Lib Dem campaign launch: £50 bn Remain Bonus

We launch our general election campaign today.  We haven’t yet had time to get fed up of our new slogan –  Stop Brexit, Build a Brighter Future  because it was only unveiled last weeK. We start to talk about what that brighter future might look like – in the form of more money to spend on public services that is directly linked to deciding to remain in the EU.

Stopping Brexit, we argue, will generate a Remain Bonus for the public finances because under Remain, the economy will grow faster than under Brexit, leading to higher GDP and consequently higher public sector current receipts. This adds up to £50 billion over 5 years.

That is there or thereabouts where   the Institute for Fiscal Studies was  in its Green Budget 2019.

Jo said:

The Liberal Democrats are the only party standing up to stop Brexit and build a brighter future for the UK.

Brexit has taken far longer and cost far more than anyone said it would. But any form of Brexit will damage our jobs, our economy and our public services, starving them of vital cash as the economy struggles along.

The Liberal Democrats will stop Brexit and then use the £50bn Remain Bonus to invest in our public services.

Every vote for the Liberal Democrats is a vote to stop Brexit, build a brighter future and invest the £50bn Remain bonus in our vital public services.

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  • Peter Martin 5th Nov '19 - 9:49am

    “Stopping Brexit….will generate a Remain Bonus for the public finances…., the economy will grow faster…. consequently higher public sector current receipts. This adds up to £50 billion over 5 years.”

    As usual this is the wrong way around and the consequence of household-economic-thinking. The Government will have created all the £ billions in circulation, including the £50 billion, by spending it into the economy in the first place. If the economy is doing well, and there are more economic transactions, it will come back to the government more quickly in taxes than if it is doing less well. The danger of the former is too much inflation. The danger of the latter is too much unemployment and recession.

    Think of government spending like the throttle on a plane. If you want more lift you open it up a little. If you want less you close it back.

    We’d all expect pilots to know this. So why are we happy that the ‘pilots’ of our economy have it all backwards? Why are we surprised when we have the bumpy economic ride (with the odd crash too!) that we do?

    This is not to argue that EU membership is necessarily a bad thing. But, if it’s a good thing, it will add inflationary pressures to the economy. This means the Government should then run a tighter fiscal policy as a countermeasure.

  • David Allen 5th Nov '19 - 10:21am

    Genuine question, is the Remain Bonus calculated as a surplus after deducting the cost of our annual contribution to the EU, or not?

    Of course one can argue that the UK contribution to the EU is in itself money well spent, in that it cheaply buys many services which UK will instead have to undertake at its own (higher) cost if we Brexit. However, the question is certain to be asked, so we should have the answer ready.

  • David Allen – “Of course one can argue that the UK contribution to the EU is in itself money well spent, in that it cheaply buys many services which UK will instead have to undertake at its own (higher) cost if we Brexit. However, the question is certain to be asked, so we should have the answer ready.” – many things, higher GDP growth is the first one, as well as avoiding supply chain and trade disruptions and potential red tapes, more businesses stop relocation, more inward investments and so on. We can effectively leverage this advantage to promote higher public investments and social spending without massive taxation increase while shifting fiscal policy making to managing debt-to-GDP ratio (again, the Justin Trudeau playbook).

  • Arnold Kiel 5th Nov '19 - 12:18pm

    50 Billion over 5 years looks entirely credible. If that factors in the net EU-contribution, one could add the part of the 39+ Billion “divorce-settlement” which does not cover the running transition-period payments.

    Long-term, sustaining industry, agriculture, and the Union will create ongoing annual dividends well in the double-digit Billions.

  • Frank Hollis 5th Nov '19 - 12:39pm

    Well, another source is predicting £70 billion over 10 years. Which is pretty close to our claims.

  • Peter Martin 5th Nov '19 - 1:42pm

    “Well, another source is predicting £70 billion over 10 years.”

