Why do the SNP think leaving the UK single market is a good idea?

If Scotland wishes to be independent then it needs to leave the UK. That means ending the supremacy of UK law and taking back control of its own laws, borders, money and currency.

I am happy for Scotland to stay in our Union and glad they voted to do so. If they truly want to be independent then of course they are free to do so following a referendum. Its not the sort of thing we should expect to have votes on every couple of years, as you have to assume people made a longer term decision than that. Current polling shows Brexit has made little difference to the balance of opinion on independence. A new referendum would require a decisive shift in Scottish opinion to be worthwhile and for the SNP to risk it anyway.

The SNP got into a muddle over the currency during the recent independence referendum. Of course an independent Scotland cannot stay in sterling. Nor would Scotland be independent if it did manage to continue with the UK currency!

Now the SNP is in a big muddle over single or internal markets. It says it is crucial to stay in the EU internal market when this is not possible as we leave the EU. Yet the SNP recommends leaving the UK which similarly entails Scotland leaving the UK internal market which is a far bigger proportion of Scotland’s trade than the rest of the EU.

True nationalists would want out of both the EU and the UK, to take back control. The SNP always seem to be shuffling various kinds of dependence, not independence, with a strong bias to control from Brussels rather than London. It gets them into all sorts of contradictory arguments. The advantages of internal markets can be exaggerated. Getting out of an internal market which is also a currency union is both more difficult and more expensive than getting out of an internal market with different currencies.

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The SNP should admit there is no single market to belong to for non EU members – the issue is access

It may suit the SNP to spin the myth that the UK can stay in the single market whilst leaving the EU, but we know that is wrong. The Single European Act which helped create the EU’s version of a more regulated and coordinated market has long since been folded into the Treaty of European Union. No-one on the continent is proposing splitting out single market laws from the rest and letting the UK belong to that. Nor are they wanting to do a side deal with Scotland rather than the UK, given the problems that could create in Catalonia, Venice, the Flemish part of Belgium and the rest.

The EU’s internal market, wrongly called a single market, comes with freedom of movement, budget contributions, the supremacy of EU law and the all the rest as part of the deal. It only comes with membership of the whole EU. Many of us explained at length in the referendum campaign that we would leave the single market as well as the EU as they are the same thing. The government also warned people that was true. The issue was always what access we will have to the EU internal market once we have left, not how we could “stay in” it, when “it” has no separate legal identity from the EU.

That was why the Remain campaign not only warned we would be out of the single market, but kept saying we would need to do a Norway or Swiss type deal to buy access to the market with concessions on budget contributions and freedom of movement. Again the Vote Leave campaign endlessly ruled out such an approach, as more importantly now has the new government. Vote Leave always pointed out all other countries have access to the single market through world trade rules, and there is every reason to think the rest of the EU would want a better trade deal than the average with the UK given the large amounts they sell to us.

The one ray of hope in the SNP blizzard of propaganda is they would like more powers for the Scottish Parliament when the EU powers are removed. That is a more productive conversation to hold. It is a of course a contradiction of their wish to stay in the so called single market, which would leave the power to decide firmly in Brussels. When the UK comes out, then of course Scotland can discuss with the Union Parliament what powers it should have over its own fishing, farming and other policies that are currently controlled from Brussels. Coming out of the EU is about taking decisions that matter closer to home, so it is a good conversation to have on the balance of power returned to the UK Parliament and given to the Scottish Parliament.

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My speech to the Commons during Wednesday’s Brexit debate

Some colleagues have already said that it must be our duty now to try to knit our nation together, to put the heat and fury of the referendum campaign behind us and to see how together we can build a prosperous and successful future for the United Kingdom as the country leaves the European Union. I think that that will be easier than the tone of this debate so far would give people to believe, because I have great confidence in the British people. I have spent a lot of time talking to remain voters, both before and after the referendum, as well as obviously encouraging the leave voters, whose cause I helped to champion.

The good news is that the remain voters are not, on the whole, passionate advocates of the European ideal and the European project, and that is why we will be able to put this together. According to polling, around 10% of all voters in Britain really believe in the whole European project—a perfectly noble vision of integration, political union, monetary union, a borderless society and so forth—but they are a very small minority in our country. I am afraid that we cannot easily build a bridge to those who want to be part of a united Europe, because it was clearly the view of both sides in the referendum that Britain did not want to be part of the single currency, the political union, a borderless Europe and so forth.

