The Brexiteers have published another alternative plan (HERE) for the Brexit negotiations. The launch was to a fanfare and attended by former DEXEU Secretary of State David Davis as well as Jacob Rees-Mogg and Gisela Stuart. Nutjobs all. This isn't the ERG plan by the way, which never saw the light of day, but a 150 page effort by Shanker Singham of the IEA. Perhaps Mr Singham will soon come to the conclusion that it would have been better if his "plan" hadn't seen the light either. It has not been received well to say the least.
John Crace in The Guardian (HERE) has a humorous look at it but don't be fooled, it isn't really funny. This is supposedly a serious attempt to dig ourselves out of the hole we're in. That we have reached such a moment at all is a national humiliation.
The IEA, never a think tank to underestimate itself, has published the document, grandly titled: Plan A+ , creating a prosperous post-Brexit UK, that will lead us to our salvation. It begins with a transparent falsehood in the very first paragraph and goes downhill from there. These are the opening words:
"The United Kingdom’s relationship with the European Union has been a divisive issue in political and economic debate for many years, but particularly so in the referendum of 2016 and in the two years thereafter".
IPSOS Moray have been running polls for a long time asking: What would you say is the most important issue facing Britain today? In December 2007, the month the Lisbon Treaty was signed, the total that thought The Common Market/The EU/Europe/Euro/Constitution was the most important issue was 1%. In other words almost nobody thought it was (see Q.7 page 36 HERE). Just 2% of the over 75s thought Europe was an important issue. It has only now become divisive because the Brexiteers aided by groups like the IEA have made it so. We are almost in civil war territory over nothing.
So, what can we learn from the report? It is a shoddy piece of ill thought out nonsense. At it's heart is a slash and burn agenda for getting rid of regulations.
But let me take a few examples of the shoddiness:
The maths
Chris Cook from the BBC (HERE) has tried to work through the maths used and in some cases it appears to show the opposite of what Singham claims.This is what Cook found:
"First, this [Singham's maths] work breaks all the rules of basic data hygiene and model designs. The peculiar way the model is fitted together means it could never produce a reliable or stable output that could be relied upon.
"Second, the model's whole weight sits on assumptions that are odd or indefensible.
"For example, all else being equal, it assumes making it cheaper to lay people off will lead to a rise in health spending and a rise in domestic banks' supply of credit. That, in turn will lead to a rise in output. But also: the IEA's maths relies - in a fundamental way - on a misunderstanding of how GDP is calculated and what drives health spending".
The basic errors
The report talks on page 55 about the ECAA as the "European Civil Aviation Authority" – something which doesn’t even exist. I think they mean the European Common Aviation Area. They can’t even get the basics right.
Page 37 talks about the IEA's "modelling work" and points to footnote 28 - which isn't there!
The deals when there is no deal
The section on no deal planning is littered with mini-deals. It admits without a deal UK aircraft will be unable to fly (page 109) for example, so we need to get a deal on remaining a member of the ECAA as well as other EU agencies – something Barnier has expressly said will not happen (see Brexit select committee meeting on September 3rd this year).
Either Singham hasn't read the Select Committee transcripts or he thinks Barnier is bluffing.
A basic FTA
Singham wants us to agree a quick "basic FTA" to solve the Irish border problem although he doesn't come up with any new ideas and even appears to endorse the backstop arrangements that the DUP and Mrs May have already rejected, "The new backstop would comprise a basic free trade agreement between the UK and the EU for goods, and a commitment by the parties to undertake all necessary investment and cooperation mechanisms to enable formalities on trade between Northern Ireland and Ireland to be overseen away from the border".
Does this solve the Irish border problem? No.
The future FTA
The 21 month transition period should be used to work out a better FTA with "maximum regulatory recognition" but the whole document is about diverging our regulations (from page 14):
The UK should make unilateral moves in domestic policy and trade policy terms. Many EU regulations are bad for growth: the UK needs the freedom to do better, this includes:
• Improving the way regulations are made to better support competitive markets: in particular to ensure a precompetitive environment in digital, financial services, and other areas that are crucial to the UK’s economic success, but where continued adherence to EU norms would hold us back
He wants the EU to recognise our regulations (maximum regulatory recognition) even when they begin to diverge. This is utterly impossible as he must know. It is the contradiction at the centre of his plan. The Joint Interpretive Instrument to CETA (the Canadian FTA) has this:
"CETA will also not lower our respective standards and regulations related to food safety, product safety, consumer protection, health, environment or labour protection. Imported goods, service suppliers and investors must continue to respect domestic requirements, including rules and regulations. The European Union and its Member States and Canada reaffirm the commitments with respect to precaution that they have undertaken in international agreements".
In other words, they are not going to allow us to lower their EU standards and regulations with respect to great areas of public policy so it is hard to see them allowing us to become a low regulation, low tax economy on their doorstep.
As for EU norms holding us back - how does Germany manage a €200 billion trade surplus inside the EU? He doesn't say.
Deregulation as a driver of the economy
Essentially it’s an agenda for de-regulation. It talks of a competitiveness Czar (God save us from these Czars) to help us to “develop a pro-competitive regulatory promulgation mechanism, which helps avoid new regulations damaging ordinary market processes” - whatever that means. It is in short the usual economists answer to make the UK more productive and more competitive without all that bothersome thinking and steady investment and R & D over years and years.
The German or French or Italian models aren’t for us, we can easily match those Europeans in a week or two simply by getting rid of the regulations or by cutting corporation tax or some other quick wheeze. If only. We are 30% less productive than the French. No amount of fiddling at the edges will solve that.
The IEA
The IEA describes itself in the report as an “educational charity” but readers might like to know (HERE) what the founders said when it was first set up:
"Imperative that we should give no indication in our literature that we are working to educate the Public along certain lines which might be interpreted as having a political bias. In other words, if we said openly that we were re-teaching the economics of the free-market, it might enable our enemies to question the charitableness of our motives. That is why the first draft (of the Institute's aims) is written in rather cagey terms."
