UK cost of borrowing falls on Brexit vote

Yesterday in the markets UK government prices surged, with an overall rise of nearly 5%. This was despite the fact that they had already risen considerably this year ahead of the Brexit vote.

The UK government can now borrow at just 1.08% for ten years, and for under 2% for 30 years, the lowest rates in living memory.

A rating Agency has meanwhile put our debt on watch for a possible downgrade, despite this strong wish all year by the markets to value our debt more highly.

Far from the UK facing a crisis in borrowing for state purposes, or having to pay higher rates as some feared, the rates have tumbled further. As a sovereign country the UK state has full powers to raise tax and to create money to honour all debts.

When Moodys downgraded UK state debt from AAA to AA1 in 2013, the last actual downgrade, they said

“The UK’s creditworthiness remains extremely high because of the country’s significant credit strengths.” They then drew attention to European risks, highlighting “the considerable risk exposure through trade and financial linkages to a potential escalation in the Euro area sovereign debt crisis”.

 

Yesterday Moodys rightly stated that out of the EU the UK needs to “largely replicate” its current access to the single market. That is exactly the aim of UK policy, with many on the continent also wanting largely the same access to the UK market after exit.

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So we will have friends after all

I was pleased to see that President Obama does wish to have a strong relationship between the USA and an independent Britain. I was not surprised to read that Mrs Merkel wants to protect the trade and friendship between Germany and The UK. Nor did it come as a shock to hear from various big businesses that they can manage the change of Brexit and see opportunities in the new landscape.

Brexit supporters need to be magnanimous in victory. We should welcome the overtures of overseas countries and companies. I always thought the world’s fifth largest economy and member of the Security Council would still be worth a visit and be part of the normal diplomatic exchanges amongst the leaders of the world. We need to make early moves to regain our seats, votes and voices on major international bodies, which will mean more countries wanting to discuss matters with us, more ambassadors seeking UK support for their causes in world bodies.

The financial markets are still behaving in a strange way. The early mark downs on the first day after the vote were often extreme, with little evidence of much volume taking place at some of the sillier prices. Investors need to think through what if anything so far has changed in the UK economic outlook? The main overseas investors are committed to their current factories and commercial premises, like their work forces and want easy local access to our market. None of this alters thanks to Brexit.

There are always some companies that think they have found a better place to go for their next investment. In the EU a number have been bid or tempted away. There will also be others that now think about coming here, given the recent downwards movement in the value of the pound making us more competitive.

Those who wanted us to stay can be reminded that we are leaving the EU, not leaving Europe. There will still be plenty of student exchanges, cultural events, sporting contests, trade, investment and research collaboration. It will also be easier to be friends with our neighbours if we are not under constant pressure to  agree our laws and taxes with 27 other countries.

 

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There needs to be a smooth transition to Brexit

The Government needs to move on from Project fear to reassure and help bind the  country back together. There are believers in the EU project who are very unhappy tonight.  There are market speculators and market makers who are fanning the idea that there will be abnormal price movements as a result of this momentous  decision.

The Bank of England has made liquidity available. Bond interest rates are low and down. There is no Brexit related cause of major downward revision of earnings or output from companies, as nothing has yet changed economically. As the government pointed out today trade continues today as yesteday.

After a great democratic decision we can all help our society by respecting each other’s views, and ensuring legitimate worries are dealt with. It is also important to avoid exaggeration or talking ourselves into problems which do not exist otherwise.

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Congratulations UK

Well done all of you who helped bring about this great victory for democracy.

Now Parliament and government has to turn to the task of reassuring people and markets. I will write this afternoon about what needs to be done to implement the promises made by the Vote Leave campaign and to smooth the transition for businesses and  investors.