However, this does mean that an awful lot of the remain voters—the overwhelming majority, in fact—voted remain not to join the full project but because they had genuine fears that when we came out of the union, we would leave the single market. They felt that that could be damaging to trade, investment and business prospects. It is on that narrow point that the House of Commons has to concentrate its activities over the next few months, because it is on that central issue that our discussions with our European partners need to concentrate.

I am conscious that the business community has one aim above all others, which is to reduce or eliminate uncertainty. Having been in business myself, I know that business is about managing uncertainties all the time, but it is of course good if we can get the politicians to make their contribution to lowering uncertainty rather than increasing it. It is important that we all work together to try to reduce the uncertainty and shorten the time in which that uncertainty exists.

I am also conscious that we can lower uncertainty in two ways. As we approach the negotiations, we must first show that we are going to go at a lively pace, because the longer they drag on, the more uncertainty will develop, the more obstacles and confusions will arise, and the longer will be the delays that can hurt. So we need pace. The second thing we can do to reduce the uncertainty is to say that we need only to discuss a limited number of things. We can narrow the framework of the negotiation. There are many consultants and advisers out there saying, “We must scope and chart every aspect of all our relationships with other European countries, be they technically single market or EU or wider. We must put them all on the table, then throw them up in the air and discuss which ones should change and how stable they are going to be.” That would be a disastrous way to proceed. It would take too long, and it would offer too many hostages to fortune.

The Government are right to say that in order to have a successful negotiation that lowers the scope for danger and downside, we need to take those discussions at a pace and ensure that we do not say too much in advance about any possible weaknesses in our negotiating position. We should not open up issues for negotiation that do not need to be negotiated, and we should take on board only those issues that are a genuine worry to those on the other negotiating side and that need to be taken seriously because they have some powers over them.

The United Kingdom has voted to take back control. That was what Vote Leave was all about. That was the slogan throughout the campaign, and when asked to define it more, the leave side said that we were voting to take back control of laws, money and borders. So we know what cannot be negotiated away. We also know that the main area of uncertainty is how we are going to trade with the single market when we cannot technically be part of it because it includes freedom of movement and wide-ranging law codes over things that go well beyond the conduct of trade and commerce. It is not a segregated, integrated whole within the European Union; it is a central part of it and part of a very big consolidated treaty.

Jonathan Edwards (Plaid Cymru) (Carmarthen East and Dinefwr): The Secretary of State said something very interesting earlier when he said that he hoped to negotiate a better economic deal than membership of the single market. As a prominent Brexiteer, can the right hon. Gentleman explain how that will be possible?

John Redwood: I do not recall the Secretary of State saying that at all. He was saying that we could have a better relationship than simply relying on World Trade Organisation rules. I have good news, however. If we were to have to fall back on WTO rules, this country would be able to trade perfectly successfully with the rest of the EU and would be free to have much better trade deals with the rest of the world, which we have been impeded from having all the time we have been in the EU.

Should there have to be tariffs, there would be many more tariffs collected on European imports into Britain, so we would have a lot of money to spend. We could give that money back to British people, so they would not actually be worse off as a result of the tariffs. Whereas, if we went the other way, the tariffs would be a great embarrassment to our European partners. I am very optimistic about our European partners. I think that they will want tariff-free trade. I do not see Germany or France queueing up to impose tariffs on us, so I hope that we will be able to get through this quite quickly and reassure them that we do not want to put tariffs on their trade either.

Mr Bernard Jenkin (Con) Harwich and North Essex: Is it not also incumbent on the Government to be mindful that article 50 was not put into the Lisbon treaty to make it less complicated to leave the European Union? If we try to include too many things under article 50 that stray into mixed competences, we will finish up with an agreement that requires unanimity? That would lead to a far more protracted negotiation than if we try to keep things simple. In fact, it would be an advantage to business if we could complete this in a much shorter period than the two years specified under the article 50 process.

John Redwood: Indeed. This is not a prediction, because I know that a lot of people have lots of good and bad reasons to want to delay and make this more complicated, but it would be quite possible to negotiate the trade issue very quickly.

