The Vote Leave campaign won the referendum war, but are Brexiteers losing the peace?

Each day we see a barrage of media stories citing the difficulties of Brexit. And in recent weeks, we’ve seen the same old Project Fear-style economic analysis rising like a phoenix from the flames.

The Conservative party needs to get serious about defying the increasing sense that Brexit might not even happen (expressed last weekend by the likely next leader of the Liberal Democrats, Vince Cable). And to do so, it needs to start making the economic case for the end goal it has in mind.

This is made difficult, of course, by the fact that both the Prime Minister Theresa May and her chancellor Philip Hammond campaigned for Remain.

Maybe they do not really believe in it, but most of their messages on Brexit seem to be couched as mitigating the downsides and risks of exiting the EU, rather than embracing the opportunities it presents.

The pressure is intensified because media coverage of the negotiations is bound to be wrapped up in exposing differences, difficulties and trade-offs within the EU deal, rather than analysing what Britain can do independently later.

But there is no reason at all why, in the long term, Brexit need be costly to the UK economically. The degree of success is largely within our own gift, and depends on how successive governments utilise the repatriated powers on trade, regulation and migration, divert the funds we currently send to Brussels, and respond to international trends and events through domestic policy.

Leaving the Customs Union means exiting the EU’s common external tariff, allowing us to reassess and reduce the current 12,561 import tariffs the EU levies on our behalf.

Ideally, we would scrap them entirely, recognising that they raise prices for our consumers and distort the structure of our economy away from its productive potential. But at the very least the government should outline its ambitions to scrap tariffs on products where the UK has no domestic market, and explain the benefits to consumers and downstream industries.

Even more importantly, leaving the Customs Union and Single Market allows us to pursue full and comprehensive trade deals with third countries, and to make the case for free trade internationally at the World Trade Organisation.

Hammond is said to have recently challenged the international trade secretary, Liam Fox, to prove that new deals will compensate from any trade lost from leaving the EU. But this static analysis based on the importance of the EU, founded in the so-called “gravity models,” misses the point.

As a recent Open Europe report explained, Germany’s GDP is forecast to grow by just 14 per cent between 2017 and 2030, yet India’s is expected to more than double. Britain outside of the EU will have the flexibility to sign trade deals with high-growth emerging and developed countries more quickly, without the need to balance the interests of 27 other member states.

Then there’s the ability to reassess regulation. In recent years, the impact of the Clinical Trials and Ports Directives have regularly splashed across our print media. But in truth, a Brexit where Britain is outside the Single Market allows us to reassess all current EU regulation, transcribing it where it is a proxy for broader international standards, scrapping it when it is superfluous, and reforming it when it doesn’t suit the needs of our economy.

There are some major areas to look at here, including the EU’s carbon emissions reductions mandates, employment legislation, financial regulation and the whole framework for agriculture and fisheries.

Yet on all of these potential exciting areas for pro-growth reforms, the Conservatives are largely silent.

Even more baffling, with the current debates surrounding falling real living standards and the demand for more public spending, is the absence of a government announcement publicly earmarking some of the saved net contribution towards either a popular tax cut or an increase in spending on a priority area.

In the aftermath of the election, there appears to have been a significant return of economic uncertainty, which no doubt is related to Brexit and the [then] threat of a Corbyn-led government. Emboldened, ‘remainers’ are pushing the idea that Brexit is a disaster with no upsides, and should therefore be reassessed. If the Conservatives are to see Brexit through, it is vital they keep up majority support for it among the public.

And to do that, they need to explain to voters the long-term benefits of this draining two-year process.

Thank you to Ryan Bourne for this article

Chair in public understanding of economics @catoinstitute

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