A clean Brexit would give us billions to spend and a chance to cut taxes

Not so much the elephant in the room – more a herd of the thunderous beasts knocking over the coffee tables and smashing the crockery. Amid the general rejoicing over extra money for the NHS and raising income tax thresholds, few have noticed that the most important economic issue facing the country secured just one passing mention in Philip Hammond’s 70-minute Budget statement this week. Yes, I am talking about Brexit.

Take one simple fiscal fact. A clean break from the EU next March would save the UK taxpayer £39 billion – actually £46.8bn, according to the Office of Budget Responsibility’s latest sums. This amount is now over twice the £20.5 billion extra that the NHS will be receiving in a few years’ time – and far more than the £420 million the Chancellor has allocated to smoothing over the potholes ruining many of our cars.

Yet, there has been no sense from Mr Hammond that he sees Brexit as a great opportunity for transforming the UK into a low tax, light regulation, open and dynamic economy trading freely with the whole world and competing vigorously in the global marketplace. Quite the opposite. As Boris Johnson put it, the Treasury is still the heart of Remain.

Yes, we are leaving the EU. But the Chequers proposals that Mr Hammond supports would see us, in effect, following the EU single market rulebook, staying in the customs union and timidly sheltering behind its protectionist walls. What is the point of Brexit, if we are subordinate to rules written by 27 other countries without our input – and then have to set our tax and spending plans accordingly?

The tax burden is unacceptably high if we want to compete in world markets. We cannot continue our spending at these kinds of levels and expect our children and grandchildren to pay for us. The reliance on high taxes stems from the Treasury’s woefully pessimistic view of the UK’s post-Brexit future. It remains hidebound by its comically inaccurate forecasts, which have been proven wrong time and again.

Much is possible if we don’t sign up to a Withdrawal Agreement that leaves us a rule-taker from the EU or sees us sending large sums of money to Brussels. No deal, which may yet turn out to be our best bet, means no “divorce bill” being paid to the EU for no good reason. The UK would have at least £39 billion to spend on our own priorities over the next three years, investing in transport and other infrastructure projects to promote growth. The work of Economists for Free Trade demonstrates that Brexit gains could give the Treasury a £65 billion annual dividend to spend by 2025. By eliminating tariffs, we can lower costs for businesses and consumers.

We can stimulate growth and boost the UK’s attractiveness for business by simplifying and lowering taxes. It is well established that lowering the rate of tax can increase revenues. Corporation tax receipts have risen since 2010 with the rate coming down. In 2010-11, the 28 per cent rate gave total receipts of £43 billion. In 2016-17, the 20 per cent rate gave receipts of £49.8 billion. The subsequent 1 per cent decrease in the main rate from 20 to 19 per cent brought about a 21 per cent increase in revenue on the previous year. The Chancellor should have been bolder and set his sights on a 9 per cent rate, matching the lowest in the Western world.

For Brexit to succeed, we cannot be yoked to the high-taxing, high-spending EU model. The low-tax outlook – harnessing enterprise, empowering investors – has been consistently successful in creating jobs. In the months ahead, the Treasury must embrace that vision. Rather than remaining nostalgically “aligned” to the rules of an institution which the British people emphatically rejected, we must forge our own, global path to a freer and more prosperous future.