Blog: Project Fear was wrong but Brexit’s rewards are also yet to materialise –

Moreover, our own tariff regime that replaces the EU’s Common External Tariff is much nimbler. Of a total of almost 12,000 tariff lines, some 2,000 have been eliminated and almost 5,000 simplified. So companies importing from countries outside the EU with which we do not have a trade deal already benefit from a clearer regime with lower average tariffs.

One much remarked upon bit of supposed economic self-harm has been the exodus of EU workers following Brexit. But this is hardly the economic disaster that it has been painted to be. It turns out that some 5m people of EU origin have applied for settled status in the UK, far more than official estimates of the numbers who had moved here in the first place. There is likely to be more immigration of skilled workers from outside the EU. This may still leave labour market conditions tight for some industries, notably hospitality, and my guess is that wages there will have to rise.

Surely the big picture is that Brexit has made relatively little difference. Of course, Covid has grossly distorted economic statistics so that it is even more difficult than usual to disentangle various effects. Yet it is clear that, despite the ravages of the pandemic, unemployment has not soared, nor has the housing market plunged into an abyss, as the 2016 Treasury assessment of Brexit warned would happen.

Admittedly, anyone who thought that Brexit would bring an immediate dividend will have been sorely disappointed. But in my view they were seriously misguided in the first place. It has always been clear to me that most of the economic benefits of leaving the EU would be backloaded, whereas most of the costs would be frontloaded.

On the tax system, membership of the EU did not really constrain us, except with regard to the permitted ranges for rates of VAT. But as things currently stand, far from heading off in the direction of being a low tax offshore competitor, the Government seems to accept that we will need to raise taxes, and perhaps by a large amount. In fact this is far from inevitable but if borrowing is to be contained, it will take a continued strong economic recovery combined with tough control of government spending to head off higher taxes, let alone to make lower taxes feasible. The first of these seems much more likely than the second.

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