Thanks to Brexit the UK government can borrow more cheaply!

The Stay in campaign seem to think the fall in the pound against the dollar is the result of Brexit fears. I don’t think so. But let’s humour them and agree that the chances of Brexit have become much higher recently and this drives markets. Then on that basis they need to explain the following:

In early May 2015 on the election of a Conservative government offering a referendum it cost the government 1.9% a year to borrow 10 year money. Clearly before the election there was no chance of a Brexit, and after the election there could only be a chance of Brexit on a Conservative win.
By January 3rd this year this had fallen to 1.77%.
On February 1st it still cost 1.626%.
Over the month of February, the first month of serious campaigning for Brexit and the first month that markets focused on the possibility of exit, the cost fell to 1.37%.

Clearly markets think the UK out of the EU will be more credit worthy! That makes sense, as we will no longer need to send huge sums of borrowed to the EU and not get it back.

38 Comments

  1. Mike Stallard
    March 1, 2016

    Good point! The pound is our currency with HM the Queen’s head on it!
    Personally I do not mind sending taxpayers’ money to Northern Ireland or Scotland. I do not mind subsidising the North of England either. They are us.
    I do not see, though, why I should subsidise very very rich people in Brussels or send taxpayers’ money to Notrumania either.
    Do you?

    1. Hope
      March 1, 2016

      Cameron claimed openness was the best disinfectant.Why is he hiding papers from Eurosceptic minsters? If his case is so strong it would be reasonable to have level playing field. Why not debate Farage? Cameron’a project Fear can only claim the world’s going to end if the UK resumes its former position. Remind me how how did we survive outside the EU and what were our nations achievements and how long we have been in held in a straight jacket unable to make decisions for ourselves?

      Hague makes the ridiculous comment in his article today that other countries were looking after their own interests in Cameron’s negotiation! Only if we had leaders who would do the same! What an absolutely stupid comment. No wonder he was useless negotiating with the Lib Dumbs.

      Openness- Why is the EU parliament waiting to have a vote on his minuscule proposals after the referendum? Why is FOI not fully extended to MPs after the institutional corruption was brought to light by wide spread abuse and fiddling by MPs, clearly this was a leadership failure by party leaders. MPs not named when arrested, they are public figures paid out of the public purse. Cameron’s word utterly worthless.

  2. Mick
    March 1, 2016

    There was a labour woman mp on daily politics show yesterday who was saying that the fall in the pound against the dollar was due to Brexit but bias BBC reporter Colman didn’t disagree with her, this is the sort of bias reporting that’s needs squashing and the truth be told

    1. bluedog
      March 1, 2016

      The trouble is that neither the BBC nor Labour know anything about financial markets, of which they inherently disapprove. This underlying disapproval shapes their view as much as their belief in the EU does.

      1. Horatio McSherry
        March 2, 2016

        Don’t forget the SNP. John Mason MSP genuinely – genuinely! – asked the other day: “How is national debt different from national deficit?”

  3. Lifelogic
    March 1, 2016

    Think how much more credit worthy still the country would be after both a Brexit and after IHT ratter, pension, landlord/tenant and savers thief and tax complexity increasing, tax borrow and piss down the drain Osborne and Cameron have gone too.

    I see that the turn coat and traitor William Hague has been talking drivel in the Telegraph again. There clearly will be a deal some where between completely out and just free trade (the best option) to somewhere in between this and Cameron’s absurd non deal. The EU/establishment will not give up on the £10bn and power/control that easily

    http://www.telegraph.co.uk/news/newstopics/eureferendum/12178284/What-are-the-chances-of-a-better-EU-deal-after-voting-Out-Zero.html

    The in side are desperate to perpetuate the lie that there will be no second deal offered. Out will however be the best deal even if we do not get full free trade we can just charge the same tariffs as they do and would thus make more from it. Or just switch production to the home market or other markets.

    1. Lifelogic
      March 1, 2016

      Democracy and sovereignty are far more important, but we will surely certainly get an economic boost too from Brexit.

