Juno News - The UK's Bungling of Brexit - Lawton with Lilico

00:00:00.000 I'm very pleased to be sitting down right now with Andrew Lillico, the lead economist

00:00:06.880 for the official Leave campaign for Brexit, also managing director at Europe Economics,

00:00:12.200 where we are right now.

00:00:13.520 Andrew, good to be with you.

00:00:14.780 Thanks very much for your time.

00:00:15.780 Good afternoon.

00:00:16.780 We've spoken on the radio before.

00:00:18.220 Very good to be doing it on your turf right now at a very critical time.

00:00:22.280 Let's talk about where we are right now, because I know that we've had a lot of people, certainly

00:00:27.480 from the Remain side of the Brexit discussion, try to force another vote.

00:00:32.540 And I think there seems to be this general sense among that side that if you were to do

00:00:37.860 this all over again, people wouldn't want the Leave to happen.

00:00:42.600 Do you think that's actually a valid analysis, that if you were to do this all over again,

00:00:48.020 the same result wouldn't emerge?

00:00:49.720 Well, I don't think there's any realistic chance that we're going to have a second vote.

00:00:55.240 And if we did have a second vote, I think that would, first of all, I mean, that would

00:00:59.700 be so enormously anti-democratic, it would make a huge change.

00:01:03.760 I think that people need to understand what's being suggested there.

00:01:07.300 It's a fairly sacred principle of British democracy, that when you vote for something,

00:01:13.120 that's the thing that happens.

00:01:14.380 You can vote later to do something else.

00:01:16.720 But imagine if we elected an MP, and then somebody said, oh, I don't really like that MP,

00:01:22.680 so we're going to have another election.

00:01:24.220 But that MP doesn't sit whilst we have the other election.

00:01:26.980 The original MP sits.

00:01:28.440 What's being suggested here isn't that we, the objection isn't to, we leave the EU and

00:01:33.140 then sometime in the future we might have a vote on rejoining.

00:01:36.080 That would be fine.

00:01:37.080 I mean, I don't think we'd probably want to do that very soon, but there's no objection

00:01:40.920 in principle to doing that.

00:01:42.540 But what's being proposed by these people is that even though we voted to leave, we then

00:01:47.020 shouldn't leave, but instead have another vote.

00:01:50.240 I think that that would have absolutely enormous ramifications for the whole way that politics

00:01:54.900 is done.

00:01:55.900 I think there would be an enormous boycott by leave campaigners.

00:01:59.200 I think it would shatter confidence in British democracy.

00:02:01.900 I think it would have implications for things like, suppose that a Jeremy Corbyn government

00:02:05.480 were elected in the future.

00:02:06.980 People saying then that the establishment would say, well, we don't like Jeremy Corbyn, so we're

00:02:10.620 not going to let him be the prime minister.

00:02:12.240 We're just going to have another election, and another one, and another one, until the people

00:02:15.920 pick something else.

00:02:16.860 I think it's an absolutely extraordinary claim, and I think it's a very dangerous claim as

00:02:21.840 well, and that people underestimate what's being proposed here.

00:02:25.320 I don't think, mercifully, there's any realistic chance of it happening.

00:02:29.100 The reality is that we're going to be leaving next March.

00:02:32.760 That's what's going to happen.

00:02:33.660 And that means that the entire discussion at this point is coming down to what that looks

00:02:39.780 like, and what that departure from the European Union actually manifests itself as, and you've

00:02:45.600 got a number of discussions that have happened around this, and I'll talk about the Checkers

00:02:50.100 proposal in a moment, but where there are a lot of people that are pushing for suggestions

00:02:54.360 that are not actually what Brexit was supposed to be.

00:02:57.220 And you've said what I think should be common sense, Brexit means Brexit, but why has this

00:03:02.320 become so overcomplicated, and why have people tried to find a lot more of a complicated work

00:03:07.780 around to what should be, and what, if we go by the referendum, was a very simple and direct

00:03:13.160 premise?

