In the annals of Brexit, when they eventually come to be written, that small band of British economists who have continued to offer support for Brexit in the face of incontrovertible evidence that it is damaging this country's economic prospects will figure prominently. Tim Congdon, once a member of the Bank of England’s monetary policy committee, is one of them. He wrote an article in The Critic yesterday: A rejoinder to rejoiners. I was going to post a response to it here but I note it was quickly withdrawn.
If you click on the link you will get this:
It wasn’t live long enough for the page to have been archived in the normal way. However, I found a copy in Google web Cache and you can read it HERE.
The essence of the article is that (a) Brexit hasn't done any economic damage and (b) the issue is now 'dead' and Britain will stay out. Congdon must, I think, be a reasonably intelligent man but his arguments are pathetically flimsy, and flat wrong and some of the data he uses proves the opposite of his own argument (in my opinion).
He showed a table of the comparative growth in real GDP since 2016 in the UK, the eurozone and the EU27, using IMF figures and from which he concludes there has been “no economic cost at all.”
This is the paragraph:
“A fair summary is that the recovery of political sovereignty has not had an economic cost at all. Whether future policies are pro-growth rather than pro-woke is to be decided by British voters. They will be free to make that choice in their own way in their own nation, and will not be told the policies they must pursue by bureaucrats in a foreign land.”
But in fact, the graph shows the UK in 2016 had growth slightly ahead of the EU27 by about 0.2% (102.3 to 102.1). By 2022, cumulatively, the UK was shown as being behind the EU27 by around 3.6% (109.0 to 112.6). So, we have essentially dropped 3.8% in six years on the numbers Congdon used.
Remember, the OBR has maintained for a long time that Brexit will cost Britain 4% of GDP by 2030. That is the assumption they have stuck to for several years. So, Congdon in effect is suggesting that we have almost reached that point eight years earlier! It is perhaps not the message he wanted to put out and may well be the reason the article has been pulled.
Just for completeness, each 1% of GDP lost is worth about £25 bn in GDP terms. For a £2.5 tn economy like Britain's, 3.8% means £95 bn and since the Treasury takes about 35% in tax revenue, the chancellor has lost £33.25bn in spending power. It’s a lot of money and far from “no economic cost at all.”
Congdon explains this by saying countries like Poland have grown quicker and others like Germany haven't done so well. But you could use the same cherry-picking to show London has grown faster than the North East. The fact is that the EU27 have outperformed the UK since 2016 and by a good margin. This year is likely to be more of the same as they inch ahead of us.
Even compared to the eurozone, we began 2016, 0.4% ahead and wound up 0.2% behind, so even on that metric, we have slipped backward.
As for never rejoining, he muses that we would have to join the euro, see freedom of movement return and the UK's armed forces subsumed into a European defence force (none of them a deal breaker for me). These are his thoughts:
“This is of course just an hypothesis. In the real world even as fervent a pre-2016 remainer as Keir Starmer knows that he would be mad to attempt any such negotiations. A majority of the journalists at the BBC, the FT and so on may be rejoiners in some loose and theoretical sense, but in serious practical politics the issue is dead. The UK has left the EU, and — just as Ireland broke away from the UK and Singapore from Malaysia — it will stay out.”
I’m amazed that this is what he believes, given the polls continue to show support for Brexit is plummeting and support for rejoining the EU rises. It is not remotely sustainable that the voters can continue to be denied forever if that is what a majority wants, regardless of Starmer's personal views.
And the example of Ireland is so stupid it's hard to take it seriously. I would be shocked if he could provide any evidence whatsoever that a majority of Irish people wanted to rejoin the UK at any point since 1921 when the Irish Free State was created. They stayed out because they wanted to stay out. Britain will rejoin because we want to rejoin.
Note also, Congdon is among those who think EU policies are ones drawn up by "bureaucrats in a foreign land.". This is factually wrong since detailed EU policies are developed the same way as ours, firstly by civil servants and then approved by elected representatives. Unless Congdon actually thinks UK laws are written and created by elected politicians without the help of civil servants his assertion is just silly.
But in any event even if what he says is true, as he himself complains, we seem to be creating the same or very similar laws or not distancing ourselves very far from EU laws. What’s the point? We look absolutely stupid.
Meanwhile, the FT carries an article (no£) by Chris Giles, asking if Britain is "once again the ‘sick man’ of Europe?" This is because we are seeing persistently high inflation and low growth, a return to the UK's twin problems from the 1960s and 1970s which some of us remember all too well.
The Guardian had a report yesterday showing UK shoppers are paying an extra £7bn a year in increased food costs due to trade barriers introduced after Brexit, this is about a third of the total rise in food price inflation. The EU membership fee begins to look like a bargain.
Politically, all we see is turmoil with Boris Johnson increasingly at war with virtually everyone, including the government, the cabinet office, most of the Tory parliamentary party and even his own lawyers. He is also involved in a row with Heather Hallett, the chair of the covid inquiry about documents and WhatsApp messages that the cabinet office doesn’t want her to see, presumably out of embarrassment.
And later this morning the immigration figures are likely to show a massive increase, many predicting well north of 700,000. This is despite huge labour shortages hitting every part of the economy, so much so that Lincolnshire County Council have a report which apparently says: "If the labour shortage is not resolved swiftly, shortages threaten to shrink the sector permanently with a chain reaction of wage rises and price increases reducing competitiveness, leading to food production being exported abroad and increased imports."
What a world we're living in.