      1. Lifelogic
        March 1, 2016

        Richard Littlejohn has it spot on today:-

        The only issue which matters is whether Britain should revert to being an independent, outward-looking nation, with the absolute freedom to pass our own laws and control our borders.
        Or whether the British people are content to remain impotent serfs in a foreign-dominated superstate which meddles in virtually every aspect of our lives.

        http://www.dailymail.co.uk/news/article-3470496/If-Britain-votes-remain-toast-writes-RICHARD-LITTLEJOHN.html

    2. Lifelogic
      March 1, 2016

      Also today we have more on Osborne’s further pension thieving plans:

      http://www.telegraph.co.uk/news/politics/georgeosborne/12179375/Minister-hints-at-pensions-tax-raid-on-middle-class-savers.html?WT.mc_id=e_DM93872&WT.tsrc=email&etype=Edi_FPM_New&utm_source=email&utm_medium=Edi_FPM_New_2016_03_01&utm_campaign=DM93872

      and: Secret-plan-to-axe-90-per-cent-of-Tory-associations

      http://www.telegraph.co.uk/news/politics/conservative/12178192/Secret-plan-to-axe-90-per-cent-of-Tory-associations-which-would-smooth-George-Osbornes-coronation-as-leader.html

      The sooner we are rid of Cameron and Osborne after the BREXIT vote the better for everyone. No few are going to vote for the appalling, tax until the pips squeak IHT ratter Osborne at the next election.

      any comment JR?

      1. Hope
        March 1, 2016

        No, they need to go now while the Tories still have a party. Cameron is not going for election so he needs to go now. Get a Eurosceptic leader and ban Europhile ministers from reading EU memos, civil service to work only for out campaign. It is rather appealing.

        As Kate Houy MP states, there is no Government positions the EU as collective responsibility was suspended by Cameron. This is about rigging the referendum and spinning Cameron’s alleged deal out of nothing. Again, Cameron talks rot.

      2. acorn
        March 1, 2016

        You have to realise that private pension funds are having a tough time. Punters are not saving enough to keep these schemes in decent profits. Osborne had to come up with a trick to get them more income; hence, workplace pensions etc.

        Pension funds pay out to pensioners, what the working members pay in, plus the free money they get from the Treasury, in the form of Gilt interest payments, plus a little bit of dividends they get from blue chip shareholdings. All of which ain’t been too big lately.

        The assets of the pension funds get bigger as working population gets bigger, and the assets rarely see the light of day again. As Neil Wilson says, paying into a private pension scheme is basically a taxation system run by the private sector, it takes what would have been spending money and locks it away for ever. It is not exactly Ponzi but …

      3. JoeSoap
        March 1, 2016

        Unsure why you voted for this lot in the first place.

    3. Lifelogic
      March 1, 2016

      Perhaps they can borrow more cheaply, rather a shame they tend to waste such a high proportion of what they get their hands on anyway.

  4. Antisthenes
    March 1, 2016

    We fought WWII to stop a foreign government from governing us. We had a cold war to stop socialists ending free market capitalism and democracy. Yet we are now allowing both to do it without putting up much of a fight. The EU is a socialist foreign based government that has already taken over much of our governance and is poised to take what is remaining.

    They would replace and are in fact doing so free market capitalism with ………….style crony capitalism and socialist centrally planned and directed means of production and choosing for consumers that which they are allowed to consume. They are doing this through their rule and regulations legislation that eventually will legislate which screw goes into which hole and what the content of everything we eat is and much more beside.

    The rot to be fair had already started domestically as our own government has been treading this path for a long time now. Though the difference being is that now and again sense takes over and Conservatives are allowed to roll back some of this iniquity.

    The markets are aware that in the EU the UK has no way to make the EU alter it’s way or it’s ambitions but out it can and so is pricing in accordingly that fact into the bond market. A measure of how economically free and democratic a nation is.

