Tim and Vince write for the Times on the need for ministers to provide leadership on Brexit strategy

Tim Farron and Vince Cable have written for the Times’ Red Box website setting out what they think should happen in negotiations with the EU and in economic strategy as we face a self-induced Brexit recession.

As Nick Clegg said before the referendum, so called Project Fear was understating the impact Brexit would have. We are also suffering a void of leadership and some very unrealistic thinking from the Brexit camp who, as we discovered, didn’t really have a plan.

We can’t hang about, they say:

Business and investors won’t wait around forever to see leadership.  Many first tier organisations will simply pack their bags and go unless they see a path ahead.  Meanwhile our smaller businesses, and particularly those in high risk/ high innovation sectors will feel the squeeze as bank lending dries up as it did in 2008.

Two things need to be done. You get the feeling this was filed before yesterday’s extraordinary events:

The first can only be done by leaders of Leave – those who wish to lead us into the new unknown – and in particular, Boris Johnson and Michael Gove.  They must now show his vision for the UK and provide a clear plan for Britain’s relationship with the EU.  To reassure the market they, and other potential prime ministers, need to make clear that membership of the single market is the priority ask for any negotiations.  Businesses need to know that, whatever else, their key relationships will not have to fundamentally change.

It will require real leadership, rather than populist platitudes.  It may mean securing a deal which pleases no one and does not address many of the concerns raised by leave voters about immigration and freedom of movement.  Leading is about making choices, it’s now time for Boris and Gove to tell us theirs.

The second urgent priority must be the responsibility of the current government.  There is now every likelihood of a Brexit recession.  If the government acts now, by abandoning its already unnecessary financial straitjacket and allowing capital investment and stimulus support to flow into precarious parts of our economy, we might avoid the worst impacts on jobs and livelihoods. The economy could be stimulated through the Network Rail Capital Project and local authorities being allowed to borrow to build houses. The £250bn the governor of the Bank of England has put aside could be put into the Funding for Lending and the Regional Growth Fund.

Of primary concern must be our most innovative industries.  Those businesses on the cutting edge are likely to see funding from traditional financial institutions dry up as banks revert to their core business model.  Giving serious financial help and stability to these industries is vital to ensure their long term future in the UK.

The British Business Bank, set up by the Lib Dems in Government, is a crucial part of the support for business that’s needed:

That is why we are calling on the government to make available significant capital resources to the Bank to engage it to expand its provisions of loan guarantees, overdraft and bridging capital to businesses in high innovation sectors such as the digital economy.  The government should revive the regional growth fund and breathe new life into the industrial strategy that we brought into coalition, focusing on manufacturing – which this government has left to stagnate.

If our government does not act quickly, we will lose investment to places like Berlin.

You can read the whole article here (£).

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14 Comments

  • Eddie Sammon 1st Jul '16 - 3:38pm

    This is fine, but if we walk around saying “we may well get a deal that pleases no one” then that is probably what we will get. We need to be a bit tougher in negotiating – look at what Erdogan manages to get from the EU for Turkey. It is not about bleeding the EU dry, it is about trying to get a fair deal.

    Regards

  • Bill le Breton 1st Jul '16 - 4:34pm

    “Project Fear was understating the impact Brexit would have”.

    No it was exaggerating the impact and mis-describing them.

    Had, for example, the Treasury not rigged its reports – ditto the Bank of England – and the IMF, had the Remain campaign not over egged the pudding, had the Chancellor not promised a punishment budget, the immediate effects would have been much more considered.

    As it is here is where we are one week on:

    FTSE100 back to and above where it was.

    Pound down 10% – a much needed depreciation of the currency – whose overvaluation was limiting the extent of the recovery.

    The target of arriving at a budget surplus – another cap on recovery – has been abandoned – hurrah. More fiscal stimulus. Just what we needed.

    And more monetary stimulus promised for this summer – again replacing the monetary tightening that was delaying recovery. Just what we needed.

    The end of Chancellor Osborne – hurrah!

    All major changes to policy that were predictable following a Brexit vote.

    And … a negotiation with the EU which will deliver the EEA approach and perhaps more (EEA +). More and more people are supporting this approach (including Vince Cable). Just a pity it wasn’t our position during the campaign.

    The probable reform of the EU, thanks to those negotiations, in an effort to head-off other exits.

    So, the UK (and the EU) is in a much stronger position this Friday than it was 10 days ago and importantly much stronger than the UK would be if it had capitulated to the EU establishment and surrendered all hope of reform.

    When the electorate looks back on the position in 2020, it will be told that the extent of the recovery 2016 – 2020 was done to Tory policies (or dare I predict, the policies of Theresa May!!!)

  • I thought LibDem was going to fight Brexit not negotiate a deal. What is the official policy?

  • “a self-induced Brexit recession”

    Normally, anyone saying this would be castigated for threatening the confidence deemed essential to the economy. Mind you, given that most of the Tories like to proclaim the god-like omniscience of markets, it’s distinctly odd for them also to believe that merely talking things up or down makes much difference. A more sensible interpretation would be that people respond logically and as best they can to the situation in which they find themselves and that politicians’ self-interested talking up (or down) of things makes little difference.

    What Brexit does do is to provide the best possible cover for Osborne to reverse his failed economic strategy under cover of *scary music* the Brexit monster.

    For the rest I agree with Bill le Breton and would add that the ultimate fall-back position is WTO rules which averages around 2% for most things. As an impost on business that’s way less than routine fluctuations in the exchange rate and also much less than the VAT increase following the financial crisis.

