The Height of Lunacy

The Height of Lunacy

There is a lot of talk these days about the amount that the UK would have to pay to get out of the European Union and so qualify to begin negotiations about a new trade deal that, according to Theresa May, would generate the “exact same benefits” as those provided by membership of the Single Market.

Regardless of the sum involved and whether the European Commission would agree to it, the whole idea of paying to walk away from the best trade deal we can possibly have with our neighbours – and one that has been proven to work well – only to negotiate something that might give us similar trading benefits seems to be the height of lunacy. It is a bit like getting down from the back door of a London bus when it stops, and rushing round to the front door to clamber on board again, paying for a new ticket to resume the same journey.

Some people are claiming that the cost of the new ticket could be £36,000 million pounds. If my arithmetic is right, this would amount to a bill of almost £2,000 for each of Britain’s 18.9 million families. Were this to be raised from an increase in VAT rates, it would mean a rise in standard VAT from 20% to about 27%.

Given the huge implications of these figures for family budgets, it seems extraordinary that May should have announced her intention for Britain to leave the Single Market even before beginning negotiations on our future relationship with Europe. By doing this, she scuttled the possibility of jointly examining with EU members mutually acceptable options for Britain remaining in the Single Market, conditional upon agreement on a reform agenda that would go a long way towards meeting the aspirations expressed by voters in the EU referendum.

Her unilateral decision to opt out of the Single Market has already – when negotiations are just beginning – inflicted massive damage on Britain’s economy. The two main but inter-related sources of economic destruction stem from the fall in the value of our currency – the pound sterling – and the uncertainties surrounding the outcome of the Brexit process.

Since the referendum on 23 June 2016, the pound in our pocket has lost about 20% of its value when expressed in Euros, falling a bit more every time that May opens her mouth about her Brexit plans. This may make more tourists come to Britain and make UK exports more competitive in overseas markets, but it makes imports and foreign travel much more expensive. Given the UK’s heavy import dependence, especially for foods, the fall in the value of sterling is fueling higher rates of inflation, pushing up our cost of living.  More seriously, it implies a massive drop in the aggregate value of the British currency and exposes it to speculation. Sterling risks losing its status as a reserve currency – for who would wish to invest in it?

The uncertainties surrounding the whole Brexit process are slowing down capital investment, especially foreign investment, in the UK. They are making lots of us think twice before making big spending decisions, like buying a car or moving house. They have also induced many companies that trade with EU countries to begin relocating their head offices out of the UK, creating job losses and reduced contributions to the national economy. The damage is already evident in the financial services sector which has played such a key role in recent British economic growth.

What is so disturbing about all of this is that May herself, during the referendum campaign, pointed to the huge risks of leaving the single market. The only plausible explanation for her recklessness lies in her deep personal aversion to the jurisdiction of the European Court of Justice (ECJ) which acts as an arbiter in relation to the operation of the Single Market and will almost certainly have a similar role in any new trade agreement with Europe!

To put it bluntly, May is intent on wrecking the British economy and its currency simply to be able to say that she has taken us out of her despised ECJ. What fools we are to let her push ahead with this self-harming lunacy: we are the ones who are already paying the bill for her to be a fugitive from European justice.

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