00:03:13.680 I think there's been a key error in the way that the government has approached the issue

00:03:19.320 of Brexit, of making the negotiations with the European Union be what Brexit was about.

00:03:24.780 And so people still, they ask, well, what kind of Brexit do you want, or that kind of language.

00:03:30.000 Now, to me, what that would mean is, well, once we've left the EU, do we want to have some

00:03:35.000 new alliance with, say, the United States, or an alliance with Canada and Australia, or do

00:03:40.600 we want to work together with countries around the periphery of Europe, a kind of ring-donut

00:03:44.700 alliance, or do we just want to stand by ourselves in the world?

00:03:49.220 Do we want to, when we do those things, do we want to cut regulation, taxes, do a kind

00:03:53.320 of Singapore-esque model or something?

00:03:56.020 Those are the questions, right?

00:03:58.200 After we've left, how do we conduct ourselves around the world?

00:04:01.500 What people have tried to do instead is to say, what Brexit's about is what we do with

00:04:05.500 the EU.

00:04:06.020 I mean, that's, we're not leaving the EU in order to have another relationship with

00:04:10.460 the EU.

00:04:10.980 That's renegotiating your relationship with the EU.

00:04:13.500 We had a go at that under David Cameron.

00:04:15.960 It didn't work.

00:04:16.860 And people didn't like the renegotiation that he'd achieved.

00:04:19.800 And so we then chose to leave.

00:04:21.480 So then having another renegotiation is just the wrong way of framing the question.

00:04:25.960 We've chosen to leave the EU.

00:04:27.760 So although in due course, doubtless, we'll have some sort of trade deal with the EU.

00:04:33.720 It may not be next year.

00:04:35.300 It might not be in five years' time.

00:04:36.740 But by 2030, we'll certainly have some sort of trade deal with the EU.

00:04:40.680 It has a trade deal with all of its near partners.

00:04:43.340 And I don't see why that needs to be controversial at all.

00:04:47.220 Make more than page eight of the newspapers.

00:04:49.620 It doesn't have to be that big a deal.

00:04:52.100 But what people have tried to do instead is to cling on to as much of EU membership as

00:04:57.580 they possibly could.

00:04:58.420 It's just a mistake.

00:04:59.380 The EU has been our central geopolitical partnership for more than 40 years.

00:05:03.540 And we've done quite well out of it as a geopolitical partnership.

00:05:06.560 We faced down the Soviet Union. 0.74

00:05:08.860 We absorbed the post-fascist states of the Iberian Peninsula.

00:05:12.560 We absorbed the post-communist states of Eastern Europe.

00:05:15.120 We did all kinds of wonderful things together.

00:05:17.940 At the same time, we developed in Europe an economic philosophy much more in line with

00:05:22.640 British traditions.

00:05:23.740 But that's all over now.

00:05:26.280 And we've chosen to leave that geopolitical partnership.

00:05:30.720 So saying, well, we're leaving that geopolitical partnership, but now we're going to have the

00:05:35.000 EU as our main geopolitical partnership, seems to me to be just absurd.

00:05:38.620 It's just not what the vote was about at all.

00:05:40.960 And that seems to me to be the root cause of the problem.

00:05:43.760 One kind of iconic illustration of this came early on when, even though we were leaving

00:05:48.820 the EU, we decided that we weren't going to negotiate new trade deals with the US or Canada

00:05:54.700 or Australia or whoever, whilst we were in the process of leaving.

00:05:58.720 Well, what did our post-Brexit trading arrangements with the US have to do with the EU?

00:06:05.780 Nothing to do with them at all.

00:06:07.120 We should have just said, well, we're doing that.

00:06:09.180 I mean, yeah, something like that could have happened and would have happened irrespective

00:06:12.620 of Brexit.

00:06:13.560 Even if Remain had won, there still could have been and should have been a trade discussion

00:06:17.820 with the United States.

00:06:18.840 Well, there would have been a trade discussion at EU level.

00:06:20.740 But whilst we're in the EU, we don't have any competence to negotiate our own trade deals.

