Naked Politics Guest Blogger
On Tuesday, Theresa May set out her plan for Brexit. In a speech which sought to confirm the fears of many Remainers and satisfied the demands of the Conservative right, it was confirmed that the UK would be leaving the Single Market to bring about greater control of immigration. It also looks certain that we shall be leaving the Customs Union in order to sign our own trade deals. In light of this speech, the country and the people need to have an honest conversation about what the consequences of her plan are to be.
Although facts have been out of fashion for some time, they are needed more than ever. A weaker pound generally means greater importing costs. Since the Brexit vote, the pound has dropped by 20% – I’m sure we’ve all seen ‘that’ graph. Yes, manufacturing sales grow with every drop of the pound, buts its repercussions are felt by all of us. It means that every time our beloved NHS purchases supplies or drugs from abroad, it can cost up to 20% more. Think of the consequences if the NHS is already performing at maximum budget capacity.
We all want better roads and a modernised railway system, and I include the building of HS2 in that category. But, from the materials used to build train parts in the UK, to the petrol which powers the machinery we use to resurface our roads, it can all cost up to 20% more as a result of the weak pound. The HS2 costs have soared in recent years, and will most likely continue to growing.
Politicians on both the right and left shout that people voted to lower immigration, but in the same breath say that we will have amazing future trade deals. May herself said, “June the 23rd was not the moment Britain chose to step back from the world. It was the moment we chose to build a truly Global Britain”.
The reality is that a restrictive immigration policy means no trade deals, or very watered down ones at best with emerging markets such as India, China and Indonesia. All three of those countries have a huge skills base of I.T. consultants, doctors and engineers, which as part of their trade policy they export to various countries. As part of any trade deals, these nations will demand visa waivers and lowering of restrictions. Mrs May went to India a few months back and was told increased free movement between the two countries is a must for any trade deal. Very recently, even Australia put increased visas for business people as a top priority in any trade deal.
Turning to Trump and potential free trade opportunities with the USA, in the 21st century it is regulatory differences which are the biggest barriers to trade, not tariffs. This is a huge point which was ignored in the EU referendum debate. Our regulatory levels and the EU’s in general, are set very high in comparison to the USA’s. For instance in the agriculture industry in the USA, growth hormones are used in beef production, and certain dangerous chemicals in crops, both of which we currently ban. So, if we are to have a major trade deal with the USA, it will ultimately mean lowering our regulations and accepting these products in our marketplace. Australia conducted a trade deal with the USA in about 15 months from start to finish, and it is one which many now regret. For instance, the Australian government is limited by the deal in market intervention of pharmaceutical drugs from the USA which are used by the Australian National Health Service, leading to increased costs. The USA pharmaceutical industry looks to our NHS as a huge cake just waiting to be carved up, and if people thought TTIP may threaten the NHS, this bilateral trade deal may be even more dangerous.
But, then how do we mitigate the losses of good trade deals with other countries or the EU? Philip Hammond has suggested, and Mrs May reiterated, that a new policy for the UK could be to become a low tax, low regulatory economy in light of Brexit – mirroring Singapore’s successes. This is a move away from our traditional European social democracy model and there are lots of questions which need to be answered.
The first and most important is the future funding of our public health services; especially our NHS – where almost £116bn out of the UK’s £760bn budget is spent. Would the cutting of taxes permit the government to raise the money it needs to keep funding all our services at a good level? Does the lowering of regulations include those aimed at protecting public health, employment rights, and the environment? The public may indeed agree to all of this, but we must first be made aware it is happening.
Also, in international relations no one likes a tax haven. There will undoubtedly be less willingness by even our closest allies to cooperate if we act against international norms and steal business in an unfair way. The Dutch Prime Minister threatened to veto any trade deal with the UK if it doesn’t include clauses on co-operation in tackling international tax avoidance and yes you guessed it, taking a tough approach on tax havens. Other non-EU countries may follow also. Therefore, is the risk to our international standing worth the price?
But, the loss of our reputation may be the least of our worries. Donald Trump is willing to engage in a trade war with China over its ‘theft’ of traditional American manufacturing. How do you think he will react if we start poaching international firms, and building our own Silicon Valley? Protectionism is fine for emerging markets, but as a model to be applied aggressively across the pond, it will have repercussions for us if we choose to threaten any aspect of the USA’s industry.
There will be no point in Brexit if the UK as a whole, having made a point about the general public’s discontent on political engagement, the government, Parliament, our media and wider political debate don’t explain the impact of such dramatic policy change. It is most certainly right to try and be positive about the UK’s future, but that requires an open and frank discussion about the implications of Brexit on our domestic and foreign policies.