On how to really solve our economic problems


I think we're all aware of what we really need to do to get out from under our current economics woes, yes? We need to cut spending, but not so much that we crater the economy while doing so. We also need to grow the economy so that the debt burden is a percentage of a larger economy: and thus easier to bear/pay off.

I don't think there's anyone at all who would disagree with that little thumbnail sketch, from the most dedicated Keynesian to the most ferociously Austrian of my colleagues. There will be disagreement about what "too much" means in reference to cutting spending of course, but the two basic points aren't, I think, argued about by anyone.

So, I argue that we leave the EU and adopt unilateral free trade as a solution.

Now it is true, I argue that leaving the EU and unilateral free trade is a solution to every and any thing, from budget woes to bunion removal. However, there is logic here as well.

We've seen the screaming matches that come from trying to cut just 1%, £6 billion off £600 billion or so of government spending. But our net contribution to the European Union is now some £6.4 billion a year. That is net, note, money that goes abroad and never comes back. Not paying that therefore has no effect whatsoever on domestic demand and therefore cannot in any manner contribute to cratering the economy. It is a straight slice off the deficit with no domestic consequences.

If we then use our new found freedom to adopt unilateral free trade (something we cannot do while in the EU) then as Patrick Minford has pointed out, we'll get a decent boost of 2.5-3% of GDP. That's a year's worth of trend growth at full employment for nothing.

A painless cut, a painless reduction in the deficit and a boost to GDP. What's not to like?

Plus, of course, it will seriously annoy all sorts of the Great and Good, from Chris Patten through the Kinnocks to Dennis MacShane, people who really do need to be annoyed.

Where is the downside to this plan then?