00:06:25.780 So what we should have said was, well, we're leaving.

00:06:27.940 Obviously, we can't negotiate a trade deal that will start before we've actually left.

00:06:31.880 But if we're negotiating a trade deal that starts after we've left, that's nothing to

00:06:35.000 do with the EU.

00:06:35.920 It doesn't have any competence over what we do after we've left the EU.

00:06:39.060 There's been a lot, I think.

00:06:40.920 In some way, it's been a novelty.

00:06:42.700 But I think there is a serious discussion to be had about KANZUK, this idea of an alliance between

00:06:47.620 Canada, Australia, New Zealand, and the UK.

00:06:51.140 And those countries, obviously, are as geographically disparate as countries can be.

00:06:56.440 But do you think that is the future of these sorts of trade and other geopolitical relationships,

00:07:01.260 that geography in this day and age is far less significant than other factors?

00:07:05.420 I don't really think that's right, no.

00:07:08.640 Because I think that in the case of KANZUK, that is true. 1.00

00:07:13.040 But I think that's a fairly unique case.

00:07:15.200 Because there aren't that many other kinds of arrangements where you have such culturally

00:07:20.680 similar people so geographically diverse.

00:07:23.060 More normally, one needs geographical similarity in order to have the cultural and linguistic

00:07:29.820 and political traditions similarity, traditions of regulation and so on.

00:07:37.020 Otherwise, the distance tends to break those things up.

00:07:42.260 And so I don't think that it's going to be true in general that everybody's going to be

00:07:45.900 forming alliances of that sort.

00:07:47.200 I think that it's important that normally geography dominates.

00:07:53.960 And I'm not even sure that there's room in the world for that many geographically disparate 0.62

00:07:59.200 arrangements.

00:08:00.060 I think that it is quite likely we will see increased concentration on regional alliances

00:08:04.800 of various sorts, increased concentration of political union within the European Union.

00:08:10.520 We have the Russians forming their zone. 0.97

00:08:12.640 We've got ASEAN and the East Asians.

00:08:16.000 We've got the new NAFTA II.

00:08:19.020 I can't believe it's not NAFTA on there.

00:08:22.620 But I would see KANZUK as almost like a... 1.00

00:08:29.200 If you imagined you cut out some felt shapes from a square piece of felt,

00:08:35.780 then you'd have a shape left over at the end.

00:08:38.380 That's almost what KANZUK's like. 0.99

00:08:40.000 It's the thing which can one...

00:08:42.200 There can be one of those that fills in the world in that kind of way as the bit that's left over.

00:08:48.820 Why is that able to, in your view, overcome those geographical barriers, though?

00:08:55.400 I think that it is because the political traditions and the ways of approaching things are so similar.

00:09:04.600 When people from Britain meet people from Australia or Canada or New Zealand, they get along immediately, right?

00:09:12.400 People understand.

00:09:13.600 You understand the humour.

00:09:14.920 We watch many of the same daytime soaps and comedy shows.

00:09:20.360 And there's a natural sense, even body language and things like that work in much the same way.

00:09:25.880 People understand each other in a different way.

00:09:27.920 It's not the same when you're dealing with people, even from continental Europe, who are quite similar, much more similar to people from Britain than people from China or Japan or many other parts of the world are.

00:09:39.860 But the people from the KANZUK countries, there's a very natural and automatic alignment.

00:09:44.760 And one of the things about the European Union was, as it's moved towards its deeper political union, we in Britain have found that, although we were happy to go along with it quite a long way, in the end, there was just a little bit too much difference between us.

00:09:59.840 Some of our constitutional traditions, the ways that they thought of things, the balance between the individual and the state, the attitudes to regulation and the freedom and the balance between diversity of approaches and the level playing field.

00:10:18.120 It isn't that the Europeans were enormously distant from us.

00:10:21.120 They're much more similar to us than the Japanese or some others.

00:10:24.760 But they were different enough that we found that we couldn't quite go along with it.

