By Adrian Ekins-Daukes – former Conservative Councillor, Tunbridge Wells
The Chancellor, Jeremy Hunt, went to considerable lengths in his budget speech to cover up the extent of the black hole in Britain’s finance’s, largely attributable to Brexit and deepened by Liz Truss’s and Kwasi Kwarteng’s mini-budget in their brief period in power. His fantasies, however, that Brexit is going to plan and delivering successes come up against the real world inhabited by most of us, where the damage caused by Brexit becomes ever plainer. The facts provided by the Office of Budget Responsibility (OBR) and other authorities are set out below.
THE DEPTH AND COST OF THE HOLE
The OBR had confirmed its view prior to the budget that Brexit has reduced the UK economy by 4% lower than it would have been had we stayed in the EU. Without Brexit, the money saved could, in theory, have increased spending on the NHS and social care from around £148bn to £327bn. Since in practice no government would have spent the whole of such a sum, the real cost of Brexit would probably be £40-£50 billion per annum.
The budget makes clear that the government is still borrowing heavily – the equivalent of 5.1% of GDP in 2023/24, dropping in phases to 1.7% in 2027/28. Without the Brexit “black hole”, that borrowing would have been lower and the interest burden less. Both the Institute for Fiscal Studies and the OBR, in their comments on the budget, stressed the seriousness of the difficulties facing our economy, notably the largest tax burden in years on and huge levels of borrowing But there also difficulties other than the black hole which impede diminishing it.
BREXIT VIRUS MAKES UK SICK MAN OF EUROPE
OBR forecasts a fall of a further 6% in disposable household income over the next two years – the biggest drop in living standards since records began, a lower level than that before the pandemic and the worst record for any major economy. According to the International Monetary Fund (IMF), the UK will have the worst economic performance of the G20 in 2023 (the 20 largest economies including sanctions-hit Russia) The UK economy will shrink this year by 0.3% in 2023 before growing by 1% next year. Other major economies are forecast to grow in 2023 except that of Germany, which is forecast to drop less than ours.
NO EXIT WITH BREXIT FROM BLACK HOLE
The Chancellor is well aware of economic policies capable of stimulating the economy. Investment is one, and he has devised tax incentives to encourage businesses to invest. However, his own figures show this will only be bring forward expected business investment, not create more of it. As for new investment from abroad, there is little prospect of regaining the UK’s position as top recipient in Europe of foreign investment when we were in the EU. The attraction of our market was largely due to free access to the EU single market. Without that access, our market alone lacks the same attraction.
A boost in trade would be another path to economic recovery, improving productivity and keeping prices down. Here, however, the OBR prediction is a 15% fall, due to post-Brexit disruption and red tape. The Brexiteer future vision of “global Britain” involves imposing costs and obstacles on previously highly profitable trade with our nearest neighbours, whilst attempting to divert our trade pattern to far off markets on the other side of the globe, where our exports will be subject to high shipping costs and high environmental impact, language differences and other costs and barriers. It is calculated that our much-trumpeted accession to the Pacific Trade Area will boost GDP by just 0.08%, no substitute for the 4% lost by leaving the EU. We would need 50 of such trade deals just to stand still. There are not 50 trading blocs in the world and, as yet we are not trading with the people of Uranus. It would seem that the Liz Truss’ thinking on growth is coming from ‘heranus’ and not Uranus.
THE MAIN BUDGET BENEFICIARIES ?
One measure in the budget is the removal of the total limit that people can save into their pension pots. The purpose of this is claimed to be to encourage retired doctors back to work, thus relieving pressures on the NHS. Whether or not it has this effect, the benefit goes much wider, granting tax breaks to the best-off 1% (e.g. bankers, hedge fund managers, development moguls as well as senior doctors), at a cost to the tax payer of £1 billion a year.
THE SOLUTION ?
Joining the EU and creating the EU Single Market provided the opportunities to raise our economy from being the Sick Man of Europe where it languished in the late 1960s/70s. Follow this path by restoring our close economic relationships with the EU as soon as possible.
Speaking of black holes, please vote the Tory aliens out on May 04.