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Sunday, November 05, 2017

How a 'no deal' will hit the pound in our pocket

I still find it difficult to believe how many MPs and Ministers contend that walking away from the European Union without a deal is a possibility. Not only would it massively undermine the UK economy but it would also increase poverty.

This is best illustrated by this article in the Independent, which quotes research that concludes a no deal Brexit could rise by almost £1,000 per year to shopping bills in the UK. The National Institute Economic Review say that a range of staple products, including meat, vegetables and dairy products will see the largest rise in prices if we just rely on WTO rules:

Entitled 'Will Brexit raise the cost of living?', the report estimates that annual shopping bills would rise by up to an estimated £930. A no deal Brexit would result in Britain trading with Europe on World Trade Organisation (WTO) rules.

WTO tariffs are highest on fresh food, with a 37 per cent tariff for meat and a 45 per cent for dairy products.

While the majority of the extra customs duties from WTO tariffs would be collected by the UK government, one of the report's authors, Professor Alan Winters told The Guardian that "in the absence of the government redistributing that money, it will just be extra money into the government coffers".

He added: “This means the overall economic welfare effects will be less than the number we have calculated but, said . “Brexit clearly also has public finance consequences, meaning the tax take would almost certainly come down and there would be claims for increased expenditure elsewhere.”

Economists from the University of Sussex and Resolution Foundation, also concluded that "unemployed and families, those with children and pensioners hit hardest".

Why anybody would even countenance leaving without a deal is beyond me.
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