Is “no deal” really better than a bad deal for Britain? In a speech in January 2017, Prime Minister Theresa May warned the EU that she would be willing to walk away from the table if she doesn’t get what she wants. By March, the British government seemed to have softened its approach, worried that a breakdown in negotiations could wreak havoc on the UK economy.
Now, however, the gloves are off again. The Tory manifesto reaffirms the belief that “no deal is better than a bad deal”, and the Brexit Secretary, David Davis, has said the threat is genuine and Britain would be willing to walk away without a deal. But what would happen next?
We had a comment from Fátima who believes we all know the consequences of ‘no deal’ for Britain. Do we really? What would “no deal” mean for Britain?
To get a response, we took Fátima’s comment to Peter Liley, a former Conservative Member of Parliament who announced he was stepping down ahead of the upcoming British general election and will not contest his seat on 8 June. Did he think “no deal” was genuinely better than a bad deal?
Yes, it’s genuinely better. But, also, you can never have a successful negotiation on anything unless you’re prepared to walk away with no deal. Why would ‘no deal’ be better than a bad deal? For a variety of reasons. But if we have no deal, we’ll trade with the European Union on what’s called Most Favoured Nation terms, which means the same tariffs and no more than apply to America, Japan, and China, all of whom trade extremely successfully with Europe. And those tariffs average 4% on the sort of things we export to Europe, less than that on industrial products, more than that on agriculture.
We currently make a net contribution to Europe of £10 billion a year, after taking account of the money that we get back, and that’s equivalent to 7% of the value of our exports. So, we will no longer have to pay 7%, but if there’s ‘no deal’ we will have to pay 4%. So, clearly, we’re better off in that respect and we can use the additional money saved if we wanted to, or a bit of it, to help those companies and sectors which have to pay above average tariffs.
For another perspective, we also took Fátima’s comment to Richard Corbett, a Member of the European Parliament for the Labour Party. He believes that:
‘No deal’ means a completely messy divorce; there’s no agreement on anything. So, on the trade front immediately you have tariff barriers overnight under WTO rules; there will be legal problems for all kinds of things on existing programmes, from Erasmus exchange programmes to scientific research programmes, to everything stops overnight as regards to the UK participation; and there will be legal and economic chaos.
We also had a comment from Julia, who thinks the UK will become a low-tax haven outside the EU. The British Chancellor, Philip Hammond, has said that Britain would be willing to “change its economic model” in the event of “no deal” with the EU. Does that mean becoming a low-tax haven, as Julia fears?
I wasn’t 100% sure what Hammond meant. If he meant what people interpreted him to mean, that in the absence of a deal we would somehow go for an entirely deregulated, low-tax economy, I wouldn’t be in favour of that. I’m in favour of having the minimum necessary regulation, but that’s quite a lot, and the minimum necessary level of tax, but that’s quite a lot. And we should do that whether we get a trade deal or not.
We should try to make ourselves a relatively lightly-taxed country with sensible but not over-prescriptive regulation. But we should do that whether or not they agree a trade deal, just because it’s a good thing for the working of one’s economy.
Finally, what does Richard Corbett think? Is Julia right to be concerned about the future direction of the British economy?
She’s right to be worried about it because that is what some people on the right wing of the Conservative Party have said. They have a view that Britain should be a low-tax centre for fiscal evasion for Europe, to put money offshore, undercutting the rest of Europe by having lower standards of consumer protection, environmental protection, workplace rights.
That’s what some of them want. That’s why some of them wanted to leave the European Union, because the European Union has the world’s largest market, the European Single Market, but it’s a market with rules that we’ve jointly agreed to protect consumers, to protect workers, to protect the environment; rules which could be better in the view of many of us, but the very fact that they exist is too much for some in the right-wing of the Conservative Party, and they see Brexit – if we don’t manage to stop Brexit – they see Brexit as an opportunity.
What would “no deal” on Brexit mean for Britain? Would Britain have to “change its economic model” if it failed to secure a trade deal with the EU? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!