I have just read Jonathn Portes’ review of Peter Foster’s book “What Went Wrong With Brexit?”. Foster was a remainer, despite following in the footsteps of Boris Johnson as the Telegraph’s Brussels correspondent. Portes looks at the economic damage, the under investment in human capital and the continued timidity of our politicians. In this review, I [hope I] add to the debate by looking at long term goals and short term modern supply side programmes, most importantly in my mind, rejoining Horizon Europe.

There’s a couple of things in the article which interest me. Portes in the subtitle ensures that we understand the damage that Cameron and Osborne ‘s austerity has done to the UK economy. A critical conclusion from this article is that the problems in the British economy are endemic, predate the Brexit vote but are made worse by the increased bureaucracy in conducting foreign trade, and the miserly modern supply side policies of this Tory government. The Portes’ review concludes with a look at Foster’s proposals on making things better. Portes suggests that the realistic choice, because of our political leader’s timidity is between minimal change to the future trade and cooperation agreement or rejoining the single market. Portes suggests that the minimal change suggestions i.e. fixing Brexit will not be as easy to achieve as its proponents hope.

Portes and Foster shred the argument that leaving the single market will reduce bureaucracy and red tape. We can see by the 5th delay to introduce full customs checks on the UK/EU sea border that  these checks are hard and expensive to implement and that the EU’s imposition of the checks and paper work inhibits EU companies exporting to the UK.  

The review, segues to macro-; a critical passage in the review states,

… this perhaps reflects a wider failing. While there are occasional references to the political and economic backdrop against which the referendum took place, it’s hard not to come away with the impression that Foster, like many broadly centrist remainers, thinks that the UK was on the right track until Brexit came along to upend both our politics and our economy. But the UK’s productivity slowdown began around the time of the global financial crisis, while other longstanding and interrelated structural issues – inequality, housing and skills – long predate this.

Portes also argues that the Cameron/Osborne initiated austerity economics has made the UK’s structural problems worse. With the exception of the Truss administration, the austerity ideology has driven the Tory government’s macroeconomics since 2010. But now, due to Brexit, we are now in a position where the balance of trade and foreign exchange rates are worsening, foreign investment is declining, there are labour shortages, and we remain the only major economy to have a GDP lower than its pre-pandemic peak.

The Government looks to compound this by reducing the number of university places, by restricting immigration, and by continuing to exclude the UK from Horizon Europe. This last aspect of government policy, I find both bizarre and another aspect of the self-harm that austerity and Brexit have caused. It is curious that Sunak permits this policy to stand, given that he is a fan of Paul Romer’s work on investment & innovation. Romer argues that growth is driven by investment in Human Capital. Re-joining Horizon Europe, the EU’s R&D funding programme, is on the table, since much of our problems are because of low skills and low investment, we should grab this opportunity with both hands. Each year we are excluded exacerbates the damage to our research, innovation, and productivity.

Portes looks at Foster’s proposals for change. He suggests that centralist remainers/rejoiners ambition is limited to either fixing Brexit or rejoining the single market. Most seem to compromise around Starmer’s Labour’s proposal to fix Brexit. Portes suggests this will not be as easy as its proponents hope.

As I have said, as have others, why would the EU amend the Future Trade & Cooperation agreement exclusively to the advantage of the United Kingdom, specifically the proposals to ease immigration controls within the European Union to allow musicians and other creative artists to tour the European Union and to allow professional services consultants to work in the EU seems highly ambitious without some form of sectoral reciprocation and the EU’s start position will be freedom of movement for all labour. As Portes puts it,

He [Foster] outlines a long list of technical changes where, with both determination and goodwill, the UK could make modest but meaningful improvements to the current Trade and Cooperation Agreement, although he perhaps underplays how hard it will be to persuade our European counterparts to engage seriously with this agenda.

It maybe the only way to fix Brexit, is to take the terms we are offered by the EU, and an indivisible single market is part of that. If that’s on offer, we should take it.

Brexit & modern supply side economics
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