We have two models available. My preferred model would be to carry on trading tariff free without new barriers, as we are at the moment. That is the most sensible model to adopt, and I think it makes even more sense for our partners, who are much more successful at selling to us than we are to them. I have not yet heard them say that they want to impose barriers. Then there is the WTO most-favoured-nation model, which would also be fine. If one wishes to have a successful, quick and strong negotiation, one should not want anything. We do not want anything from our former partners. We want them to get on and develop their political union in the way that they want, in which we have been impeding them, and we want to be free to run our own affairs in an orderly and friendly way.

We want to have even more trade with our European partners. We want more investment agreements, more research collaborations, more student exchanges and more of all the other good things we have. Those things are not at risk, and there will be an enormous amount of good will from a more united United Kingdom. [Interruption.] Opposition Members want to split us up by saying that everything has to go wrong. If they want us to negotiate successfully, they should show confidence and optimism—let us show that we can do this and be good friends with our European partners.

Helen Goodman (Bishop Auckland) (Lab): The right hon. Gentleman is absolutely right: we have a mutual interest with other European countries in continuing research projects and university collaborations. However, those things are part of the EU budget, so if we are going to do them, he will have to get off his high horse about not making any contributions to the EU budget.

John Redwood: We will behave like all other independent countries of the EU and have lots of collaborations with them. We will have agreements on those collaborations as the need arises. The important thing is that we will have taken back control.

I urge the Labour party to understand that I and people like me are passionately in favour of parliamentary democracy. That is why we waged the long campaign that we had. I have every confidence that Parliament will rise to this occasion. Today is a good example of that. The Opposition had time and allotted it to this crucial subject.

They could have tabled a motion about the position they would like us to strike in the negotiations, but they are not yet ready to do so. I understand that, but it was in their power to do so. They could have tabled a motion to try to veto an article 50 letter, had they wanted to, but they were very wise not to do so because many of their constituents would have seen it as an attempt to thwart the will of the people in the vote. There is nothing stopping this great Parliament from doing those things.

I am pleased that the Secretary of State has already made two statements and given evidence to two Select Committee investigations. He was here in person today to answer the Opposition debate. We do not always get the courtesy of having the Secretary of State before us in an Opposition day debate. That augurs well for there being more scrutiny.

I am pleased that the main way we will leave the European Union is by repealing the European Communities Act 1972, because that means that the central process will be a long constitutional Bill—not long in length or wordage, I hope, but in terms of proceedings, as I am sure SNP Members will want to cavil over every “and” and comma, and they have every right to do so, up to a point. Parliament will consider that legislation and vote accordingly. That is exactly as it should be. It will be a great celebration of our parliamentary democracy, which the majority voted to strengthen, that we do it by parliamentary means.

The right hon. Member for Doncaster North (Edward Miliband), the former leader of the Labour party, correctly said that all the European law will at that point become British law—that is the irony of it—but we will do that for the purposes of continuity. Thereafter, we in this House will be able to judge whether it is wise or necessary to repeal or amend any part of that legislation. If it would have a direct bearing on our trade with the European Union, it would not be a good idea to do that without knowing that the EU was happy or that it would not react unreasonably. For example, when selling into a market, one needs to meet the product requirements, and things like product standards will be part of that continuation of the legislation.

The only thing about the single market that is really worthwhile—it is mainly very bureaucratic, expensive and pretty anti-enterprise—is that it provides common product specifications and standards, so that if a washing machine is saleable in France, it is also saleable in Greece. The great news is that when we are out of the EU, that will still be true. It is an advantage for an American exporter into the EU, just as it is for a UK exporter into the EU. When we are in a similar position to America—a friendly independent country trading with the EU from the outside—we will get the full benefit of that.

Let us bring the country together. Let us show that we can be more prosperous and more successful. Let us show that our trade is not at risk. Let us be confident in our negotiation. Let us not use this place to make all manner of problems that will give those who want to wreck our negotiation good comfort, support or extra research. Let us show how everything we do can create more jobs, more trade and more investment.

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How to reduce the uncertainties of Brexit.

Yesterday in the Commons I spoke of the need to reduce the uncertainties and disagreements following the vote to leave the EU.