00:10:28.540 And if you think, from a British perspective, that that's why we're leaving the EU, that they were pretty happy to be together with medium-sized countries of similar values and by working together we can achieve more than we would individually, but found that in the end we just couldn't quite go along with it.

00:10:45.780 The natural thing from the British point of view is to think, well, is there anyone else out there that might be more similar to us, that we might not face that particular barrier of finding that in the end we couldn't take that final step?

00:10:57.320 And I think if you frame the question in that way, it answers itself.

00:11:01.060 There's nobody in the world that's remotely as close to the UK as the New Zealanders, Australians and Canadians.

00:11:08.180 So that's the natural thing for us to try doing in that context.

00:11:11.720 And I think that the one important feature of that relative to the European Union is because we have natural affinities, it won't be necessary to impose the same kind of one-size-fits-all approach.

00:11:25.540 Within the European Union, they were trying to force together countries that had quite different political traditions, cultural traditions, in many cases had been at war with each other historically.

00:11:35.220 So they had to overcome natural antipathies rather than natural alignments.

00:11:41.260 Whereas in the case of the Kansak countries, you don't need to do any of that.

00:11:46.020 And so I don't think we would need to have anything like the same forcing of regulatory convergence, legal convergence.

00:11:54.040 These things will just happen quite naturally.

00:11:55.840 That doesn't mean you wouldn't have any institutions at all.

00:11:58.060 I mean, even the UN has some kind of institutions.

00:12:01.360 But it does mean that the things that you had wouldn't be anything like the European Union's agenda at all.

00:12:07.360 To bring it back to that very idea that seemed to drive Brexit for so many people, there was a lot that certainly in Western press coverage we were seeing that was framing it as about immigration wholly or about, you know, just this populist wave that we're seeing in other parts of the world really coming home to roost in the UK.

00:12:25.740 And there were, I think, a number of people that were saying that the arguments for Brexit on the immigration, on the anti-elite, on the populism were in spite of the economics of it.

00:12:36.020 Whereas there was this entire other stream that I don't think got as much play outside of the UK and perhaps not even in the UK in some of the media coverage, which was that it was an economically positive move or even in some cases economically neutral, but not as catastrophic as some of the remain alarmists were saying.

00:12:53.920 And we've now seen a little bit of a bump, I'd say, or I'd say a negative bump immediately in sort of that shock reaction to the Brexit vote, which seemed to rebound in terms of the markets.

00:13:06.500 But when we look at the economics of this, what's the part of the story that you find is missing from the people that say a leave, a true Brexit is going to be economically disastrous?

00:13:17.060 OK, so two things there. First of all, just a little point about the immigration.

00:13:22.280 So the immigration issue, I think, should be understood as being the most retail or the most everyday life version of the loss of sovereignty.

00:13:32.200 So when people said, oh, well, we've lost sovereignty and that means that we don't have the ability to set some obscure piece of financial services regulation or some engineering company can't do quite what they want to do, that all might seem for most people very distant to them.

00:13:47.620 They don't quite know what that means or why they would care.

00:13:50.060 But when the government says, well, we would like to keep immigration to the tens of thousands instead of the hundreds of thousands, and then every year it's the hundreds of thousands, and the government says, well, that's because the EU says we have to let lots of people in.

00:14:05.560 And actually, for all the talk that much of the net immigration from outside the EU is larger than the EU, it's actually the EU bit, which hasn't worked out as the government expected, that tells people what losing sovereignty means.

00:14:22.620 What losing sovereignty means is our government can't do what it wants to do.

00:14:28.100 And people see that. People visibly see that in their neighborhoods and in their communities.

00:14:31.640 And that, of course, then translates, that then gives them a sense of what that might mean for the businesses and so on and other parts.

00:14:38.780 So I see the immigration question as just a reflection, a retail version of the sovereignty question.

00:14:44.840 And that has implications for all kinds of business regulation and lots of other things as well.

00:14:50.420 Now, the thing that I would say about the economics of Brexit,

00:14:55.060 I don't think you should assume that Brexit is going to make a large difference economically either way.