    I really don’t understand why anyone gives these forecasts any credence at all! If weather forecaster predicts sunshine with a few showers and we have a downpour then we rightly start to think they don’t know what they are talking about. That’s because we remember what the weatherman said the day before.

    We don’t remember what economic forecasters have said years ago and neither will we remember this one in 10 years time!

  • @Peter Martin

    You are confusing weather and climate!

    Most people – except a few climate change deniers accept that the climate is getting warmer due to carbon emissions. Even if we do have a wet and cold Wednesday from time to time!

    Actually in general it tends to be the same Tory hard right that deny the mainstream economic forecasts of lower economic growth if we leave the EU as deny climate change!

  • David Allen – higher GDP growth from Remain also means that we will need less tax increase to meet the same spending commitments.

  • William Wallace 6th Nov '19 - 10:38am

    Just to add on calculations of costs and benefits: the additional costs of Brexit have not yet been factored into the debate. On Monday a government minister answered a Question in the Lords on how the UK will manage to consult with EU countries after Brexit by declaring that the FCO is recruiting 1000 extra staff. That’s a small department; DEFRA is recruiting much larger numbers. And then there are the national agencies we’re setting up again to replace operating within EU agencies. Massive increases in staff, and in costs.

  • Peter Martin 6th Nov '19 - 1:32pm

    @ William Wallace,

    The premise of your thinking is that if it costs £N to administer Brexit then we’ll all be worse of by £N/P afterwards where P is the UK population. It doesn’t work like that.

    Think of an extreme example like a war. I’m not sure just what the Americans spent on WW2 but according to a quick Google search it was around $4 trillion in today’s terms. Yet, surprisingly enough, the standard of living of the average American was much higher in 1946 than it was in 1941. Probably that wasn’t quite the case in the UK. It took a few more years, but not many, for the standard of living to be higher than it was in 1939. Nevertheless the drop in living standards was nowhere near what we would expect on the basis of totting up the cost of the war and dividing by the number of people living in the UK at the time.

    Neither was the accumulated debt a burden for the post war generation! Every seems to agree we did quite well.

    PS This isn’t an argument for starting wars to solve our economic problems BTW!

  • Peter Martin 6th Nov '19 - 1:58pm

    @ Michael 1,

    I’m perfectly well aware of the difference between climate and weather. Thank you very much. I’m not denying what the climate scientists say. That’s because they are proper scientists. They don’t always get it right but when they do get it wrong they go back and check why. They do what they can to improve matters. Theory has to fit the observables.

    That’s not the way economists work. Unfortunately. The mainstream have some very odd ideas indeed. Robert Barro, who I believe has a Nobel prize, doesn’t like the idea of Governments controlling their economies by fiscal measures. He claims it doesn’t work because:

    “….. people alive today reduce their consumption when the government runs a deficit so that they can leave behind a bequest to enable far distant descendants to pay the eventual tax: ‘a network of intergenerational transfers makes the typical person a part of an extended family that goes on indefinitely. In this setting, households capitalize the entire array of expected future taxes, and thereby plan effectively with an infinite horizon.’ ”

    If this sounds like BS, that is because it is. It’s these kinds of assumptions which are built into modern day economic modelling and it’s why they produce BS results too!

  • Rupinder Singh 7th Nov '19 - 4:52pm

    Fit for Economic models are like pants…all depends on the elastics!

    I think it is a great banner and Qualitatively at least provides a clarity of the potential upside to Remain for the undecided.

    As I have argued elsewhere, the quantitative/empirical stuff can be elastic, thus the probabilistic fans that official agencies like to present.

    The nominal GDP ie UK annual income was circa £2.5trn in 2018 in nominal terms or put another way, £2500 bn. So £50bn is but 2% of annual income and likely to be around 1.7% of income in 2019…and projected over 5 years in net present value terms even lower.

    As Lord Wallace rightly argues there are other contingent liabilities not included…nor potential contingent assets from a Remain perspective. So I would argue that £50 bn could well be…all other pants equal…even higher.

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