Newsletter 26/07/22

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MPs have voted, and the Conservative leadership hopefuls have been whittled down to two hopefuls.

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Dear Subscribers,

MPs have voted, and the Conservative leadership hopefuls have been whittled down to two hopefuls.  Liz Truss and Rishi Sunak will compete for the votes of the party’s roughly 180,000 members.  Much of the contest between the two has focused on Truss’s commitment to tax cuts, condemned by Sunak’s campaign as fiscally irresponsible – and her policy has been subject to some misrepresentation in the media, as our contributors have argued for Briefings (and see below).

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Head to head

Truss has an edge over Sunak in a contest against Labour’s Kier Starmer, according to polls for Opinium, though neither are favourites.  Sunak has nonetheless been backed by a number of party grandees.  The ex-chancellor was rumoured to have opposed confronting the EU over the Northern Ireland, and opposed scrapping the reams of retained EU law clogging up the statute book.  Partly for these reasons, Sunak only wins Remain-voting Conservatives.

Despite this, however, the Northern Ireland Protocol Bill has now passed the House of Commons.  Though the House of Lords will likely delay the bill, given its preponderance of Remain-supporting peers, they may do so for a maximum of one year.  The prospect has led some Tory commentators to suggest creating new peers to overcome the majority.  Such a move would be constitutionally radical, and it is not clear that it is necessary as yet.

Russia is reported to have committed around 85% of its available military forces to its Ukrainian campaign, and continues to make incremental gains at the cost of serious losses of men and material.  The test for Putin’s war machine will be whether it can keep up the pressure, and whether Ukrainian losses and Western diminishing willpower can force Zelensky to concede some combination of territorial losses, regime change and disarmament.

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Holding fast

Elsewhere in Europe, the EU’s new ambassador to China made the incredible statement that he supported the eventual “reunification” of Taiwan with Communist mainland.  The Eurozone’s financial issues appeared to worsen, as markets watch Italy and the ECB’s potential response to an Italian refusal to structurally reform its economy.


Editor Robert Tombs has published several pieces this week.  Robert has written in defence of the selection of the prime minister from among Tory party MPs rather by some alternative, more presidential process, and pointed out the failure of EU supporters to address intellectually the EU’s very real flaws.  He has written a more casual piece on the new Netflix action drama RRR, which has provoked some lively discussion on Twitter.


The Treasury (and Rishi Sunak) are wrong again on tax cuts, by Harry Western

Tory leadership candidate Rishi Sunak and his allies are peddling a false narrative on the impact of tax cuts on inflation. There is plenty of room for the tax burden on UK firms and households to be eased without pushing up prices, provided government borrowing is financed in a non-inflationary way. This is even more the case given the UK economy is facing a very sharp slowdown, or even recession, in the months ahead. Arguably tax cuts are a necessity, not a luxury.

“Sunak’s claims on tax cuts and inflation are based on confused and erroneous economics. If we properly understand the cause of the current high rate of inflation, we can see that reducing taxes over the next year against a background of dramatically slowing monetary growth, rising recession risk and the long-term damage of planned tax rises is a sound idea.”

Would Liz Truss’s plans to reduce taxes increase UK inflation?, by Catherine McBride

Inflation is not due to ‘tax cuts’, and Liz Truss is anyway mostly planning to limit increases. Reducing taxation cannot increase inflation, nor greatly reduce it. But it would have other benefits and should be undertaken urgently.

“Inflation is the result when increased money supply is coupled with a shortage or fundamentally limited supply of goods. Sunak has already increased the UK money supply by £450 billion to pay for the lockdowns which closed anything the Government considered to be non-essential manufacturing, distribution, retail, services and even some routine maintenance work.”

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Key Points

The European Commission has added a new grievance to its list of problems with the UK’s approach to Northern Ireland.  The Commission now objects that the UK has failed to impose checks on goods travelling from Northern Ireland to the UK.  What danger is posed to the Single Market by such actions, you might ask?

Apparently, there is a danger that EU exporters will use Northern Ireland to send goods and services to locations where to EU has export bans or restrictions.  As with goods entering the Single Market, however, the Commission can’t prove that this is actually going on.  And more problematically, unlike the issue of goods entering the Single Market, goods exiting the Single Market poses far less of a threat to the EU legal order, and it is not clear that the Northern Ireland Protocol even covers this issue.

Be that as it may, the EU’s “precautionary principle” (ie. maximum red tape) approach commands support among some UK regulators.  The Financial Times reports reluctance at the Bank of England to deregulate financial markets – one of the major potential opportunities available to post-Brexit Britain.  Just like the issues with retained EU law above, the issue exposes a sharp divide between those who would replicate the EU within the UK, and those who would take full advantage of the UK’s newfound sovereignty.

The real reason behind Brussels’ action is its fear of a Truss victory.  By launching proceedings now, with Liz Truss the favourite in the Conservative leadership contest, the Commission probably seeks to show both EU and British observers that it will respond robustly to attacks on its remit.  Brussels probably has half an eye on politics in Italy with this move: the Italian right is poised to form an anti-austerity coalition after the fall of technocrat Mario Draghi, which will provoke fresh friction within the Eurozone.

Disruptions at the English Channel probably fit this pattern, too.  Emmanuel Macron’s government is weak given the loss of his parliamentary majority.  Macron’s ministers may also be trying to exert pressure on the British government, though given previous deliberate slowdowns at the Channel borders the issues may be unrelated to Brexit.

Finally, it’s worth flagging a Guardian article which suggests that Northern Ireland is trading more with the Republic.  As Julian Jessop points out, however, Ireland’s trade with the rest of the UK actually grew more than with Northern Ireland.



We are also on Twitter, posting articles and retweeting the daily events that bring Brexit to the fore in the national news.


Discussion also continues over on Facebook.

How you can help

There is much about Britain’s relationship with Europe that remains to be decided.  Our MPs listen to their constituents.  Do continue to send them links to our articles, especially on matters relevant to your constituency – for example, in rural areas, articles on the threat to British agriculture.  Alternatively, make an appointment to speak to them at their next surgery.  Let them know what you want post-Brexit Britain to look like.

As Boris Johnson said in in his post-election address, it is also time for unity and reconciliation.  Keep reading our posts and share links to our quality content to help others understand how leaving the EU benefits the UK economy and our own democratic governance.  We aim to educate our critics to think differently and more positively about the long-term impact of Brexit.

You can follow us on Facebook and Twitter.

Yours Sincerely,

Newsletter Editor

A Cambridge PhD Student

Dr Graham Gudgin

Economist, Centre for Business Research, Judge Business School University of Cambridge

Professor Robert Tombs

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Briefings For Britain