Monday, September 07, 2020
Does Johnson's breach of trust make a no deal Brexit inevitable?
The Guardian carries the astonishing news that the Prime Minister plans to tear up the legally binding withdrawal agreement by publishing legislation that will row back parts of the UK’s agreement with the EU on state aid and customs arrangements for Northern Ireland.
In doing so, he will effectively end trade talks with the European Union, by proving once and for all that he cannot be trusted to keep to negotiated agreements, and no doubt rauise doubts amongst other countries as to whether the UK are reliable trade partners, and make a no deal Brexit inevitable.
His actions may also undermine the Good Friday Agreement, on which peace in Northern Ireland is built, and damage their economy and that of the European land border neighbours, the Republic of Ireland by introducing tariffs and restricted trade between the two.
The proposals also break countless promises and reassurances to the public after Ministers told us during the referendum that securing trade deals would be easy, that a no deal would not happen and that leaving the EU would make no difference to the way we interact with the trading bloc. Variations on these promises have been repeated constantly since June 2016, and none of them are now worth the oxygen used up in making them.
With a no deal looking to be the almost certain outcome of this process, it is worth repeating warnings by the Institute for Fiscal Studies from October last year. They warned that emergency tax cuts and higher public spending to offset the impact of a no-deal Brexit would send government debt to its highest level in more than half a century.
At that time the IFS said a no-deal Brexit could cause economic growth to flatline in 2020-21, even if the Bank of England cut interest rates and the government stepped in with emergency tax cuts and higher spending:
Describing the scenario emerging from a “relatively benign” no-deal Brexit, the IFS said the budget deficit would rise to almost £100bn or 4% of GDP by 2021-22, reversing the progress over the past decade of producing gradually smaller deficits.
And then there is the Treasury's own analysis from February 2018, which found that a no-deal Brexit will blow an £80bn hole in the public finances, with the leave-voting heartlands of north-east England and West Midlands worst affected.
The report suggests that the north-east would face a 16% hit to regional economic growth, and the West Midlands 13%. And it claims that a hard Brexit would mean an overall 21% rise in retail prices, with a 17% rise in food and drink costs.
The additional borrowing costs would be mitigated by £40bn of gains from leaving the EU, including £11bn in saved payments, leaving £80bn in net costs. Of this, £55bn can be put down to the impact of non-tariff barriers, which could include regulatory divergence or quotas.
The Treausry predicted an additional 21% rise in retail prices, an 18% rise in agricultural costs, a 17% rise in food and drink costs and 14% rise in motor vehicles and parts, over the 15 years post-Brexit. It predicts that if the UK were to trade under WTO terms, tariffs could mean food and drink prices increase by an additional 12.7%.
The really scary part is that these forecasts were made before the Cofid crisis, a pandemic that has already seen the national debt rise to unprecedented levels and one of the deepest economic depressions on record. The government's behaviour in pursuing a no deal at this stage, and in the middle of the current mess, is irresponsible and reckless.
The splendid isolationism that sits behind all these government decisions could cast us into one of the longest recessions in history.
In doing so, he will effectively end trade talks with the European Union, by proving once and for all that he cannot be trusted to keep to negotiated agreements, and no doubt rauise doubts amongst other countries as to whether the UK are reliable trade partners, and make a no deal Brexit inevitable.
His actions may also undermine the Good Friday Agreement, on which peace in Northern Ireland is built, and damage their economy and that of the European land border neighbours, the Republic of Ireland by introducing tariffs and restricted trade between the two.
The proposals also break countless promises and reassurances to the public after Ministers told us during the referendum that securing trade deals would be easy, that a no deal would not happen and that leaving the EU would make no difference to the way we interact with the trading bloc. Variations on these promises have been repeated constantly since June 2016, and none of them are now worth the oxygen used up in making them.
With a no deal looking to be the almost certain outcome of this process, it is worth repeating warnings by the Institute for Fiscal Studies from October last year. They warned that emergency tax cuts and higher public spending to offset the impact of a no-deal Brexit would send government debt to its highest level in more than half a century.
At that time the IFS said a no-deal Brexit could cause economic growth to flatline in 2020-21, even if the Bank of England cut interest rates and the government stepped in with emergency tax cuts and higher spending:
Describing the scenario emerging from a “relatively benign” no-deal Brexit, the IFS said the budget deficit would rise to almost £100bn or 4% of GDP by 2021-22, reversing the progress over the past decade of producing gradually smaller deficits.
And then there is the Treasury's own analysis from February 2018, which found that a no-deal Brexit will blow an £80bn hole in the public finances, with the leave-voting heartlands of north-east England and West Midlands worst affected.
The report suggests that the north-east would face a 16% hit to regional economic growth, and the West Midlands 13%. And it claims that a hard Brexit would mean an overall 21% rise in retail prices, with a 17% rise in food and drink costs.
The additional borrowing costs would be mitigated by £40bn of gains from leaving the EU, including £11bn in saved payments, leaving £80bn in net costs. Of this, £55bn can be put down to the impact of non-tariff barriers, which could include regulatory divergence or quotas.
The Treausry predicted an additional 21% rise in retail prices, an 18% rise in agricultural costs, a 17% rise in food and drink costs and 14% rise in motor vehicles and parts, over the 15 years post-Brexit. It predicts that if the UK were to trade under WTO terms, tariffs could mean food and drink prices increase by an additional 12.7%.
The really scary part is that these forecasts were made before the Cofid crisis, a pandemic that has already seen the national debt rise to unprecedented levels and one of the deepest economic depressions on record. The government's behaviour in pursuing a no deal at this stage, and in the middle of the current mess, is irresponsible and reckless.
The splendid isolationism that sits behind all these government decisions could cast us into one of the longest recessions in history.
Comments:
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In that recession they build their new Jerusalem. The rich being able to recoup their losses
at others expense.
To me the whole idea of Brexit was for the elite establishment to remain 'supreme leaders' maintain there supremacy ,tax haven wealth and to get richer via buying the cheaper shares of the economic disaster and then later cash in.
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at others expense.
To me the whole idea of Brexit was for the elite establishment to remain 'supreme leaders' maintain there supremacy ,tax haven wealth and to get richer via buying the cheaper shares of the economic disaster and then later cash in.
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