  5. Mick
    March 1, 2016

    Just watching the Calais jungle camp being dismantled, and all these lovely new containers with heating being provided for the migrants as got me thinking that its funny it is happening now with a Brexit looming,the synic in me is wondering if the government as funded a share in this so that the general public will be fooled into thinking the migrant issue is under control and vote to stay in the dreaded eu

    1. Lifelogic
      March 1, 2016

      How can you be so cynical! Cast Iron, no if no buts, would never do anything like that he is authentic to his very PR core.

    2. JoeSoap
      March 1, 2016

      Indeed it is quite a co incidence isn’t it?

  6. majorfrustration
    March 1, 2016

    Agree. Change of topic – there does need to be some form of rebuttal unit for these scare stories. The Prince of Darkness – EU pensioner – was on the Today programme wittering on about the adverse effect on UK trade if we were to leave. Cobblers of course but unless something is said against this line of argument we will never take the fight to the “remainers and undecided”

  7. alan jutson
    March 1, 2016

    Thank you JR.

    Amazing how all of these other so called financial experts, who have been silent for years, crawl out of the woodwork to make one off statements when a microphone is placed in front of them, just because THEY think it suits THEIR purpose at the time.

    I seem to recall that the Pound against both the Dollar and Euro was far less a few years ago before Brexit was even mentioned. It also changes every day against every other currency as well !!

    Some days it goes up, some days it comes down, doubtless this will continue for many years to come.

  8. ian
    March 1, 2016

    Its because trouble in the share market from aug but the government might see 1.2 on the 10 year bond or less, the market look like will be going higher by april so government will come off a bit but as soon as they go back up 2 percent with the share market rising they need more fear to bring them back down because over 2 percent now is to high for the amount of debt that has built up, wet & mad might be paying less on the debt but he get less back in QE and with debt rising quit a lot this year again, so it will close run thing.

    He needs to nick 8 billion off the people some where to pay for there tax cut.

  9. Richard1
    March 1, 2016

    I would be careful of this line of argument. Other sovereigns have also seen bond yields fall. Germany and France eg – both of which borrow at below 1% for 10 years – have seen their bond yields fall by more than 1%. Pursuing this line of argument we should vote in and join the euro!

    Reply – it’s a tease to show how silly the pound argument is!

  10. The Active Citizen
    March 1, 2016

    You made an fine speech in the House yesterday JR, where you mentioned this. I’m pleased you’ve put it on the record in your diary too. Not only does it make the Remain side look foolish, the fall in the cost of borrowing also delivers a massive financial benefit to the UK for as long as it lasts!

    For those wanting to hear JR’s speech, he’s here on Parliament Live. Scroll forward to 18:11.

    ALSO, here is Mr Cameron’s absurd document on “The Process For Withdrawing From
    The European Union
    “. I’m sure many on here will want to read it, although I don’t recommend it for those with high blood pressure…..
    Rgds, TAC

  11. Nig lander
    March 1, 2016

    Plus our exports become cheaper and earnings from abroad worth more. HMG over decades has allowed the pound to drift so we can stay competitive. Amnesia seems to have struck the ‘remain’ group. Funny that’s!

  12. Tim
    March 1, 2016

    Its a worry that the main headliners for leave are ids nigel farage and boris
    we need more people like JR and back bench mps to get on shows etc.
    Question time is in Liverpool this week. I hope There are better voices then red len and alex salmond this time.

  13. ian wragg
    March 1, 2016

    We wouldn’t have to borrow so much bloody money if we left the EU.
    Plus we could reduce borrowing significantly if the stupid aid budget was halved.

  14. Lifelogic
    March 1, 2016

    Matthew Parris however is, as usually, totally wrong. Does he prefer Mugabe & Zimbabwe as it is now? It is the remain side who lack a single rational argument.

    http://www.spectator.co.uk/2016/02/brexit-campaigners-remind-me-horribly-of-ian-smiths-rhodesian-front/

    1. Richard1
      March 1, 2016

      It is an absurd comparison by a normally thoughtful writer. Take the Labour side. I cannot imagine 3 more temperate and appealing personalities than Frank Field, Kate Hoey and Gisella Stewart, all for Brexit. There might be good arguments for Remain and Matthew Parris can support them, but he will have to win the argument on its merits not on smears like this.

