Preparing for Brexit

The Bank of England has come to the stunning realisation that if the country prepares for a no-deal Brexit, it might not be so bad. Yesterday, the Bank said it was scaling down its predicted economic impact on the back of preparations already done. The Bank’s forecasts have been doom-laden precisely because they didn’t factor in activist government policy; they seemed to assume that in the event of chaos or a recession, the state would literally do nothing.

That said, Theresa May and Philip Hammond did indeed behave as if they intended to sit on their hands, resulting in two wasted years in which the Tories should’ve been getting ready for a no-deal Brexit to strengthen their position in negotiations. That’s the essence of Boris Johnson’s argument: it is only by empowering the country to walk away from the table that the EU will be pressured into a better deal. Mr Hammond’s inaction made Brexit that much harder to accomplish.

In yesterday’s spending announcement, Sajid Javid signalled a dramatic change in direction with the largest increase in spending for 15 years. It includes £2 billion for Brexit delivery, including more support to ready businesses and prepare Britain’s ports for a no-deal outcome. On top of that, his spending priorities suggest a party in election mode: more for policing, social care and education.

But the Tories must be wary of jettisoning fiscal rules altogether and allowing transitional spending to turn into Labour-style welfarism. The post-brexit UK will require strong infrastructure, certainly, but also lower taxes, lower spending and a flexible economy capable of global competition. It would be wrong to throw away nine years of trying to balance the books.