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Brexit

I do not make public forecasts of results in elections where I am a candidate or in votes where I am closely involved on one side. If you forecast your own success it can look arrogant or complacent, and you need to keep working to persuade as many people as possible of your good intentions and just cause. Nor can you ever be sure you will win until you see the ballot boxes opened and the votes counted.  If you were silly enough to predict your own defeat your opponents would not let you forget it. I always think it odd broadcasters keep on asking participants if they are going to win or not, when I want to hear from them why I should vote for them and not waste time on punditry from the biased.

Now the polls have closed I will express a view of this referendum. I have always found it strange  that the polls have generally been so close, and that most of the pollsters and pundits have united to tell us it is so close they cannot predict the outcome. 50/50 should be  an unlikely outcome, not the  norm or mean.  From what I have seen and heard I am anticipating a win for Leave.

Judging by the arguments and attitudes set out by the two campaigns, it seemed to me people began to disbelieve the greater fears about Brexit expressed by  the Remain side quite early on. They also began to take more note of just how restrictive and unhelpful the EU can be, and saw the dangers of staying in a body with very different aims  from the trade and friendship limited policies  shared by most UK voters.

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Make 23rd June Independence day

Tomorrow we can restore our democracy.

A free people can make their own laws, impose their own taxes, decide on their own spending together.

A free people can elect their representatives, lobby them to carry out their wishes, and dismiss them if they fail to heed the popular will.

A free people are all under the same law, adjudicated in their own courts, and impartially administered by people accountable to their Parliament.

 

Inside the EU much damage has been done to these essential freedoms which we should hold dear.

We live in a  nightmare world of 5 Presidents, an unelected Supreme Court, a Commission which does  not bend to our will.

We elect  none of these people and cannot get rid of them when they let us down.

We have a puppet Parliament at Westminster, that has to bow to EU law and European Court instructions.

 

UK awake!

Let every man and woman do  our democratic duty.

Let us grasp the opportunity of this vote.

Let us once again be a free and sovereign people.

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Why Remain is the riskier option

During the campaign there has been a deafening silence from Remain over the EU changes planned on the continent once the referendum is out of the way. Remain never seems proud of the unifying impulses of the EU, and spends its time in denial about the substantial moves to full economic, monetary, banking and political union which the EU institutions and many continental governments seek.

The European Peoples party Manifesto is a good starting point. This grouping of the main centre right parties of the EU, which the Conservatives under Mr Cameron left as it is federalist, state

“We want a European political union.” They envisage pan European elections with “a direct election by the people of a President of the European Commission”. They see the Euro and free movement of people as two central pillars of their new Europe. They seek a common defence, and majority voting to form a single foreign policy view.

Meanwhile at the practical day to day level the EU Commission is currently hammering out a more integrationist agenda. In full knowledge of the UK’s wish to have more flexibility on VAT, and written after the so called UK/EU deal,EU comment on the latest VAT Action Plan says

“Any such uncoordinated stand alone measures (different rates etc) would shift the focus from the overriding objective of putting in place a definitive regime at the first available opportunity. It would create additional distortions within the single market and thereby also increase opportunities for fraud”

So even in the crucial area of taxation where the UK government implied it had won new freedoms for us to tax as we wish, the EU is already planning detailed legislation to centralise and to limit such freedoms.

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Good Europeans will vote to leave

I want us to trade with the continent, be friends with them, have plenty of student exchanges, free tourist travel, plenty of joint ventures and commercial agreements. We wish to enjoy the varied cultures of the European peoples, to share food and fellowship, and to ally together in common causes. None of this will cease if we leave the EU.

I also want us to be good Europeans. Many European people and most EU governments want to move more quickly and purposefully towards a governmental union. The UK does not wish to tread that path. That is why we should leave now. We are getting in their way, we are an obstacle to the completion of their single currency driven  border free state they wish to create. It is not fair of us to slow them down and to complain of the cost, and not fair of the EU to imply the UK can keep her freedom and democracy whilst going along with the grand European project.

