Philip Hammond is an 'economic illiterate' on trade, says former Thatcher adviser
Credit:Steve Back /Barcroft Media
16 February 2017 • 7:36pm
Chancellor Philip Hammond is an “economic illiterate” and does not understand the benefits of free trade, according to veteran economist and former Treasury advisor Professor Patrick Minford. Mr Minford published a new paper yesterday calling for unilateral free trade, with the immediate elimination of all taxes on imports into Britain. He argues this would cut costs for British consumers, boost economic growth and inject more competition into the economy. But in December Mr Hammond said that this policy would hurt British industry and jobs and so should not be adopted.
“In the short-term for the UK consumer it would clearly be advantageous, it would reduce the cost of imported goods,” Mr Hammond told the Treasury Select Committee. “But we have to look slightly more strategically because the UK consumer is also probably a participant in the UK employment market and he will want to know that he has a job as well as that he can buy his imported goods slightly cheaper.”
He added that it would also be more difficult to persuade other countries to cut their tariffs against UK goods because Britain would no longer be able to offer to cut its tariffs in return. Mr Minford, a professor at Cardiff University and chairman of campaign group Economists for Free Trade (EFT), said this position betrays a flawed understanding of economics. “This is economic illiteracy. I don't know how one deals with an economic illiterate other than to say ‘come to my lectures’,” the professor said, speaking at the launch of EFT. “The point is that we have a fully employed economy. If you bring down the consumer price index [it creates] opportunities for other industries to expand.”
He also argued that the benefit of cutting tariffs on imports is more important, in the long-run, than persuading other countries to cut their tariffs, and so Britain would be best served by seizing the opportunity to scrap import taxes altogether right away. His colleague Roger Bootle, the head of Capital Economics and also a member of Economists for Free Trade, as well as a Daily Telegraph columnist, said that he hopes he can persuade the Chancellor of the merits of the argument. “Think of how far we have come already - in the run up to the EU referendum people said we have to stay in the single market, and we have come an awful long way since then,” said Mr Bootle. “I wouldn’t give up on Philip Hammond, I think we can convince him.” A Whitehall source close to the Chancellor said: “It is preposterous that he should suggest the Chancellor doesn't look at every potential option to decide what would be best for the British economy.”