Project Fear is back – and bigger than ever
Ahead of the June 2016 referendum, a Remain-backing prime minister used a paddedout HM Treasury study to claim voting Brexit would spark “an immediate and profound economic shock”. The UK, we were repeatedly told, would fall into an instant recession, even before we’d left.
Another Remain-backing Prime Minister, faced with her own Brexit impasse, has adopted the same tactic, only more so. Ludicrously alarmist projections, this time from the Bank of England, are being wielded to scare voters and MPS into backing a Brexit-in-name-only Withdrawal Agreement that leaves the UK entirely at the mercy of the European Union.
The British economy will contract by a punishing 2.1pc during the 18 months after any leave vote, the Treasury told us ahead of the referendum, with 500,000 job losses. Such lurid forecasts spread a tsunami of anti-brexit news across our airwaves. Far from shrinking, UK GDP actually grew 2.8pc during the year and a half after the vote. Employment surged, with unemployment reaching a 42-year low. The pre-referendum Treasury forecasts, epically wrong in direction and magnitude, were bogus – as some of us said at the time.
Now the Bank of England is leading the charge. A “no-deal Brexit” could spark a 30pc house-price collapse, we were told last week, with the economy shrinking 8pc in a single year. This is arrant, headline-grabbing nonsense.
The biggest annual GDP drop in modern history was in 2009, amid a worldwide financial crisis and the worst global slump since the Thirties. Yet the Bank now claims, with a straight face, that trading with the 27-member bloc using World Trade Organisation rules, the system covering the bulk of trade across the globe, could see our economy shrink twice as much as in 2009. When our total EU exports amount to just 11pc of GDP? When fewer than one in 12 UK firms sell goods and services to the EU? These utterly ridiculous estimates are “a worst-case scenario, not a firm forecast”, says the Bank. But they’ve still been injected firmly into the bloodstream of public opinion, via endless blood-curdling bulletins, as those ultimately responsible for producing them knew they would.
Former Brexit secretary David Davis says the Bank’s projections, published alongside a similar Treasury effort, are part of “a propaganda onslaught”. Given he resigned from May’s cabinet, some might say he’s biased.
How about Andrew Sentance, a respected economist, former Monetary Policy Committee member and staunch Remainer? The Bank’s analysis is “highly speculative and extreme” he says, “further undermining perceptions of its independence and credibility”. Nobel Prize-winning economist Paul Krugman, again no fan of Brexit, meanwhile describes the Bank’s handiwork as “pretty far out on a limb”, based on assumptions that “don’t follow from basic trade theory”.
As for ex-mi6 boss Sir Richard Dearlove, he thinks “WTO terms is now the only viable way to leave the EU”. May’s deal “subordinates UK defence forces to EU military control and compromises UK Intelligence capabilities”, he observes, while the “hysterical demonisation” of leaving under WTO rules “is, of course, Project Fear, like its scaremongering 2016 predecessor”.
I’ve long argued that no-deal is the most likely outcome. While I’d prefer Britain to secure an EU free-trade agreement, trading under WTO rules is just fine. Doom-mongers who say otherwise – characterising this route as “crashing out of the EU” or “unthinkable” – are either ignorant, trying to prevent a meaningful Brexit, or hoping to reverse the 2016 vote altogether. And that, I’m afraid, includes our Prime Minister.
Under WTO rules, UK-EU trade continues – a statement of the obvious but in the current climate of fear it
needs restating. The US and China annually sell hundreds of billions of pounds of exports to the EU from outside – with none of the onerous sovereignty restrictions conceded by May. The UK can do the same.
Britain already conducts most of its trade outside the EU, largely under WTO rules. Such trade is growing and generates a surplus. Our EU trade, in contrast, despite the much-vaunted single market, is falling, accounts for well under half of exports and generates a deficit – with Britain making massive contributions and accepting countless anti-democratic rules for the privilege of “access”.
“No deal” means withholding the £39bn EU “divorce bill” – spending it at home and boosting the domestic economy. Under WTO rules, we charge relatively low reciprocal tariffs – again, generating billions for Britain, seeing as “they sell us more than we sell them”. Such funds could support sectors where WTO tariffs are higher.
Behind the scenes, despite Downing Street’s reluctance, the necessary no-deal preparations have been under way. This reluctance was deliberate, we now see, given May’s reckless determination to present her agreement as “the only option”. Still, the National Audit Office recently concluded an ongoing HMRC upgrade means Britain’s revamped customs service should be ready to cope with the extra checks from January 2019.
Recent “news” that the UK will run out of “widely used vital drugs” and “drinking water” under no-deal is beyond the pale. Other advanced countries manage just fine outside the EU, as we did before we joined 45 years ago. And will planes really “fall out of the sky”? The UK is a massive aviation player and landing rights are reciprocal. Any UK-EU agreements will be forged by March and, if not, memorandums of understanding will extend current practices until they are.
Complex supply chains? Yes, there are issues. But we import plenty of just-in-time components from outside the EU and the solutions to most problems relating to goods entry into Britain are in our gift. And the Irish border already copes with differing currencies, duties and tax rates. Physical “hard border” posts that might inflame sectarian sensitivities are unnecessary if we leave the customs union – as numerous experts, and the WTO, have confirmed. The EU won’t erect them, nor will Dublin or London. Yet Mrs May has let border falsehoods warp her Brexit strategy.
A no-deal Brexit, while not ideal, would start to normalise long-term UK-EU relations. It puts us in a strong position to strike a mutually advantageous EU free trade agreement once we’ve left.
The real danger is a Corbyn government – the likely outcome if May continues to betray the majority of the country, and democracy, by preventing a clean break.
‘While I’d prefer Britain to secure an EU free-trade agreement, trading under WTO rules is just fine’