Matthew Lynn

We will export less. There will be less competition. Prices will be higher and productivity lower. Textbook economics tells us that trade friction – that is anything that makes it harder for goods or services to flow across borders – is a very bad thing. So why is the British Government suddenly accepting trade frictions with the EU? As chief Brexit negotiator David Frost made clear in his key speech yesterday, the UK is willing to accept some restrictions on trade with the rest of Europe if it has to. The answer? Because they are not necessarily as bad as the textbooks predict and the prize is a big one. True, in an ideal world we would have completely free trade with the EU. There would be no tariffs or quotas. We would remain members of the Single Market.

It will be big, shiny and it will make a difference. Even with its astronomical and rising cost and its wobbly economics, it is possible to see the gut appeal of HS2, especially to a big spending government such as this one which can borrow freely at virtually zero cost. After all, it needs to do something to close the gap between the regions. It also needs to improve the country’s transport infrastructure and this project is, at least, almost ready to start. The trouble is, there are far better ways of spending what is likely to be £200 billion by the time the final bill is due. After all, high-speed trains are a 40-year old technology. There is nothing especially modern about them anymore.

At least no one will be able to accuse it of not caring about the environment. The government has just bought forward its ban on all diesel, petrol and hybrid cars to 2035. From that date onwards, you will only be allowed to buy electric or hydrogen vehicles. The gas-guzzling, polluting SUVs we all like so much will be banished from the road, and all those petrol stations will be replaced with sleek charging stations. There is a problem, however, and it is far from a minor one. The government shouldn’t be telling us what to drive – because consumers left to themselves can decide for themselves. True, there is nothing wrong with electric cars. They are far, far better for the environment.

Less than the cost of a Spotify subscription. Less than Netflix charges you every month. True, you might not be able to get the latest Taylor Swift remix or episodes of Stranger Things, but the Labour Party is trying to reach out to the streaming generation with the claim that the state costs you less than either your music or TV fix. According to its Twitter feed, someone earning just £82,000 a year has to pay only £8.33 a month for ‘free healthcare, free education, properly funding the NHS, lifting children out of poverty, ending the climate crisis, and ending homelessness.’ https://twitter.

The morning of 13 December. A series of salacious revelations about his private life have sunk Boris Johnson’s campaign. A re-energised Nigel Farage has led a Brexit party surge in the north, splitting the Leave vote. The ousting of Jo Swinson in a coup organised by refugees from the People’s Vote campaign led to Remainers flocking back to Labour. The SNP has swept Scotland. Plaid Cymru and the Greens have picked up a dozen seats where they co-operated. And a couple of Tory rebels have managed to hang on as independents. After the dust settled on the most chaotic election campaign in memory, Jeremy Corbyn had just enough votes to lead a Labour/SNP/Green/Plaid/Independent coalition. The first 100 days of the Corbyn government were to prove a challenge, however.

If you wanted to completely destroy a modern twenty-first century economy there are various places you could start. You could print money to finance unlimited government spending. You could put up tariff barriers on all your main imports. You could even try raising the minimum wage to £30 an hour, while cutting the working week to three days. In truth, however, if you wanted to do some real long-term damage your best bet would probably be this. Nationalise the broadband network. Unfortunately, that is what the Labour party has just proposed. Labour has made a splash today with a headline grabbing proposal to provide free broadband for everyone by 2030.

We were about to crash out of the EU without a deal. The political system was in deadlock. Businesses were fleeing the country and investment was drying up, all against a backdrop of global trade wars and slumping demand across the eurozone. And what happened to the British economy against all those headwinds? As we learned this morning, it sailed right through the storm with steady, if hardly spectacular, growth. It now looks certain that far from reducing us all to poverty, leaving the EU won’t even create a brief technical recession. The predictions of catastrophe could hardly have been more wrong. If you had to choose a day to officially declare Project Fear dead, this would be it.

The schools will all get new books. The hospitals will all be rebuilt. Long-suffering public sector workers will finally get a pay rise and there will be a ton of money to fight climate change. Liberal Democrat leader Jo Swinson is promising there will be a £50 billion ‘Remain Bonus’ to spend on public services after she has won the general election and cancelled our departure from the European Union. If she weren’t quite so humourless she might even be tempted to put that figure on the side of a bus. But hold on. From die-hard Remainers, who accuse the other side of peddling dodgy figures and who pride themselves on ‘evidence-based’ policy-making, that claim is more than little outrageous.

The uncertainty will be lifted. Businesses will know where they stand. Our politics can return to something approaching normality, and the government can get on with tackling all the other issues the country faces. Whatever the precise pluses and minuses of Boris Johnson's Withdrawal Agreement for getting out of the EU, you might think that finally resolving the issue would be helpful for the economy. Except apparently not. Just when you might think we had seen enough forecasts of this deal or that to last several lifetimes along comes the National Institute of Economic and Social Research with the alarming news that not only will leaving the EU make us poorer, this particular way of leaving will make us even poorer than Theresa May's deal. By how much?

Some fiddly amendments from Sir Oliver Letwin that no one quite understands. A legal action against someone or other from Gina Miller. Lots of protest marches. A petition or two – and possibly even an unreadable novella from Ian McEwan/JK Rowling/John Le Carre (delete as applicable) ranting against Brexit. We don’t quite know yet how exactly we will fill up the latest three-month extension to the already protracted saga of our departure from the EU. It probably won’t be a great deal different from the last three months, or the three months before that. There is one thing we should know for sure by now, however. It will be very bad for the economy.