00:15:02.880 So it isn't really about we leave the EU so as to make some enormous, at least in the short term, economic gain.

00:15:10.080 I think that would be a mistake to imagine that's the point.

00:15:12.720 The key thing about the economics of Brexit is that they're not sufficiently negative to deter us from grasping the very considerable self-determination opportunities,

00:15:23.120 the increased stability of the union, less likelihood of Scotland leaving, for example, now that we're leaving the EU,

00:15:30.920 and a greater ability to direct and choose the sort of structure of economy that we want.

00:15:37.560 So it gives us more control over what we do, for good or ill.

00:15:41.360 We might well use it to screw up.

00:15:43.080 We might elect Jeremy Corbyn and do all kinds of catastrophic things.

00:15:48.500 Absolutely, that's the choice that you make by increasing your freedom.

00:15:52.820 You increase your freedom to make errors as well.

00:15:55.800 But that's our call.

00:15:58.540 I rather like the, so there used to be a famous saying of Chesterton's that there were two kinds of activities in life.

00:16:06.880 So one was things like being a polar explorer, which if somebody did it, you'd rather he did it well.

00:16:12.720 Whereas another thing he said was like blowing your nose, that once you're past being a child,

00:16:18.340 we'd rather a person blows his nose for himself, be he ever so bad at doing it.

00:16:23.500 And the point of that is that the key things that we would want to do for ourselves post-Brexit,

00:16:30.840 the way we manage our economy and our society and so on, are like that blowing of our nose.

00:16:34.400 Whether we do it well or whether we do it badly, we want to do it for ourselves.

00:16:39.140 And when we think of the economics of that, though, it's a mistake, I think, to imagine that,

00:16:46.920 first of all, it's a mistake to think that the EU is primarily a trade deal.

00:16:50.660 It isn't a trading agreement.

00:16:51.820 It's a political union.

00:16:52.920 That's the point of it.

00:16:53.700 And so by leaving the European Union, the key loss that you make is losing having the EU set your policy for you.

00:17:01.700 Because the EU is quite good at setting policies in all kinds of ways.

00:17:04.480 And most of the countries that you benefit from that, if you're Italy or if you're Poland or lots of other countries,

00:17:09.200 the fact that the EU overrides your national government and makes you do various things

00:17:13.500 that your political system wouldn't choose to do for itself, is an enormous gain.

00:17:18.020 For us, not so much.

00:17:19.740 At least we hope that we can outperform the EU in terms of the things which are best for us by making choices for ourselves.

00:17:28.440 So one of the things that you should expect is, it won't happen straight away,

00:17:32.580 but over time, as new things turn up to do, we would expect that by doing them our own slightly different way,

00:17:40.700 we will end up doing them better.

00:17:42.500 Now one illustration of that is, many of the things that the EU has done,

00:17:48.440 part of the EU's traditions involved a ratchet.

00:17:51.000 So once any measure is in place, it's enormously difficult to undo it, to reverse it.

00:17:55.940 Because you have to get 28 sets of countries, 28 sets of ducks in a row, in order to decide to undo it.

00:18:02.580 Now that means that either the EU is sometimes deterred from acting early enough when it should,

00:18:09.600 or it acts, and if it's not clear what the right thing to do is, it can get it wrong and be stuck with that.

00:18:15.720 Whereas the British political system, for good or real, and it leads to lots of political controversy of various sorts,

00:18:24.300 is very good at U-turns.

00:18:25.700 So we try something, we got it wrong, we'll go back, we have another go, we try it again.

00:18:29.760 So people have a sense of being empowered to try and experiment to make mistakes.

00:18:34.400 When the best things to do are obvious, like reducing tariffs or stripping away non-tariff barriers in well-trailed areas.

00:18:41.920 Should be obvious anyway.

00:18:43.220 Yeah.

00:18:43.700 When the best things to do are obvious, then there are advantages in the ratchet process.

00:18:48.860 You don't want the forces of reaction.

