What will the UK economy look like outside the EU, 10 years from now? Nobody knows the precise answer to this question but we can generate likely potential scenarios. What follows are two scenarios, the Brexit I love and the Brexit I fear.
The Brexit I love is where the UK is open to the world, outward looking and the leading global advocate of completely free trade. This is a Britain which for the second time in its history – the first was the repeal of the Corn Laws in the nineteenth century – leads the way on free trade. This is a Britain which can confirm the iron law of economics, that greater free trade always leads to greater prosperity ultimately.
The Brexit I love is the fastest growth scenario, resulting in much higher per capita income. This is the scenario where exit from the Customs Union enables the UK to trade at world prices (with zero tariffs on all imports), fully exploiting its comparative advantage, spurred on by global competition – a more powerful force than that available within the EU protectionist wall.
Brexit is not just about Brexit. This is also a scenario where the years following the Great Repeal Act are a period of intense deregulation, particularly with regard to employment law. Such a scenario sees the UK taking advantage of Brexit to trigger a supply-side renaissance and an acceleration in potential output growth to 3 per cent. This could well include a reduction in Corporation Tax to 10 per cent by the early 2020s. There might also be a significant easing in planning law in order to facilitate an increase in housing supply, in response to increasing housing demand in the wake of a stronger economy.
Trading at world prices would be a challenge for the agricultural sector, but an easing in planning law to allow limited extra residential construction on agricultural land could keep farmers happy and address housing issues all at the same time.
Stronger growth and stronger public finances could also provide the funding for two areas of expansion in government spending. First, with regard to transport infrastructure. Second, with regard to defence spending on new kit and more men and women in the armed forces, to help fly the flag overseas and promote an Anglosphere of the US, UK, Canada, Australia and New Zealand.
The Brexit I fear is something very different. This is a Brexit where the EU protectionist wall is replaced by the UK’s own tariff wall. In such a world the UK would never reap the benefit of trading at world prices. A Brexit to fear is one where the entire body of EU law is transposed onto the statute book and then stays there, permanently.
This is a very different scenario, devoid of any supply-side renaissance. It is also a scenario which leads to permanent sniping at having left the EU. The Brexit I love is one where the benefits are clear for all to see. The Brexit I fear is one where the benefits are far less visible and it becomes a permanent political battleground.
This is not to argue that the Brexit I fear makes the case for staying in the EU. Rather that we would not have seized the opportunity to make so much more of leaving.