Johnson is due to give evidence on Wednesday to the Covid inquiry, which should be fascinating. He’s never good at the detail regardless of how much coaching he’s had and he’ll be on the stand for two full days. Watch out for plenty of pratfalls.
Last night Sunak lost a vote in the Commons when his MPs were on a three-line whip. This is on the question of compensation for victims of the NHS contaminated blood scandal and apparently means a £multi-billion bill which The Treasury was trying to avoid. The government wanted to delay establishing a scheme until after the conclusion of an inquiry but will now have to bring it forward.
Tory MPs are in despair about the polls which show no sign of the Tories pulling out of the disastrous nosedive which is going to see them obliterated next year. Populism is becoming unpopular.
It's against this backdrop that we had the publication of a nearly 300 page report from The Resolution Foundation with the title: Ending Stagnation. It’s about growth in the economy or rather the lack of it since the financial crisis.
There are a lot of charts showing how living standards have stalled, how wealth is spread unequally in this country compared to almost every other except the USA, how our productivity is woeful and has been for decades, and so on. None of it should be surprising since the RF has been putting out this stuff for years.
It’s not expressly about Brexit but it gets plenty of mentions - 91 to be precise - and the report tries to give an overview and offer some solutions. They don't suggest reversing Brexit completely but on page 13 they do say this:
"The defensive priority now is securing EU market access for high-value-added manufacturing firms struggling to retain their place in European supply chains. Half-way houses, even joining the EU’s Customs Union, will not address the fundamental issue faced by British manufacturers: the existence of the UK-EU border for goods. Instead, the objective should be a ‘UK Protocol,’ building on the current position of Northern Ireland to restore the lost benefits of being part of the EU’s customs territory and the single market for goods. This will not be easy, but it is essential to the future of some of our most successful manufacturing industries." The bold text is their emphasis.
It looks like more cakeism to me.
The reason we need access to the SM is because the report foresees "more change is to come as some sectors serving the EU market shrink and others grow as a result of less competition domestically."
UK fishing output will fall by 30% while food manufacturing "could increase by more than 5%" but overall UK manufacturing will change "rather than grow, as high-productivity sectors like chemicals and electronics shrink even as lower-productivity food manufacturing expands."
Wages in London, Wales, and the North East will be hardest hit by the resulting decline in productivity which, across the country as a whole, means "workers will be £470 worse off by the end of the decade."
On trade barriers, the RF has this to say:
"The UK is three years into a new economic era, defined by more potential freedom over domestic regulation and global trade relations, but also substantial trade barriers with the EU. The lack of wide-ranging tariffs shouldn’t disguise the scale of the disruption: the new trade barriers have been estimated as equivalent to a 13 and 21% increase in tariffs for our manufacturing and service sectors respectively, similar in scale to the tariffs implemented during China–US trade war but covering a much larger proportion of UK trade."
On trade openness (trade as a percentage of GDP):
"By 2023, Britain was the only major European country to have sustained a decline in trade openness even after global trade rebounded from the pandemic. UK trade (all imports and all exports added together) as a share of GDP was 2.2 percentage points below pre-pandemic levels (2019), compared to a rise in trade openness of 0.5 points for the G7 excluding the UK, including a 1.7-point rise in France with its similar trade profile."
And they expect trade openness to fall further:
"By 2030 we expect UK firms to export over 24% less than if we had remained within the EU. But as Figure 20 shows, this varies hugely by sector: agricultural exports are expected to fall by over 80% in total (and by over 90% to the EU)."
Fig 21 shows the winners and losers in different sectors:
"Sectorally, finance and insurance are set for the most significant real wage falls (£1,260 per year), with manufacturing wages also falling more than average (£650 per person per year relative to staying in the EU)."
"Higher-productivity areas, such as chemicals or transport manufacturing, will shrink, as they rely on being part of integrated European supply chains to achieve the economies of scale necessary to be competitive. In contrast, low-productivity (for example food) manufacturing for domestic consumption will grow in the face of reduced competitive pressure."
And finally, on page 130 we get to the nub of the report as far as Brexit is concerned with two paragraphs that essentially sum up the issue:
"The defensive priority now is to be clear-eyed about what it would take to prevent this structural shift, and the loss of high-quality firms and jobs that it implies. No one should pretend it will be easy. Small improvements to the status quo such as government promises of a seamless digital border, Labour’s plan to negotiate light-touch Sanitary and Phytosanitary checks (regarding food safety, animal and plant health), or even the UK joining the EU’s Customs Union, will not address the fundamental issue faced by British manufacturers: the existence of the UK-EU border for goods. Ultimately, frictionless flow for goods between the UK and EU is the essential condition for maintaining or growing the UK’s role in European supply chains.
"And trade agreements beyond Europe cannot compensate for its absence because, for physical goods in particular, the pull of trade ‘gravity’ towards markets we are closer to is hard to defy.
Thus the objective of the UK’s trade strategy should be to restore the lost benefits of being part of the EU’s customs territory and the single market for goods through a ‘UK Protocol’, building on the agreement that Northern Ireland has.
This is not the same thing as re-entering the single market as a whole, with its implications for services and the free movement of people, still less rejoining the EU. But it would involve negotiating alignment with Brussels in respect of goods, as regards both customs and standards."