  15. Denis Cooper
    March 1, 2016

    A very nice one, JR.

  16. Chris
    March 1, 2016

    Thank you, Mr Redwood, for all these articles. Most helpful and informative.

    I understand you are giving a presentation this Saturday in Wokingham on leaving the EU, which your readers may be interested in?

  17. David L
    March 1, 2016

    I have tried to find a “remain” blog as informative and well-argued as this “leave” one is. My head tells me that there must be pluses and minuses whichever way the vote goes, life is never as simple as some protagonists on each side claim….but what are the disadvantages of leaving? Anyone know any? Actual ones, not generalities please.

  18. Denis Cooper
    March 1, 2016

    Open Europe have decided to remain neutral in the referendum:

    http://openeurope.org.uk/today/vision/

    It’s a great pity that the British government can’t also bring itself to remain neutral and instead is acting as if it were a foreign enemy of the British people in cahoots with other foreign governments:

    http://openeurope.org.uk/daily-shakeup/cameron-hits-back-at-accusations-of-scaremongering-in-eu-referendum-campaign-following-publication-of-official-document-on-withdrawal-process/?utm_source=Open+Europe&utm_campaign=4cb302f7d8-RSS_Campaign_Daily_Shakeup&utm_medium=email&utm_term=0_c045172cb6-4cb302f7d8-262466097#section-6

    “UK asks other countries to consult government before intervening in EU debate”

  19. Anonymous
    March 1, 2016

    And I can’t get my head around people who say that the EU gives us money and we’d be worse off out because of this. It’s our own money they’re giving back !

    The same people who think that state employment is good for the tax take. Well it’s good for lots of things but certainly not for the revenue.

    Luckily for David Cameron and George Osborne lots of people are economically dyslexic.

  20. Dennis
    March 1, 2016

    Ed Stourton (?) had a good exchange with a farmer today on WATO who responded to a question about the possible loss of the CAP payments to farmers by saying money saved from not paying to EU would be available so no problem.

    It would have been interesting if the farmer had cunningly said that the loss would be regrettable to see what Stourton would have said and if not explaining that the money farmers get is actual UK taxpayers money the BBC would have been revealed as a corrupt deceiving player in the Brexit debate.

  21. matthu
    March 1, 2016

    George Osborne has said Britain will face a “long, costly and messy divorce” if it leaves the EU, as he promised to publish a full cost-benefit analysis on Brexit.

    Well, it was a long and costly courtship which we should not feel under no obligation to continue with.

    Do you advise someone in an abusive relationship not to separate because of the risk of what might happen during the process of separation?

  22. Margaret
    March 1, 2016

    I have just seen the video of the one to one FT debate. Your opposition made the point that exit would put us in a period of flux with the implication that this would cause standstill.
    In every other national aspect of law it is being and doing which takes precedent . Why do countries have to wait until a written agreement is passed before trading? This may sound a silly question , but if we look at the manipulation of other agreements , then the word is not set in stone either. Being and doing means that we continue and rewrite terms that either side likes or dislikes.

    1. Denis Cooper
      March 1, 2016

      I was interested to find out today that the FTA deal with South Korea was signed on October 6th 2010, but it has still not formally come into force. Instead it has been “provisionally applied” since July 1st 2011. That is not some unusual invention, as provisional application of treaties is not uncommon, but it does seem a long time to be trading on the basis of a deal which formally has not come into legal force.

  23. bluedog
    March 1, 2016

    They say the trend is your friend, Dr JR. Important to be able to quote these reducing borrowing costs in order to refute the false claims of Europhile alarmists. It would only take another Euro crisis, and that can’t be far away, to further boost the attractions of lending to non-Euro UK even before Brexit. Once again this highlights the weakness of the Remainians position, they can’t recommend joining the Euro.

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