00:18:50.340 Once you've finally decided to strip away that silly agricultural subsidy or whatever,

00:18:54.500 you don't want the forces of reaction coming in and saying, oh, that's going to destroy everything, we best undo that measure.

00:19:01.140 Whereas, if you don't know what the best thing to do is, if you're working out how to regulate something completely new,

00:19:08.720 commercial exploitation of space or artificial intelligence or driverless cars or vaping or green technologies or hyperloop systems,

00:19:19.780 or all kinds of things that will turn up in the future, if you don't know what the best way to regulate is,

00:19:24.980 there are enormous advantages in being able to experiment, get it wrong, and have another try.

00:19:29.800 And I think that the UK has a considerable opportunity over the next decade or 15 years

00:19:35.120 to become a world leader in the regulation of many of these new and emerging technologies.

00:19:39.520 It will be able, through experimentation, through getting it wrong and trying again,

00:19:43.060 to move faster, to be more flexible than the EU, and it will gain from that kind of regulation.

00:19:48.160 A second set of areas where we should be able to gain relative to the EU is that we will be able to do trade deals

00:19:55.960 with countries that the EU would struggle to do trade deals with.

00:19:59.280 Now, it isn't that the EU is disastrously bad, but the EU gets a bit of a bad press on trade deals

00:20:03.880 because the EU, for many years, was quite a keen supporter of the global process.

00:20:10.260 So it was hoping to force things through at the global level rather than making specific deals.

00:20:16.520 Then it switched to doing specific deals later.

00:20:19.240 But nonetheless, I think that the fact that the average US trade deal takes about 18 months to,

00:20:24.780 whereas the average EU trade deal is, what, seven years or something,

00:20:27.760 is rather telling of the difficulties that you have when you have to get so many different interests to agree in order to do anything.

00:20:34.600 And so I would expect that the UK will make quite a rapid trade deal with the United States, with Australia.

00:20:44.280 It may well do trade deals with Japan, even though the EU already has a draft agreement with Japan.

00:20:51.740 It may well be that the UK gets its agreement through finally with Japan before the EU does.

00:20:58.060 Because as things stand, even the Canadian deal is in question, with the Italians at this stage saying that.

00:21:05.540 Even when you get that far down the road, the EU still looks like it might reverse certain trade deals.

00:21:11.100 You can't really imagine that happening with the UK.

00:21:13.780 So the UK will do extra trade deals around the different countries.

00:21:17.240 So a second area, as well as better regulation, will be better trade deals.

00:21:22.120 A third area, which is quite important for us, is I think that by being in the EU, we tended to destabilise it.

00:21:29.320 So the EU tried for far too long to accommodate the possibility that the UK might eventually join the euro.

00:21:36.340 And by doing that, it progressed political integration within the eurozone too slowly.

00:21:43.140 It should have moved some years, a decade and more ago, towards an elected president, a treasury function, debt raising at euro level,

00:21:53.940 which was properly backed by the EU, sorry, by the ECB, by the European Central Bank, backing the sovereign debt of the EU.

00:22:02.440 And the fact that it didn't move down those proper governance paths that were required to make the currency stable,

00:22:09.120 has led to some of the problems that you had with the eurozone.

00:22:11.160 And I believe, and I hope, that with the UK leaving, that really strips out, that guts the non-euro EU.

00:22:21.640 There's really, after the UK, there's really only Poland left that's still a serious non-euro EU member.

00:22:30.420 Which, no offense to Poland, doesn't have the same implications as the UK.

00:22:33.820 Exactly.

00:22:34.400 It's not nearly so significant.

00:22:36.540 It's still big, but it's not nearly as big as the UK.

00:22:40.040 And so I would expect that what will happen is, now that the UK is left quite quickly, say, by 2025,

00:22:48.120 all the countries who are in the EU will have to choose between joining the euro

00:22:54.400 or being rolled together with Norway into a second tier of EEA slash non-euro EU.

00:23:01.700 That'll all just become one thing.

