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Dr Stewart Tolley: The Cost of Brexit
17 Feb, 2019

It is fair to say that Brexiters love Professor Patrick Minford. The heterodox economist is routinely praised by Jacob Rees Mogg for his ‘remarkable track record’.1 Nigel Farage in 2015 called him a ‘top economist’ whilst citing analysis from Breitbart by another prominent Brexiteer, Raheem Kassam.2 This should not be surprising; Minford and his group Economists for Brexit, are the only ‘experts’ to predict any kind of positive economic benefit from Britain’s departure from the EU.

Clinging to this academic fig leaf has been a mainstay of pro-Brexit propaganda and nearly all of the positive claims made by the European Research Group on the shape of trade and the economy post Brexit come from reports and research conducted by this eccentric little group. Of course it is important to emphasise just how unusual Minford’s analysis is compared to other economists. The absurdity of how isolated Minford is from mainstream economics was only accentuated recently when Minford was the only qualified economist to attend the launch of Rees Mogg’s ‘A World Trade Deal: The Complete Guide by the Economists for Free Trade’.3

As a comparison, forecasts from the Treasury and the Bank of England have recently revealed that Britain will be poorer as a result of Brexit and in particular the no-deal scenario championed by the ERG and its acolytes. The most extreme no-deal scenario would see GDP 10.7% lower in 15 years’ compared with staying in the EU.4 Even without this nightmare situation, the common trend from all other bodies concerned with mapping Brexit, is that if implemented we will be poorer as a country. However, the Brexiteers are only credible if they can claim some sort of rosy future from no-deal, even if they are somewhat economical with the truth about how this future is to be achieved.

The research compiled by ‘Economists for Free Trade’(EFT) on the whole paints an extremely optimistic portrait of life beyond the EU. There are, however, some fundamental flaws in the research. First Economists for Free Trade reject the widely accepted ‘gravity model’ of trade, which highlights the natural tendency for states to trade more with their neighbours.5 Actually rather than an economic boom of new trade deals, it is likely that we will be scrabbling to make up for lost trade after our departure. Analysis shows that for every 5% loss of trade with the EU we will need to make up for it by increasing trade with the up and coming BRIC countries by 25%.6 EFT routinely over-emphasise the benefits of reducing tariffs and seem to ignore the fact that most modern trade deals involve barriers that are non-tariff related. The Institute of Fiscal Studies has also produced a report that claims that even if all tariffs were abolished this would not lead to lower prices in the shops, in fact ‘quite optimistic assumptions’ would lead to a reduction of between 0.7% and 1.2% which wouldn’t even cover the 2% increase in prices after Sterling was devalued.7

I think most voters would agree that these sorts of changes are not worth it for the gains which seem to be more driven by an ideological desire for unilateral free trade than genuinely helping ordinary people. There are worries that in the long run we could become like Singapore if Minford, Boris and Mogg had their way. This seems to have also gained traction in the Cabinet, with the Foreign Secretary Jeremy Hunt recently praising the ‘dynamic’ city state.8 In reality this would mean economic and lifestyle changes that many Britons would find deeply unpalatable. To be competitive, Singapore operates an economy with very little welfare, significant State-ownership and no public pensions, it has a heavily deregulated labour market. This may be fine if you are rich or middle class but the poor as a result have to work well into old age with some having to survive on as little as $5 a day.9 This future may seem impossible and certainly is in the short-term, however it is likely to be our destination if we want to make Brexit ‘work’, at least in terms of the headline economic figures.10

The EU insulates Britain from the high social costs of unilateral free trade. It provides us with the largest and most integrated free trade area in the world and has the economic clout to strike uniquely advantageous trade deals. Despite Brexiteer propaganda to the contrary, the EU is remarkably good at this, having more FTA’s than the USA and China combined.11 12 As a member we have gained from a steadily expanding trade area. The EU uses globalisation to its advantage, not allowing itself to be dictated to by larger global forces. What Minford, Mogg and the like are doing is seeking to expose the UK willy-nilly to the full untamed forces of globalisation (the antithesis of ‘taking back control’); this can often lead an unforgiving and predatory economic environment, creating a high social cost. This is clearly not what the electorate voted for, but the ill-defined nature of the referendum has allowed the free trade purists to interpret this particular destination as being the true ‘will of the people’.

Dr Stewart Tolley is a tutor at Oxford University, where he currently teaches courses on eighteenth century political history. He has also undertaken examining work for OCR and has served as a Local Councillor. 

Stewart is the Academic Officer of the Young Conservative Group for Europe as well as Secretary of the Northamptonshire Branch of the European Movement.

This article was originally published by The Conservative Group for Europe