Business is right to chide politicians to be more precise and to reduce the worries they have There are three main ways to do this.

The first is to rule out the need to negotiate over large areas where we need to take back control. You cannot negotiate taking back control. We need to resume decision making over our laws, our money and our borders. Saying these are not up for negotiations greatly simplifies the task.

The second is to make a generous offer on trade, where we do need to reach an agreement over how we trade with the rest of the EU in future. We should offer trade tariff free with no new service trade barriers. it’s a generous offer, and would make sense for the continent to welcome it. I have still not heard any continental government Ministers demanding that tariffs be placed in the way of their exports to the UK, so it should be pleasing to them. Nor would they wish to lose their financial passports to London.

The third is to have a rock solid fall back position which does not require any positive decision by the rest of the EU, just in case Remain are right and the Commission does make the member states damage their own trade with us. We are founder members of the World Trade Organisation and can therefore file a schedule of tariffs with them under the MFN procedure, using the current EU schedules. We could trade reasonably well using this, just as the USA, China and others do into the EU at the moment without special trade deals. It would also mean the Uk government had a substantial revenue from the tariffs on rest of the EU exports to us, which could be given back to UK consumers in various ways.

There is absolutely no need to pay money into the EU budget in order to import products from the EU. There is no need to trade freedom of movement for the exchange of goods.

There is no need to spend two years sorting this out. If we rely on existing trade terms it could be much quicker.

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Protecting employees

There was general agreement in the Leave campaign that on departure from the EU all employee rights that are in EU law should be retained as good UK law.

When we researched what was entailed, it became apparent that Labour and Conservative governments had pioneered rights which subsequently the EU took up, or had gone beyond the standards required to comply with EU law anyway. Conservative and Labour spokespeople on the Leave campaign all united to recommend to government retaining the rights in UK law. The UK government did not propose diluting them and there are no plans to do so.

The new Prime Minister has repeated the pledge, and made clear she has no wish to dilute rights currently included in EU law that benefit employees. The European Communities Act 1972 Repeal Bill will include crucial clauses confirming that after leaving the EU all current EU law including the employment measures will be good UK law. Whereas following the passage of the Act the UK government may well wish to amend the border laws and the fishing laws amongst others, there will be no adverse changes to employment law.

This means that Mr Corbyn’s understandable concern that Brexit is not used to undermine employee rights will be fully respected. It also means that Labour MPs will need to vote for the Repeal Act if they wish to keep their pledge to maintain EU employment law in UK law, as this will be the way to do that. Were we leave without doing this, then all directly acting EU law would lapse on our exit. It would be odd indeed if Labour wanted to undermine this legal settlement.

The passage of the Bill will give Parliament plenty of opportunity to debate these matters. There will also continue to be other debates and votes. This week we had a Statement on Brexit on Monday and will have a debate on it with a vote tomorrow.This is an Opposition motion. Interestingly, it does not seek to stop an Article 50 letter, so maybe they understand they need to help implement the wishes of the people.

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Don’t the Treasury know the referendum debate is over?

According to the Times someone in the Treasury thinks the UK could be a lot worse off outside the single or internal market. They have put some more figures into the Times that make some bits of Project Fear look quite modest. What is the point of putting out silly figures that bear no relationship to the current reality of the UK economy? Why suggest the UK will be in a weak position when we leave the single market, when it is more than likely the rest of the EU who has much more to lose than us wants to keep good access to the UK and therefore has to continue with our good access to them. We now know the Treasury figures for the short term impact were wrong, so why trust their longer term numbers? With or without a special deal with the EU the UK will have good access to the EU’s internal market, on terms as least as good as every other non EU country around the world does.

As people shouted out in one of the public meetings I spoke to during the campaign when the Remain side used their Project Fear figures “We don’t believe you”. These numbers are bad economics and even worse politics. The UK needs to show a united and confident face for the discussions over trade with the rest of the EU.

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What should we do about big business?

There is a notable anti big business mood in the advanced world’s political winds. In the USA both Mrs Clinton and Mr Trump wish to see major changes to the behaviour of large corporations. Mrs Clinton wants to regulate them more, intervene more in health care, and tax them more. Mr Trump wishes to limit their access to cheap migrant labour, and proposes a big tax reform which he hopes will combine lower rates with getting them to pay more and to repatriate offshore cash.

