Blog: Boris Johnson needs to level with the public that Brexit is making the cost of living worse – iNews

Opinion

Chief Political Commentator

Boris Johnson needs to level with the public that Brexit is making the cost of living crisis worse

Honesty about the downsides of quitting the EU can help the PM prepare the nation for the coming recession

June 22, 2022 3:19 pm(Updated 3:20 pm)

Boris Johnson is not known for his strategic patience, but this week he tried to take the long view as the nation grappled with strikes, soaring inflation and squeezed wages. “I say this to the country as a whole, we need to get ready to stay the course,” he told the Cabinet.

That bid to lift our eyes to the horizon is reflected in a string of policy areas, where the Government has set targets for delivery by 2030 (which the eagle-eyed among you may have spotted, is a deadline way after the next election).

On Brexit in particular, Downing Street stressed this week that it was “too early to pass judgment” on whether that historic shift in the UK’s global role was having a negative impact on the economy.

That quote reminded me of the famous quote by the late Chinese premier Zhou Enlai, who when asked about the influence of the 1789 French Revolution replied: “Too early to say.” Except in No 10’s case it felt not so much like cautious, historic wisdom but calculated political evasion.

Unfortunately for the Government, a new economic study out today suggests that Brexit isn’t just having an impact on the short term – but on the medium and long-term too.

The Resolution Foundation’s The Big Brexit report (a collaboration with the LSE, funded by Nuffield Foundation) provides the most detailed assessment to date of the ongoing impact of the UK’s Trade and Cooperation Agreement (TCA) with the EU.

The good news for the Government is that, contrary to some other studies, the report finds that the UK hasn’t seen a large relative decline in its exports to the EU that many predicted (although UK imports from the EU have fallen more swiftly than those from the rest of the world).

The bad news, however, is that we have suffered a sharp decline in trade openness (total trade as a share of GDP) since 2019, with a fall of eight percentage points. Competitiveness has fallen too.

The result makes for some pretty grim forecasts for 2030, the Government’s favourite timeline. The average worker in Britain was now on course to suffer more than £470 in lost pay each year by 2030 after rising living costs are taken into account, compared with the UK staying in the EU.

The key behind that statistic is that productivity will be reduced by 1.3 per cent by the end of the decade, due to the changes in trading rules alone. That is only a fraction of the five per cent in lost productivity forecast by the Office for Budget Responsibility (OBR) by 2030 (which takes into account migration and investment and other factors).

Crucially, the Resolution Foundation study also manages to disentangle the trade impacts from the pandemic and the war in Ukraine, which ministers righly cite when trying to suggest the big picture is a complex one.

The latest report has more bad news for the Government’s “Red Wall” areas, as it predicts that the North East is expected to be hit hardest by Brexit – as its firms are particularly reliant on exports to the EU. By contrast, the East of England, London, Northern Ireland and Scotland are expected to outperform the rest of the country. The output of the UK fishing industry is expected to decline by 30 per cent, and “some workers will face painful adjustments”.

“Project Fear” is beginning to look an awful lot like Project Fact.

But it is the hit to productivity that ought to worry ministers, not least because the Government’s entire wages policy is based on the idea that higher wages can only be justified by improved productivity. The latest report seemed to confirm that Brexit’s impact is more like a slow puncture than a blowout.

As we approach the sixth anniversary of the 2016 EU referendum, no one wants to reheat the old debates or relitigate its outcome. Yet for many there has been a conspiracy of silence from both the Conservatives and Labour on the reality of the downsides of quitting the EU.

While the Brexit deal can’t be reopened fully, there is a strong case for getting fresh agreements with the EU on things like veterinary and agrifood standards (at the heart of much of the Northern Ireland problem). This is one of the few areas in which Labour has dared to dip its toe. Mutual recognition of professional qualifications and ID cards are other ways of smoothing the relationship.

As UK in A Changing Europe think tank chief Anand Menon said today, there are some Brexit opportunities which can be grasped. He said that if new immigration rules mean there are more Indian nuclear scientists rather than Romanian fruit-pickers, it’s possible that productivity will increase as a result.

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More importantly, Brexit (and the 2019 election) has also changed the narrative in that both the main political parties now at least talk about tackling regional and economic inequality. As Menon points out, there’s nothing like a marginal seat to focus political attention.

The PM himself has in the past talked about “bumps in the road” on the way to his promised land. Yet he and other ministers need to be much more open about the trade-offs involved in Brexit. Admitting the downsides as well as the potential upsides would surely help Johnson tackle his twin problems of trust and honesty with some voters. Just as with the looming recession, identifying the problems is a prerequisite to trying to mitigate them.

It would also fit with the new note of downbeat realism that the PM himself tried to strike this week. Michael Gove has been among the few ministers to try to prepare the nation for what looks like recession, warning that “there are inevitably tough times ahead for the UK and the global economy”. That was a far cry from Johnson’s previous attacks on “the doomsters and the gloomsters”.

And unless ministers are honest about the short and medium term, their pleas for patience may fall on deaf ears. Jacob Rees-Mogg, the Minister for Brexit Opportunities, today unveiled plans to “liberate” the UK from retained EU law. But he has also tried to say it could be “50 years” before the “full economic consequences” of quitting the EU are known.

No 10 took a similar line earlier this week when the PM’s spokesman said: “The opportunities Brexit provides will be a boon to the UK economy in the long run.” But as the economist John Maynard Keynes pointed out: “In the long run, we’re all dead.”

For Johnson, levelling with the public about the downsides to Brexit may be a key step in his plan for “levelling up” the country.

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