    In short, we’ll survive and probably thrive. I voted Remain but there are some clear advantages to leaving, not least that it might at long last concentrate our politicians’ minds on what needs to be done to make our economy work properly – and work for everyone and not just a handful of CEOs and financiers. (Hint: proper, high-quality training in trade skills, acting against asset-stripping and levelling the economic playing field would be good to start with).

    Meanwhile, the Eurozone is looking ever more dodgy; the Italian banking system is perilously close to collapse held together mainly by sticky tape. If it does collapse the EU will cease to exist long before we can leave it.

  • It seems that things are unravelling and economic targets cannot be reached.. Once the new Prime Minister is in we may well find that there is an early move to keep us in the EU, could be a combined move from May and Gove. Suggest do not listen to what is said now but await developments from the now eadership contenders probably at the Conservative Party conference. I someone once said nothing is as it firast seems. The main issue is that we all have too much to lose by leaving the EU and deep down even the apparent leave leaders probably know this.
    In the meantime a cracking win yesterday in Leatherhead.

  • (In short, we’ll survive and probably thrive. I voted Remain but there are some clear advantages to leaving, not least that it might at long last concentrate our politicians’ minds on what needs to be done to make our economy work properly – and work for everyone and not just a handful of CEOs and financiers. (Hint: proper, high-quality training in trade skills, acting against asset-stripping and levelling the economic playing field would be good to start with).

    Very good – now can you tell Tim that who is obsessed with tackling yesterday’s battles.

  • Bill Le Bretton
    Exactly.
    The funniest thing about Osborne’s inane utterances was that he could not tell anyone when his current austerity drive would end but was absolutely certain Brexit would extend it! I’m pretty certain if Remain had won he would have had an emergency punishment budget anyway, probably claiming markets need reassurance or some such.

  • Bill > As it is here is where we are one week on:

    When absolutely nothing has changed (i.e. we are still in the EU) and no one knows what’s going to happen next. Or when. Or who’ll be in charge of whatever it is.
    I do hope your optimism is right. But it’s all a bit ‘eye of the storm’ at the moment. This week’s FTSE etc are just a reflection of this moment, is all.

    If it wakes the government up to the impact of austerity etc on much of the population, and if Labour sorts out its raison d’être, and if right-wing Tories and others lose the EU as their scapegoat for all ills, there may be some positives.
    I still feel robbed and cheated by Thursday’s result, though.

  • Paul Pettinger 1st Jul '16 - 11:23pm

    The Party has played a blinder in the last fews days, serving as a centre point for people who want to live in an open, diverse and inclusive society, and giving us (an emaciated minor Party) a widely appreciated USP. It is possitively defining our new leader in the minds of many voters of a liberal outlook. The fallout from the referendum is helping to accentuate the liberal/ illiberal divide in party politics, and is giving us new life. I’m therefore surprised at the emphasis in the extract of this comment piece, which appears to try help manage Brexit, rather than fight what would otherwise be the greatest blunder by Government since appeasement. Our public role in this drama, in the current political vacuum, should not be to impressively rival technocratic advice of civil servants, but offer leadership to the growing number of remainers and work with others to fight against our opponents terrible proposals (not advise how they may be implemented in slightly less terrible ways). It worries me a great deal that the thrust of the piece is therefore not anti-Brexit. There is nothing to be gained, right now, by being anything but unequivocal in our appetite to frustrate and prevent Brexit which (as we all realise) wouldn’t just hurt the UK economy, but lead to the break up of the UK and set others on a path towards greater protectionism.

  • @Paul Pettinger
    I agree, and said as much in response to Vince’s earlier post. There is absolutely no point in compromising at this stage on our anti-Brexit stance. It’s winning us new members and getting us hearing with people who might otherwise ignore us.

    Of course we don’t want to be a single-issue anti-UKIP, but if people listen to us about Europe then they might find our other policies and principles are attractive too.

  • Conor McGovern 2nd Jul '16 - 12:02pm

    We should be striking a free trade deal with the EU as soon as possible, not a TTIP-style corporate stitch-up but one of genuine open markets as well as lower tariffs. If ending free movement is the only way to meet concerns on migration, so we can plan public services, take the wind out of the sails of xenophobes and have a fair, liberal system, let’s work to end free movement and have a sustainable deal. We should be working to maximise our access to the single market at the same time, but of course we don’t need to be a member of it to retain access, if free movement and the single market are inseparable. It’s very important we also protect (and expand) workplace rights and environmental standards across the board, so I’m hoping the progressive parties can get their act together, agree an electoral deal (will it ever happen?) and wrest control of our country and our future from the hands of mindless zealots like Michael Gove come the next election.

  • Conor McGovern 2nd Jul '16 - 3:14pm

    Bill le Breton’s right – he certainly paints an impressive picture of the state of the economy. I’m extremely sceptical of the EEA option though, as it requires freedom of labour and would be a slap in the face to even the bulk of Leave voters who are moderate and want us to manage immigration. WTO rules would allow for this but there’s the risk of recession. I personally think a bilateral free trade deal, with focus on open markets and lower tariffs, would be the best option while still retaining access to, but not membership of, the EU single market.

  • Bill le Breton 2nd Jul '16 - 6:10pm

    Conor and Newshound (for different reasons) this piece by Nobel prize-winning economist Paul Krugman on the lowering of intellectual standards by those who warned of the dire economic consequences of a Brexit is a must read:

    http://krugman.blogs.nytimes.com/2016/07/02/more-on-the-short-run-macroeconomics-of-brexit/?smid=tw-nytimeskrugman&smtyp=cur&_r=0

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