The EU is ever keen to regulate them further . It has already put through controls on bonuses in the financial sector, numerous rule increases on banks, and a blizzard of new laws on everything from the environment to employment. Both the EU and the US authorities are keen to increase tax revenue by tightening tax rules, and keen to fine businesses for wrong doing as another source of revenue for the government.

In the UK the Labour party has moved strongly against companies and capitalism generally, proposing a range of new controls, interventions and nationalisations. Mrs May has been the most balanced of all these actors and actresses, but she too is saying that companies that misbehave over employment or tax should expect tough treatment from the state.

So what has business done wrong? Big business has allowed spectacular failures to disfigure its central contribution to progress and better lives. In an era when business has delivered us the internet, mobile communications, better personal transport, a range of labour saving devices for the home and office and record living standards, there has been a steady drumbeat of disaster or dubious practises from some corporations. We have witnessed the oil spill in the USA, the emissions scandal from VW, employment issues from some UK retailers, pension problems at BHS, tricky tariffs from utilities, lack of customer awareness and a financial crash from banks,and poor broadband in various locations. This has been made worse by a perception that a gilded business elite of executives who do not own their companies think they have the right to huge seven figure sums in remuneration just for being good at corporate politics. They enjoy over the top pay without necessarily delivering the better service or product for customers that might deserve such fabulous rewards. Much of the drive to better and new products and services comes from exciting challenger companies run by people who own and run entrepreneurial businesses.

The public does distinguish between entrepreneurs and company executives or corporate politicians. If someone risks their own money and reputation and builds a big business, they can enjoy great income and wealth as a result. It is someone who is good at corporate climbing, who inherits the success of past generations of executives and shareholders, who needs to exercise some pay restraint and to put the needs of customers and shareholders first before their own vaunting financial ambition.

Changing this culture without driving jobs and business away is not easy, but it is a necessary task. I would be interested in your ideas on what should go into an industrial strategy.

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False narratives

I find I have to spend a lot of my time explaining why so many of the conventional views, pumped out by the establishment institutions in the UK, are false narratives. I am going to do an occasional item on these.

The latest false narrative is that the pound has fallen owing to Mrs May’s decision to go for “hard Brexit”. As many of us have explained there is no such thing as hard Brexit. Vote Leave made crystal clear we would leave the single market when we left the EU as they are part of the same Treaty, and the continentals see freedom of movement and budget contributions as a key part of the single market. It should therefore be no surprise to markets, several months later, that we will be leaving! The issue was and is what access we will have to the single market. Again it is quite obvious we will have decent access, as they need decent access to us. I think we will get tariff free access, but if they want WTO level tariffs they will suffer much more than us, and we will get a boost of substantial tariff revenues on all our imports of manufactures from them which we could spend on other economic improvements at home. Services are of course tariff free.

The pound fell sharply on Thursday. This was four days after Mrs May made her wrongly named “hard Brexit” speech. If the cause of the fall was the market’s ignorance of the obvious until she spoke, then surely the fall would have occurred on the Monday immediately after the speech?

Today I want to just remind you of some of the main false narratives and their accompanying soundbites, that have distorted our public debates in recent years.

In the first decade of this century the government assured us they had found an end to “boom and bust”. No matter how hard we tried to explode this nonsense, it was commonplace as a view. This complacency lay behind the egregious errors made in allowing banks and government to rack up huge debts which proved unsustainable.

Throughout the Brown and Coalition years we were told that the Bank of England is independent. I have recently produced a couple of articles on this site showing what nonsense that was and still is. The Bank was very politicised through much of the period 1997-2016 and subject to several changes of direction from government and Parliament instructions.

During the crash the Labour government successfully blamed the banks for the crisis. Whilst some of the commercial banks made bad judgements or misbehaved, the largest errors were errors of central Bank and Treasury policies, deliberately bringing solvent banks down through starving them of liquidity, and refusing to use bail ins and other techniques to resolve their problems.

The Coalition economic strategy was characterised as cutting public spending to eliminate the deficit in a Parliament. 80% of the work of deficit reduction was said to be spending cuts. Yet every year real spending rose a little, and the government relied on large tax revenue increases to pay for the extra spending and get the deficit down. They fell well short of eliminating the deficit in the Parliament.

