There's no sign of a meltdown yet following Britain's decision to leave the European Union, Matthew Lynn lists four areas the chancellor should focus his energies instead.
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Alongside the usual assaults on the self-employed, the raid on pension funds, and the 10p whacked on a packet of cigarettes, all of which are just about standard features of every Budget, Chancellor Philip Hammond's speech on 22 November is likely to be dominated by Brexit. He will need to put aside billions to pay the divorce bill, or prepare for a "no deal" exit. That is understandable, but wrong.
A few industries aside, the EU makes relatively little difference to the UK one way or another. One neutral study this month suggested at most a 2% drop in exports even with no deal (and we don't export that much anyway). True, the car industry will be impacted, although the main manufacturers are still expanding in this country. The City will almost certainly take a hit, although the Bank Of England's forecast of 75,000 job losses is still only around 4% of the workforce in financial services, so it's hardly the end of the world.
It is remarkable how little impact our decision to leave has had on confidence and investment. We are seeing a slowdown in growth, and we are underperforming the rest of Europe. That is almost certainly a consequence of Brexit. But it is hardly a catastrophe, not even a recession. The meltdown Project Fear predicted has completely failed to materialise and there is no reason to expect it to happen now. Instead, the chancellor should focus on the issues that will make a real difference. Such as? Here are four good places he could start.
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First, infrastructure. As we leave the EU, it will be more important than ever to open up to the world, and to make sure our trade doesn't suffer. A new runway at Heathrow and a high-speed rail line from London to Birmingham are only the start. We should be spending money on regional airports and other road and rail links as well, so that people, goods and ideas can flow in and out of the country.
Second, tax. Our corporation tax rate is already scheduled to come down to 17%, which will be one of the lowest in the developed world. But over in France, President Macron is cutting the rate to 25% and in the US Donald Trump is cutting it to 20%. To maintain the differential, we should bring our rate down to 15% and perhaps even 10%. We need to retain our relative attractiveness once we leave the single market. We need lower tax rates to keep global businesses based here and to tempt more to come.
Third, entrepreneurship. One of the most encouraging trends in the UK has been new business creation. There are now almost 3.8 million companies in the UK, an increase of almost 700,000 in the last three years. Okay, a lot of those are just self-employed people who incorporate because the tax rates are lower. A lot, but not all. It is the tech start-ups in London that get the attention, but plenty of new businesses have been created across the country. A few will go on to be the stars of the future. Why not give them some help by exempting them from corporation tax for the first five years?
Finally, deregulate. An industrial strategy based on picking winners and making soft loans always ends in expensive failure. But if you deregulate before your rivals, you can attract global investment and allow entrepreneurs to flourish. There are obvious areas such as robotics where we can steal a march on the rest of the word. But there are others bubbling to the surface as well. Such as? Flying cars and lab-grown meat are just a couple of examples. The first country to allow them will take a lead that will last for a generation. Why not make it the UK especially when we won't have to worry about complying with EU rules any more.
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Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
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