00:23:03.060 Incidentally, by the way, I think that that would probably have happened, even with the UK in the EU.

00:23:11.100 I think that would have eventually happened, which is one reason why it's silly to suggest that we leave the EU and then go for a Norway-type model or a Norway-plus-customers-union-type model or any of those kind of things.

00:23:23.280 Being a bit like Norway is where we would have ended up if we remained in the EU.

00:23:27.380 So it would have come full circle to had no Brexit happened in the first place.

00:23:31.360 Exactly.

00:23:31.820 So I don't understand what the point is of leaving the EU in order to get us to where we would have been if we'd stayed in the EU.

00:23:38.320 And that...

00:23:38.880 But just coming in terms of what's an advantage.

00:23:41.520 So if the EU integrates better politically, then I think that that will enable it to grow faster, which is good for us because we'll be able to export more to it.

00:23:49.380 So that's a third area of growth.

00:23:50.800 Just a couple more quick ones.

00:23:52.280 Yes, absolutely.

00:23:53.160 So we obviously won't have to make our... send money to the EU, so that will save us some money.

00:23:58.520 So although I have every confidence that the government will spend the same money incompetently, it will at least spend the money incompetently within the UK.

00:24:06.280 It's like the nose blowing.

00:24:07.280 At least they're doing it here.

00:24:08.580 Instead of somewhere else.

00:24:09.740 Exactly.

00:24:10.220 So the government will squander lots of money in the UK instead of squandering money in, you know, Italy or Bulgaria or wherever.

00:24:16.820 Poland, yeah.

00:24:20.740 Quite an important thing is it'll make the union more secure.

00:24:24.540 So we're less likely now that over the medium term Scotland will end up leaving the United Kingdom.

00:24:30.200 It's a much bigger step for it to leave the UK if we're outside the EU than it would have been if we were both inside the EU.

00:24:37.980 So even though I think, I mean, we won fairly handily 11% in 2014 to maintain the union, it's whatever residual risk there was that eventually Scotland might leave.

00:24:50.720 It's probably been eliminated by four, you know, who can say after 30 years ahead, but probably for the next 30 years, there's not much chance now that Scotland will leave.

00:25:00.260 So that, again, that increased stability to the union is another potentially important economic gain, quite apart from the political and other kinds of gains associated with it.

00:25:10.240 Those are a few.

00:25:11.220 There are some other things we could carry on all day.

00:25:12.800 But that gives you some sense.

00:25:15.200 Now, I expect that those, one thing about that is it's lots of different little sorts.

00:25:19.200 What people want in economic arguments, they don't want anything as complicated as there are nine ways you gain or something.

00:25:25.640 What they want to do is they want to say, well, we estimate that you lose this amount of trade by leaving the EU with the EU and we want the one factor that balances that.

00:25:34.400 But it isn't like that.

00:25:35.360 In fact, it isn't that when you are taking control of your ability to execute policy right across the board, it isn't about there being one thing that you object to.

00:25:45.440 No, and that speaks to, I think, how linked to the point of excess the EU has become in all of these different areas that should be sovereign United Kingdom areas and files.

00:25:57.760 And I guess that brings us to a question I want to close on that I fear the answer to, but I have to ask it nonetheless.

00:26:04.560 Are you, given the current political and economic climate, confident or, dare I say, optimistic that what you would like to see happen with Brexit actually happens in March?

00:26:16.540 What would have been best would have been if we'd been able to do a fairly rapid free trade agreement with the EU.

00:26:23.780 I don't think it was absolutely crucial, but that would have been the best scenario.

00:26:26.680 I think it's now, we're now probably looking at 60 to 70% chance of no deal at all.

00:26:33.640 And there's a pretty high probability, perhaps 25%, that we just tough out no deal.

00:26:40.360 And so it's like both sides decide that they don't like each other that much for the medium term.

00:26:45.620 Perhaps 35%, maybe a percent probability.

00:26:49.140 The single most likely thing is that we have no deal, and then fairly quickly we cobble together some sort of face-saving just enough that we get along.

