How Chancellor Rachel Reeves missed obvious way to kickstart UK economy: a Customs Union with EU

The autumn Budget arrived not with a bang but a whimper. Perhaps it was because almost every part of it had been leaked weeks in advance but the speech delivered by the Chancellor on Wednesday was about as low key as any I have known for years.

Tax tweaks galore – and a few welcome outcomes like the scrapping of the two-child limit on benefits – but nothing really new. In the turbulent times we face today, tweaks and tinkering just are not good enough.

We needed a Budget that could shift the dial, and that simply has not happened. Instead the Chancellor missed the most obvious way possible to fix the economic and fiscal mess we are in – by seeking a Customs Union with the European Union.

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Chancellor Rachel Reeves visits a Primark store in London earlier this week ahead of the Budget (Picture: Carl Court) | Getty Images

Single most effective step

We are not exactly swimming in alternative ways to turbocharge our economy. The Chancellor has shown little appetite for significant tax changes, preferring stealth taxes to anything more fundamental. She has also – rightly, in my view – rejected Tory proposals for cuts to spending.

If the Chancellor cannot change tax or cut spending, however, then she must deliver growth in some other way – and yet the government has turned its back on the single most effective step it could take to fix this crisis.

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Just this week, new research found that leaving the EU has cost our government £90 billion a year in lost tax revenues – far higher than even many of the most pessimistic estimates before 2016. You do not have to believe that Brexit must be reversed wholesale to understand that we can help our financial situation by cutting down the barriers to trade it has created.

The way we do that is by securing a Customs Union. If the government is serious about getting the economy moving and restoring public confidence in our country, that is where their attention should be focused going forward.

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Thin gruel for rural businesses

This matters to the country as a whole but to rural communities in particular. Our rural economy has had pretty thin gruel from the government. There was little respite in the Budget for farmers facing the existential threat of inheritance tax hikes.

Hundreds of farmers had travelled to London to plead for the Chancellor's support – but the government turned a deaf ear. If they are not going to reverse course there, then they might at least seek to soften the blow with a better deal for our exports.

Working and trading more closely with our neighbours and allies is a good idea. It benefits our communities and our economy. Putting up economic barriers, on the other hand, has been proven to do our economy harm (just do not tell the SNP that, of course). With the Chancellor boxed in on other solutions to her troubles, this is the moment for bolder thinking.

Isolationism might have seemed to be a luxury we could afford back in 2016 – it surely no longer is today. Now is the time for those of us who believe in integration and cooperation and the liberal values that underpin them to stand up and be counted.

A new deal with Europe: that is how we get our economy back with a bang.

Alistair Carmichael is the Scottish Liberal Democrat MP for Orkney and Shetland