The desperate Remain campaign have been predicting higher interest rates if we leave.

Why then have official interest rates plunged since January whilst expectations of Brexit have risen?

 

(10 year official bond rate fallen from 2% around the opening of the year to 1.29% on Friday)

There is one feature of the Treasury’s ludicrous forecasts for 2030 that I agree with. They reckon in our out of the EU the UK will be better off in 2030 than today. Given the rate of technological change and the ability to work smarter and better in the years ahead, it would be surprising if we were  not better off.

The issue in dispute is will be even better off if we leave or stay?  2030 is too far ahead to be sure. Whichever route we choose, we will never be able to answer that question definitively, as the country can only live one of the two options. I do think it more likely we will be better off out, for the many reasons I have set out in recent weeks on this site.

It is easier forecasting the next two or three years. Forecasting the next fifteen is just about impossible. Will China be the world’s largest economy in 2030, still growing well, or will there have been a China crisis as some fear? Will there be major new breakthroughs in technology, or will still be adapting and using the main internet, materials and biotechnologies we already know about? Will the world comfortably absorb the huge supply of potential labour from the poorer countries, or will there be difficulties in spreading wealth and incomes more widely?  Will political tensions in the Middle East, in the China Sea and elsewhere remain contained?

It seems likely that if we leave the EU we can look forward to a better pay rise at the bottom end of the pay scale than if we stay in. Lord Rose, the Chairman of Remain, said as much in a rare honest forecast from that campaign. Assuming a post Brexit government does take control of our borders and impose sensible and effective controls on EU migrants wanting to come to take low paid jobs, we will remove some of the downwards pressure on wages.

We will also have £10bn a year to spend at home that we have to give way to EU in contributions we don’t get back. This will enable us to hire more people for the NHS and schools who will tend to be better paid people with more skill. This also helps boost UK family incomes as we train more nurses, doctors and teachers and get them into employment.

There is also the stimulus effect of the first post Brexit budget, spending that money and removing VAT on fuel to increase  people’s spending power. That too will boost incomes and help create more jobs as the money circulates through our economy instead of being paid away. The left has often called for more so called fiscal stimulus. They want the state to spend more to create activity and jobs. That is exactly what we can do if we reclaim our own money to spend on our priorities.

 

(A longer version of this has appeared as an article in City am)

This week I attended a presentation to a group of investment professionals in London about the world economic outlook by a leading strategy house with a U.S. Economist. This was a private event.

They examined at some length the possibility of a world recession before concluding there would not be one soon. Amidst all the possible threats that could cause one there was no mention of Brexit, nor did any of  the expert guests ask about it though there were lots of questions. It seems the wilder thoughts of the Bank of England do not even warrant discussion as people do not think it plausible.

I am one of the few MPs who foolishly will stand up for Investment bankers. I have no problem with them earning big money as long as they live by the market and financially suffer by the market if they get it wrong. I think paying them  bonuses in good times is a good idea, as long as these are removed in bad times, as that makes their businesses a bit more stable.  I don’t want any public subsidy or government guarantee. I do accept that at their best they do good work in financing projects and companies, in underpinning and helping create new jobs and activities.

I do find it odd that some of the foreign owned ones whine and whinge about the UK’s possible exit from the EU. The very essence of good corporate and investment banking is managing risk and change. They are usually ace at finding their way round rules without breaking any, outwitting lumbering governments and  bureaucracies, and avoiding tax legally. I don’t mind them piling in for Remain. As  they are so unpopular with many UK  voters I suspect their over the top dire  forecasts help the leave side and provide many with another reason to dislike them.

The new scholarship level question they wish Leave to answer is how will they manage without the passport system of access to the single market when we leave. There are four simple points to make.

The first is, why should we lose the passports? As Germany wishes to avoid a WTO 10% tariff on her cars she will see the reasonableness of  not altering arrangements that suit her in return for not altering arrangements that suit us. Why would the UK agree to ending the passports?

The second is even if they found a way of withdrawing the formal EU passport, under MIFID II any external country to the EU with equivalent financial regulations would be free to sell services and product in the EU. The UK will clearly qualify, as our regulations will be not merely equivalent but identical as most of them are now  based on EU law.

The third is the number of successful passported products is limited. The best example, used by the government, is UCITs investment funds. Practically all of these EU funds are domiciled in either Dublin or Luxembourg. So they will remain when we leave the EU. The UK will still be able to continue our contract work for these EU domiciled funds, which will  retain their passport status.

The fourth point is most of these grand Investment banks that complain have other subsidiaries around the EU in addition to their London office, so they will always have a brass plate address to qualify.

I have every confidence that these  bright and motivated people will flourish out of the EU in London. Some of the same people and their predecessors told us if we stayed out of the Euro they would all have to  move to Frankfurt or Paris. They didn’t and London did even  better by staying out of the single currency.

They may be bright and good at what they do,  but some of them do seem unable to grasp the simple realities of how the EU works and of modern politics.

