The coronavirus crisis is likely to transform the Brexit negotiating framework, according to a newly formed Brexit think-tank.
Its experts say, as the crisis tightens its grip on the European economies saddled with the euro, our negotiators must be alert to how this will affect negotiations. Its likely effect will be to accelerate recently identified financial risks the Eurozone poses for the rest of the world.
The danger is that the resulting slump will blow the lid off deep-seated flaws inside the Eurozone set up 20 years ago. Once the UK leaves the EU’s framework at the end of 2020, this financial risk should be lower for the UK itself and the global financial market and it is more likely that the threat can be mitigated by collaborating with other global financial centres.
They warn that a recently published report identified that the foundation of the Eurozone financial regulatory system is based on toxic country debt that is wrongly treated by the Eurozone as riskless liquid sovereign debt. The impact of the virus crisis on countries, such as Italy, could be that of a “financial Chernobyl” exposing the fatal flaws inside a currency union without the fiscal and monetary powers to cope with a huge drop in output driving thousands of European firms to the wall.
The experts say Britain is well placed to avoid the fallout from such a crisis because it opted to keep the pound and City regulators have long been taking actions that protect the global financial centre based in the UK.
But the UK must still take great care to avoid getting sucked into the looming Eurozone financial crisis via liabilities to the EIB and other agreements with the EU. This should be a guiding principle in our Brexit negotiations and could potentially protect us – and the global financial market – from the actions of others.
The warning is sounded by the newly formed Centre for Brexit Policy, a think-tank backed by cross-party politicians and veterans of the national Brexit debate.
The CBP has been formed to propose the critical policy changes enabled by Brexit that will boost national prosperity and well-being in years to come, as well as help ensure that Britain fully ‘takes back control’ when it leaves the European Union.
TheCBP will aim to perform a role similar to that played by the Centre for Policy Studies when it helped to pioneer the controversial reforms of the British economy implemented by Margaret Thatcher’s government of the 1980s.
Former Cabinet minister Owen Paterson will chair the CBP, backed by a cross-party team of directors including Labour MP Graham Stringer, DUP MP Sammy Wilson and former Brexit Party MEP Matthew Patten. John Longworth, former Director General of the British Chambers of Commerce, will be responsible for day-to-day management in conjunction with Senior Adviser Edgar Miller, also Convener of Economists for Free Trade.
The think-tank plans to appoint a broad supporting cadre of expert CBP Fellows drawn from disciplines to provide additional expertise and experience in developing an agenda for policy change that will ensure the British people benefit from Brexit. CBP Fellows already appointed include economist Roger Bootle, trade expert Michael Burrage, energy expert Dr John Constable, Professor of Oncology Angus Dalgleish, Barrister Martin Howe QC, economist Dr Ruth Lea, economist Professor Patrick Minford, financial services lawyer Barnabas Reynolds, science and environmental expert Lord Ridley, and historian Professor Robert Tombs. More appointments will be made as the CBP evolves its agenda.
In addition, Mr Longworth will chair a CBP Business Forum that will bring a business perspective to shaping CBP’s agenda, provide input to policy proposals, and deliver a pro-Brexit business voice.
The CBP already has plans to roll out a number of policy papers this year; but with the coronavirus crisis eclipsing all other policy matters and triggering unprecedented help by government for beleaguered British firms, the think-tank’s experts will concentrate initially on how coronavirus will affect our exit from the EU and how the UK can best position itself in the Brexit negotiations.
John Longworth, Executive Director of the CBP, says, “Coronavirus has produced cause for another round of QE and will cause multiple pits of bad debt to deepen in Southern Europe. It is possible that the whole edifice could be teetering on the brink very soon. The entire economic and political raison d’être of Germany, especially, and of France, depends on the EU project and no doubt they will do everything possible to continue to defy gravity.
“It is not in our interest to see a precipitous collapse. We must however put as much distance between us and the Eurozone as possible – it would not be wise to be in the same room with an explosion. The realpolitik of the massive bargaining tool this gives the UK should not be lost on us, just as the USA saw its opportunity at Bretton Woods at the end of World War II.
In addition to the near-term focus on the impact of coronavirus, other papers in the CBP pipeline include ideas, for example, for ‘leveling up’ the North and other regions, reversing the EU’s unlevel playing field, freeing the NHS from the crippling constraints created by our 47-year membership of the EU, and formulating how new Brexit freedoms can provide more fiscal headroom for investment, spending, and reducing taxes. A constant theme will be showing how global free trade should be employed to support the Consumer rather than aiding protectionist producers. In the longer-term, the CBP will address such areas as deregulation, tax reform, national productivity, rebalancing government spending, and energy policy.
With the Government committed to a clean break with the EU once the transition period is over, the CBP expects to support ministers as they pursue a Canada-style free trade deal with Brussels and negotiate a future relationship that restores Britain’s status as a sovereign, self-governing, independent nation.
Mr Paterson said: “The current crisis – unprecedented in recent times – makes us reflect and recalibrate our sense of perspective. But the CBP is still an important project. Indeed, it is all the more important that we come to a good, long-term arrangement given the obvious need for co-operation and recovery in the months ahead. The period of recovery could be long, but the countries which emerge the strongest will be those which can manage their own laws and affairs to suit their own circumstances. For all the hardships which we now face, we should not lose sight of the fact that regaining those kinds of freedoms was exactly why the UK voted for Brexit in the first place.”
Mr Stringer said: “We must also look to the longer term. Generations of people have grown up conditioned by British membership of the EU. Now this is about to change and we will once again become a self-governing, independent nation. The question is what will change as a result of our rediscovering our sovereignty? Will we remain in close orbit around the EU and continue to follow many of its rules, regulations and broader attitudes and values. Or will we forge a distinctly British outwardly-looking global position on the challenges facing us at home and abroad?
Mr Wilson added: “We want the CBP to play a leading role in that debate. We want to identify the priorities for policy change and to bring forward practical proposals for making such changes happen.”
Mr Longworth said: “The referendum campaign gave the impression that British business was a Remain stronghold and that few firms wanted to embrace the commercial opportunities of Brexit. This was always a misrepresentation. Although many big businesses backed the EU, most entrepreneurial, family and private businesses found its intrusions irksome and wanted the freedom to operate without them. A new dawn is fast approaching and I want the CBP to work with firms to set a new and lighter regulatory framework that will encourage and reward entrepreneurship and innovation.”
For press enquiries please ring +44 (0) 20 3585 5290.