, of course, is collectively support her, so we can get this deal over the line, and then actually what is really important after that is we get back and focus on all the other issues that really matter to our constituents.

“It could be potholes, issues around access to GP surgeries, issues around housing. Come the next general election, which I very much hope will be in 2022, we will be judged not just on the outcome of Brexit, but actually what we have done in terms of making people’s lives better.”

ConHome: “You’ve been very loyal to this Prime Minister. Maybe it’s an underreported thing, because obviously if someone threatens to resign it’s a story.

“But if you go and tell your news editor that Alok Sharma is remaining very loyal…”

Sharma: “…it’s not news.”

ConHome: “It’s taken for granted. Presumably you’re hoping in due course to rise to Cabinet rank?”

Sharma: “I think everyone who comes into politics, certainly colleagues that I talk to, they will be coming into politics because they want to bring about positive change.

“And clearly if you’ve been a junior minister the opportunity to run your own department is something that I think most colleagues would look forward to. But I mean that’s a matter for the Prime Minister rather than for me.

“What I want to be judged on right now is the work that I’m doing on the welfare reform, which is incredibly important, the work we’re doing in terms of Universal Credit.”

ConHome: “Is that going on all right?”

Sharma: “Universal Credit is certainly in the news a lot. I think it’s worth pointing out that whenever we talk about Universal Credit we need to look at what it has replaced.

“Any parliamentary colleague who has been around for a while will have dealt with constituents who have been on legacy benefits, six different benefits delivered by three different agencies of government.

“We have simplified the process. Along the way we have made changes, we have learned, adapted, and in the last two Budgets an extra six billion pounds has gone in to support people.

“I want to make sure that absolutely every single person who has an interaction with Universal Benefit has a positive outcome. We need to make sure the system delivers that.

“For the first time you’ve got these individuals called work coaches who work in the Job Centres who are able to provide one-to-one support.

“We’ve got to continue to adapt, change, make the system better. At the end of the day we need to have a really compassionate system which is sustainable but above all people are being helped into work or better paid work.”

ConHome: “David Cameron and George Osborne used to go on and on about ‘our long-term economic plan’, and so were backbenchers. Is the present government doing enough of that?

“During the general election, the Chancellor wasn’t really used, or indeed any other big economic spokespeople.”

Sharma: “Well I think there will be lots of lessons that we will have learned from the last general election. The issue right now is that so much bandwidth is taken up with Brexit that some of these stories aren’t going to be front-page news.”

ConHome: “Hasn’t your departmental boss [Amber Rudd] got away with blackmailing the Prime Minister and shouldn’t she be fired?”

Sharma: “An easy one there. Look, I think what’s really quite important is to focus on delivering this deal. The Prime Minister set out the case on Tuesday in another statement to the House, and what is key is once we’ve got this deal over the line we’re going to have to come back together as a party.

“And Brexit has been a divisive issue for all political parties, and across the country. We need to be generous, big-hearted with each other, come together after this, but we will only be able to do that if we help the Prime Minister to get this deal over the line, and that’s certainly what I’m focussed on.”

The cake, incidentally, arrived, and was excellent.

Stephen Booth: Brexit and the economy. There are ups, there are downs. But whatever happens, our fundamentals remain strong.

A flexible labour market, a well-regarded legal system, and comparatively favourable demographics relative to the major European economies are all valuable assets.

Stephen Booth is Director of Policy and Research at Open Europe.

As the ongoing Brexit saga continues to drag towards the 29th March without resolution, every announcement or scrap of economic news is greeted by hard-line Remainers or Brexiters as proof positive of their arguments. Nuance is no use to either extreme in this debate. In reality, since the referendum, there have been positives and negatives but, overall, the economy has held up relatively well compared with the political wreckage that Brexit has been causing in Westminster.

After retail sales figures outstripped forecasts in January, the consultancy Oliver Wyman suggested the reason for this pleasant surprise was that consumers might be stockpiling for a No Deal Brexit. This might have tallied had the boost been attributed to a spike in the purchase of tinned baked beans, but Office of National Statistics figures illustrated that sales of discounted clothing were the biggest driver. Are we really stockpiling jumpers?

Japanese carmaker Honda’s decision last week to close its Swindon plant provided the latest opportunity to confirm our prejudices. Some rushed to cite Brexit as the cause, before Takahiro Hachigo, Honda’s chief executive, stated that “Brexit was not taken into account” in the decision. Moves towards emissions-free vehicles, over capacity at the Swindon plant and the removal of tariffs under a new EU-Japan trade deal seem to be the prime reasons for the closure. After all, Honda is not closing its UK plant in favour of another location inside the EU market, or another European country with more certain access to it. Indeed, it is also closing its plant in Turkey, which has a customs union with the EU.

However, Brexiters should not take comfort from this episode. Rightly or wrongly, many outside the UK see Brexit as damaging to “Brand Britain”. Equally, it is very hard for companies like Honda to “blame” Brexit because they risk a consumer backlash. Blithely dismissing businesses’ legitimate concerns about uncertainty or the impact of a No Deal Brexit as a rerun of “Project Fear” does nothing to dispel this instinct. Even if only a minor contributing factor, Brexit uncertainty was a very useful excuse, at the very least, for Honda to pull the plug in Britain. To reiterate the degree of uncertainty facing businesses, we are just five weeks away from a potential No Deal Brexit and we are still eagerly awaiting an announcement of what tariffs the government intends to levy on imports from all over the world.

Ultimately, each isolated case is complicated and can only tell us so much. The wider reality is that, in 2016 and 2017, UK growth was sluggish in comparison to the global upswing. But in its January forecast, the IMF forecasts that, following an orderly Brexit, the UK growth rate will converge with France and Germany at around 1.5 per cent in 2019 and 2020. The European Commission expects the UK to marginally outpace Germany in 2019.

According to Gertjan Vlieghe, an External Member of the Bank’s Monetary Policy Committee, the reason for the UK’s comparative underperformance is that while business investment has grown strongly across the G7, it has stalled in Britain. Given the seismic nature of the Brexit vote and the political fallout it would be surprising if many businesses weren’t hesitant to invest. Getting a deal through which provides for an orderly Brexit might unlock some pent-up investment. However, it is difficult to see how a No Deal Brexit or Article 50 extension in the hope of a second referendum would provide businesses with the confidence they crave.

On the other hand, despite a weakening of the pound, consumer spending has on the whole remained buoyant and reflects the UK’s strong labour market performance. Employment is at record high levels, and wages are rising faster than inflation. The Government recently posted its largest January revenue surplus since records began in 1993.

Looking to the longer term, the UK’s economic fundamentals remain strong. A flexible labour market, a well-regarded legal system, and comparatively favourable demographics relative to the major European economies are all valuable assets. In and of itself, Brexit will not be a life or death matter for the economy. As consumers and supply chains adjust to whatever new trade barriers arise on both sides of the Channel, there will be winners and losers. This is the inevitable reality of altering years of deep economic integration.

However, onlookers and potential foreign investors might wonder whether the fundamentals of our politics are as sound. Parliament has so far been found desperately wanting in what is only the first stage of Brexit. Many MPs on either side are still intent on debating Brexit as a matter of principle rather than pragmatism, two-and-a-half years after the referendum campaign. There must be major doubts about their ability to wrestle with the real-world challenges and decisions required to reshape Britain for the big, wide world outside the EU.