Some say the rest of the EU will not want to trade with us if we leave. This is absurd. All the senior contacts I have made over the years on the continent have no wish to impose new barriers against their lucrative exports to us, and understand that has to be a two way process. What need have either side of any new barriers when we leave? How would they be imposed under international law and WTO rules anyway?

Some say we could  no longer travel freely and enjoy each other’s countries. That never stopped us before we joined the EU and I see no reason why it would when we leave. I see plenty of US and Japanese tourists on the continent though neither state is a member of the EU. Universities on both sides of the Channel will still be free to attract cross border students, and to undertake collaborative research, as we do with US universities today.

Some say the world will be a more dangerous place if we leave the EU. That is offensive to our partners. Germany will be no more likely to invade France or vice versa if we leave the EU than they are likely to with us in it. They are  both peace loving democracies with post war habits of working together and avoiding new conflict. The worry is the EU’s wish to be a force in foreign policy with an ambition to build some kind of military presence could reduce stability. The EU’s record in eastern Europe is not encouraging.

Our balance of payments will improve on exit, as we cease the contributions we pay away. Our economy will be boosted by spending the net contributions we surrender on jobs and priorities here at home.

Above all we will become a free people with an independent democracy again.

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Some famous defeats for the EU in referendums

The EU can often be an unpopular cause on a ballot paper.

In 1997 and 2001 Switzerland voted against its government’s wishes to join the EU.
In 1972 Norway voted against its government’s advice to join.
In 1973 Greenland voted to leave the EU, and eventually did leave.
Denmark voted down the Maastricht Treaty favoured by its government. This led to major opt outs from the Treaty including from the Euro before the Danes would consent.
In 2001 Ireland voted against the Nice Treaty. The EU had to grant opt outs from the military union and other matters.
In 2000 Denmark voted against joining the Euro, confirming its earlier vote against Maastricht. Its government still hadn’t got the message.
In 2000 Sweden voted down joining the Euro, and to this day violates the Treaty by not joining.
In 2005 France and the Netherlands voted down the European Constitution. This was rebranded as Lisbon, despite the popular dissent.
In 2008 Ireland voted against Lisbon, but was persuaded to change the view following some changes to their text.
In 2015 Greece voted against the Euro austerity policies, but subsequently gave in
In 2016 The Netherlands, against its government wishes, voted against the EU/Ukraine Agreement, which the EU has ignored.

None of the dire economic predictions made at the time of some of these votes came true. Norway and Switzerland are the two richest countries in Europe per head, despite not being members or because they are not members. Nor did the rosy forecasts of the pro EU sides come true where they prevailed. Greece who did as she was told by the EU lives to this day with a deeply damaging long recession.

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Brexit can mean a smooth transition to democratic self government

If Brexit wins we wish the transition to be smooth and straightforward. There is no need for any disruption of trade or investment, and no need to change trading rules and product regulations.

It is vitally important that the government does not make an Article 50 request to leave the EU under the current treaties. Government lawyers and Remain campaigners just assume that is what they would do. Vote Leave is equally clear that is exactly what we should not do.

A vote for Brexit is a vote to restore UK democracy and leave the legal controls of the Treaties. The easiest way to implement the popular will if that is the result is to pass a short Act of Parliament. This Act would do two main things. It would remove the support for Treaty based European law afforded by the 1972 European Communities Act. It would confirm all current EU rules and regulations remain in place as good UK law.

The UK government should then open discussions with the EU over what if any changes they wish to see in our bilateral relationship. The UK government can also then take the necessary actions to implement the two main pledges of the Vote Leave campaign. We cancel the payments to the EU, and we establish a points based system of border control which does not distinguish between EU and non EU migrants.

Legislating first but not wishing to change any business arrangements with the EU is the best combination of strength and friendship. Thereafter we have our veto back over any new EU proposal, and can in the years ahead seek improvements or domestic UK changes as we wish. The EU for its part is unlikely to reach agreement amongst the members to impose any tariffs or other additional barriers to our trade unilaterally.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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