 

(this item was requested by a reader)

Today the cost of government borrowing for ten year money has fallen to just 1.29%. Last November and even this January before  Brexit came to dominate much market commentary the cost of UK borrowing was over 2%. It is particularly noteworthy that as the chances of Brexit have risen in the polls and in the betting, so the cost of UK state  borrowing has fallen.

This is of course the opposite of the predictions of the Treasury and the US investment banks. They have been wrong again. UK public finances will obviously be sounder out of the EU, as we will no longer have to pay all that money to them. We will no longer risk being dragged into ever more expensive EU policies trying to offset all the economic damage Euro austerity does.

Last night I put the case for Brexit to a meeting attended by 200 people in the Willink School in Burghfield.

When the Remain side put some of their more absurd fears to the audience, many just laughed.

Project Fear seems to be backfiring.

Those parties the EU would destroy are first driven into coalition. In Germany the old rivals, CDU and SDP are in grand coalition. It is proving especially stressful for the SDP who now wish to differentiate from the government line in a number of areas. The anti Euro AFD is on the rise, rallying the growing number of voters who think the Euro and the open borders are not policies working in Germany’s interest.

The EU’s interference in law making, budget setting and much else is crushing the traditional parties in many European countries. The collapse of the two main rivals is at its  most pronounced in Greece, where the grotesque austerity enforced on the country has removed Pasok as a party of government  (Labour like) and badly damaged New Democracy (Conservative like). In both Spain and Ireland the two traditional parties that contend for power received only around  than 50% of the vote between them in recent elections, leaving their countries without governments.

In the UK being out of the Euro moderates the impact of the EU somewhat. Even here  the vote share of Labour and Conservative together has fallen, but last time there was still a small majority for the Conservatives. However, to get the many EU laws, taxes, budgets and measures through against the opposition of a large number of Eurosceptic Conservative MPs the government has had to rely on Labour and SNP votes, or on their abstention. This reliance is creating tensions within the ruling party and within the opposition.

Now we come to the referendum the same truth underlies the Remain campaign. They can only hope to win if Mr Cameron attracts a majority of Labour and SNP voters to his cause, as many Conservatives are strongly against the EU and its works.

Government coalitions tend to erode confidence and respect for main parties, as the parties have to dump manifesto pledges and compromise principles people thought they held dear. Though many say they would like parties to work together more and find more compromises, in practice the results of that are often perceived as being bad faith and untrustworthiness. This is intensified if the compromises are to accommodate laws and taxes imposed by the EU rather than ones stemming from large bodies of opinion at home.

There are many critics and criticisms of two party choice  democracy. I think it the least bad system.  The problem with  multi party democracy is it can so easily mean weak government or  no elected government, more bureaucratic and EU control, and more scorn for parties who are forced to renege on some their most closely held beliefs and cherished policies. The EU is a creating a crisis of government in its large area. Many people now object to EU policy but have no way of changing it, even when they change their own national government in an attempt to do so. It is also fuelling parties that want to split up their nations, encouraged by the Europe of the regions rhetoric and grant regimes.

I have been sent the results of the votes held at the Thames Valley Business Forum yesterday morning where I spoke for Brexit against a Labour MEP for Remain:

 

 

Arrival poll:-

 

OUT – 34%

IN – 43%

Don’t know – 23%

 

Exit poll:-

 

OUT – 58%

IN – 37.5 %

Don’t know – 4.5%

 

It shows the Business community does have plenty of supporters for Leave who see the damage the EU is doing to many businesses in the UK, or who like many of us want our democracy back.

 

Mrs Merkel tells us that you never get what you want if you are  not in the room, meaning as a full member of the EU.

So she seems to be telling the USA, China, India and the rest that as they are not members of the EU they will never  get what they want from Germany.

That’s not very diplomatic, and not a  good way to make friends.

Normal countries  build friendly relationships with other countries without seeking to put them under the duress of strict special legal structures.

She also seems to believe the UK has to join the Euro, as we are often not in the room on Euro financial matters.

Of course Germany wants us to stay to help her pay all the bills of this increasingly risky and expensive project.

When we leave I know she will be equally keen to keep all the very profitable trade Germany does with us . Then we will be in a new room negotiating as she seeks to retain the trade advantages Germany currently enjoys. The good news for her is the UK does  not want to impose new barriers on German trade with us.

The OMFIF debate drew an audience of 200 to Westminster yesterday.

The vote at the start of proceedings showed 68% in favour of Remain and just 29% in favour of leaving.

Following the debate, led by myself and Gerard Lyons for Leave, with Lord Adonis and Vicky Pryce for Remain, the vote was 38% for Leave and 60% for Remain, a useful swing of 8%

It demonstrates  that even with an audience of well connected establishment figures it is possible to sway opinion if we have a chance to explain our case properly. As latest research  shows, this was a far from representative audience, as Leave is doing well overall and is ahead in recent polls.