Matthew Lynn

What will Farage-onomics look like?

What will Farage-onomics look like?
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It might be 30 per cent. It might be 35 per cent. It could even be 40 per cent or higher. Until the results of the European elections come in late on Sunday night, we won't know what percentage of the vote Nigel Farage’s new Brexit party will get. But we do know that it will be the clear winner, and that it will have established itself as a major new force in British politics. So far, the party has deliberately said very little about its policies, although most of us are getting the vibe it might be in favour of leaving the European Union. Once the dust settles on Monday morning, however, that will have to change. It will be in the driving seat. It will be time for some Farage-onomics.

So what would that look like? We know that Nigel Farage is an instinctive free market, pro-business, anti-EU Thatcherite with his roots in the trading rooms of the City of London. In truth, a Brexit party manifesto, once it emerges, is likely to look something like this:

First, and most obviously, we will leave the EU without a deal. There is no point in any more negotiations with Brussels. The common ground has long since disappeared. Either we remain, or we depart with no formal agreement. To make that happen, the UK will need to step up the planning and preparations for its exit, and also start negotiating the dozens of smaller agreements it will need with countries across Europe to cover all the stuff that is currently taken care of by Brussels. There is nothing especially challenging about any of that. The danger is systematic breakdown because of the sheer volume of stuff that needs to be done – and a lot more resources will have to be devoted to it.

Next, unilaterally remove all tariffs. The biggest economic choice the UK will have to make after leaving without a deal is the trading rules it adopts. The EU will probably impose some tariffs on us and the temptation, especially for a populist party, will be to retaliate. That would be a mistake. In truth, by far the best response would be to make the UK a beacon of free trade by offering completely open, tariff-free access to our markets, and then persuading other countries to allow us into theirs. Sure, a few sectors such as agriculture would need financial help with that – but it will work out in the medium-term.

Thirdly, stimulate the economy with tax cuts. Even the more swivel-eyed Brexiteers will surely admit the economy is going to take a hit from a no-deal Brexit, even if some of the forecasts are exaggerated. The impact of that can be mitigated with some immediate tax cuts. On day one, take VAT back down to 15 per cent, take 2 per cent from income tax, and suspend stamp duty for a year. At the same time, Mervyn King could be drafted back into the Bank of England for some emergency quantitative easing. Cheap money and tax cuts may be simple levers to pull – but they work.

Finally, an aggressive programme of deregulation, especially for the fast-growing technology sector and the City, along with the scrapping of expensive infrastructure projects like HS2 (some of that money could be used to cut taxes instead). GDPR. Pop it in the bin. A financial transactions tax? Forget it. Sugar and sin taxes? Consigned to history. The version of leaving the EU favoured by the Brexit party will be the Singapore version.

After winning the Euros, Nigel Farage will be in a more powerful position than ever. British politics is so fluid right now, no one really knows what might happen next. A rebooted Conservative party under a new leader might manage to re-capture those voters. There might be a formal alliance between the Tories and the Brexit party. Heck, Farage might replace the Tories, and become the Prime Minister who takes us out of the EU. Stranger things have happened (although admittedly, not very many quite that strange). Detailed policies are not exactly Nigel’s thing. But as the Brexit party develops, it will need to acquire some – and fast. And those are the natural places to start. Who knows, it might even be a pretty good recipe for the UK in the 2020s.