The Opposition always characterised everything the government did as austerity policies, yet the areas of cuts were relatively modest. It is true some of the welfare cuts were ill judged and allowed a more general narrative to be written which was not true. Meanwhile spending on pensions, welfare overall, EU contributions, overseas aid the NHS, education and others went up. Nothing was attempted on the scale of the damaging cuts in Greece, Ireland, Spain and Portugal under EU controls, where big reductions were made in spending. The left in the UK never seemed too keen to condemn these.

Now we see the false narrative that everything that goes wrong is caused by the Brexit vote, and everything which stays good just means we have not yet seen the impact.

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The CBI and the EU

Yesterday’s letter from the CBI was a general cry from the heart that they might not enjoy the influence and access to government they think they ought to have. I suspect they will find with the new government much as they have with other past governments that they will have access to put legitimate points about the business interest to the Ministers and Ministries that tax and regulate them. It should be a professional relationship, not a special friendship.

The CBI has often provided pro EEC/EU advice that has turned out to be very damaging to the UK economy and business interests they claim to represent. I took the large industrial quoted company I led in the 1980s out of the CBI because it insisted on campaigning vocally for the UK to join the European Exchange Rate Mechanism. I was one of the few critics of the scheme. I pointed out the UK would get a high inflation or a nasty recession from membership. I lost the argument to keep us out, and we ended up getting both the inflation and the recession. That deeply damaging economic policy closed many factories, bankrupted businesses and meant the Conservative party spent 13 years out of office and 18 years without a majority. The government should remember the downside of some CBI advice.

I remember having an open door to the CBI and to their member firms when I was the UK’s single market Minister. I had the task of “completing” the single market in the early 1990s, when we had to put through a huge legislative programme of almost 300 new business laws to carry out what the EU thinks is a single market. Many businesses came to lobby me. Practically every time they came, they either wanted me to delay or dilute the proposed measures. Often they would have preferred me to veto it, but I had to remind them we no longer had that power under the terms of the Treaties we had signed with their encouragement.

One of the worst examples of a bad proposed EU measure was the one that would have made the London Stock Exchange’s method of trading illegal. The Directive had been drafted based on continental methods of trading. I went to great lengths to get that proposal changed, including going to Brussels to attend the working meeting of officials myself as well as to the Ministerial meeting. I managed to get the draft changed. Having no veto made this difficult.

Now I advise the CBI to recognise that the biggest threat to London’s financial business is the proposed takeover of the London Stock Exchange by German shareholders. Whilst they will offer short term reassurances that business will still be conducted in London, there will be nothing to stop them shifting large quantities of business to Frankfurt later on. Why isn’t the CBI highlighting this and lobbying to block the merger on competition grounds, as it will clearly reduce competition in European financial transactions.

It is curious that many of the laws that are what they call the single market were thought to be damaging to business at the time they went in, but are now apparently thought to be crucial to business. I would like to reassure the CBI that if they like all these laws now, we could always decide to keep them once we are out. The good news is that once out we can keep them, repeal them or improve them as we please. Where the laws are narrow matters of standards and requirements for the continental market then of course exporters will still need to meet the customer demands, just as they have to meet the different ones for US or Asian exports.

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Advising government on Brexit

I have a simple answer to the government on seeking advice on Brexit.
They should not seek advice from consultants who were urging us to stay in until June 23rd, who want to charge the taxpayer a lot of money for their advice, and who have not read and understood the many documents which have established the EU.
The task is much easier than many of these wannabe consultants want us to believe. The PM has made clear we are taking back control of our laws and our borders. We also need to take control of our money. This means none of these things can be negotiated.
There are two simple ways of trading in the future. We can carry on as at present tariff free. This is obviously the right answer for our partners who sell us so much. If they want to damage their trade with us, then we can trade under WTO MFN status.
There are various people who have read all the necessary documents, who believe there is a good way through for the UK and who will provide their advice free. I suggest this is what the government accepts. Some of us have recently published a blueprint through Legatum, which covers all these issues and offers a strong negotiating strategy on trade to maximise the chances of a happy outcome and to speed it up to remove the uncertainties.

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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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