00:26:58.660 Just to tie this over even until a bigger deal could happen.

00:27:01.460 Well, yeah, I mean, not necessarily committing to any longer term deal.

00:27:06.420 Maybe some very vague political commitment to seek to have no tariffs at some point in the future.

00:27:12.240 But nothing, but some very minimalist kind of arrangement.

00:27:15.960 I think that those sorts of no deal scenarios are the most likely now, and they're not that desirable.

00:27:21.200 But I didn't, no, to me, we aren't leaving the EU in order to have a deal with the EU.

00:27:26.820 So if we don't have a deal with the EU straight away, I don't think that should be considered to be that much of a problem.

00:27:31.480 But are you optimistic that the sovereignty that the Leave campaigners sought will actually be realized?

00:27:39.640 Well, it does in a no deal scenario, right?

00:27:41.660 And apart from no deal scenarios, there's some probability still that the EU panics a bit and we end up with a Canada Plus.

00:27:49.660 That's what we refer to our preferred free trade agreements as by the model of the Canadian deal with the EU.

00:27:58.940 So there's a non-tributeal chance of that.

00:28:01.280 There are some, there's some outside chance that we end up with some quite bad thing happening,

00:28:06.440 like committing to remain in the customs union over the long term or something of that sort.

00:28:12.720 There's some risks that we end up with with those scenarios.

00:28:15.640 Because, again, politicians might panic and we might end up with an EEA plus customs union thing for quite a long time.

00:28:22.540 I think that that would simply lead to a Brexit 2.0 movement where we'd have another movement to try to get us out of that over the medium term

00:28:32.600 because it would be so restrictive.

00:28:34.100 And as I say, that would, all that that would achieve is to get us two or three years earlier to exactly where we would have ended up if we'd remained in the EU anyway.

00:28:42.600 So there's absolutely no point in committing to an EEA plus customs union arrangement over the medium term.

00:28:48.560 It's just silliness.

00:28:50.180 I think that the likelihood is that we will end up with either a no deal or a Canada Plus tight deal in the short term.

00:28:59.420 That's the vast majority of the probability.

00:29:01.220 If we don't do that, then most of the rest of the probability is we end up, we have a Brexit 2.0

00:29:07.160 and after another six painful years of arguing about this, we finally get ourselves out.

00:29:13.180 I think that would be quite bad for British politics to carry on.

00:29:18.240 It's been quite bad.

00:29:19.460 It's a fairly toxic political environment we've had for the past couple of years, even as things stand.

00:29:24.820 And I've never seen anything like the unwillingness of the Remain side to accept that they lost in this particular campaign.

00:29:32.500 I've never seen – and that's just – politics doesn't really work if you don't accept that the other team can win.

00:29:38.340 And I don't think the Remainers have really accepted that the – some of them have, right?

00:29:43.540 There's been a reasonable number of had, but there's been a hard core of Remainers who've just refused to accept that they lost.

00:29:49.680 And I find that extraordinary.

00:29:51.400 And if we were to establish that, if we were to have, say, a second referendum or something like that, that could really poison UK politics for a very long time.

00:29:59.920 So I really hope that that doesn't happen.

00:30:02.900 But as things stand, I would say the most likely scenario is no deal or perhaps a Canada Plus deal.

00:30:09.600 If there's no deal, we'll end up with a Canada Plus deal in a few years' time.

00:30:13.100 I really hope it doesn't have to make more than page four of the papers.

00:30:16.240 And like a true economist, I ask a yes or no question and I get an answer with probabilities, which I like.

00:30:20.820 So we've got the options.

00:30:22.460 Dr. Andrew Lillico, thank you very much for your time and insight.

00:30:25.660 I really appreciate it.

00:30:26.800 You're welcome.

00:30:28.220 For the True North Initiative, I'm Andrew Lutton.

00:30:29.980 Thank you.

00:30:35.380 Thank you.

00:30:36.520 Thank you.

Juno News - November 22, 2018

The UK's Bungling of Brexit - Lawton with Lilico

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