Fraser Nelson Fraser Nelson

A response to David Smith’s economic case for Remain

When it comes to making economics understandable, no one does it better that David Smith of the Sunday Times*. Today, he has written a emphatic endorsement of the case for the UK remaining in the EU. As a longstanding admirer of his work, a few points jumped out at me when reading it. Here they are.

Britain’s economy is convalescing from the biggest financial shock in a century. A few years ago we were on the edge of the abyss. We live in the shadow of the crisis. One shock was careless: to impose another, self-inflicted one before we’re over it would be stupid.

Yes, you can argue that now is not the best time. But now is the only time: this referendum is a freak event, promised by a Prime Minister who never thought he’d be re-elected and actually have to call the vote. We have to ask: given the EU’s failure to reform (which he doesn’t look at in his article) will Britain always want to stay in it? If the answer is no, then we have to vote out – because we won’t be asked again. As everyone who has been in a bad relationship knows, there’s never a good time to end it. 

There might have been a time when we could happily accept a shock of this kind, with growth strong, the world economy buoyant and interest rates high enough for the Bank of England to be able to cut them aggressively. But this is not that time.

Let’s look at what he didn’t say: oddly, no mention of the collapse in gilt yields bringing UK borrowing costs to a record low. If there’s to be more debt, then it will come at a time when borrowing has never been cheaper. Even the pro-Remain Paul Krugman has pointed out what Smith doesn’t: that a fall in sterling would bring benefits to a nation that borrows in its own currency and has a massive trade deficit.

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