Jeremy Hunt will doubtless spend this weekend putting the final coat of Panglossian obfuscation on his second budget ahead of the next general election, against a backdrop of deepening economic gloom.
Taxes are at the highest level since 1948, public services are being systematically starved of cash, stretched to breaking point and beyond, while government borrowing is still expected to be £68bn a year in 2026–27, according to the Institute of Fiscal Studies (IFS). The chancellor will present it as a bold tax cutting budget despite official forecasts showing tax revenues continuing to rise as a share of national income until at least 2028–29.
Growth is stagnant at the moment and has been sluggish since 2016. The IFS expects it “to remain weak in the following years”. A nugget of good news is that the OBR is expected to reduce its medium-term debt interest spending forecast (for 2028–29) by £10bn.
But don’t break open any champagne, it will go from an eye-watering £122bn to a slightly less eye-watering £112bn. A year, that is.
The one thing which might kick-start growth would be to lift the trade burdens that Brexit has imposed on British industry and taxpayers, but for ideological reasons that’s not on the table. In fact, the word Brexit will probably not even figure in the chancellor’s speech.
The economy is increasingly problematic but the connection with Brexit is left for others to make.
The economic editor of The Sunday Times, David Smith compares the lacklustre growth in the UK since the second quarter of 2016 (7.6 %) to America’s astonishing 18.9%. He asks the people who consistently rubbish the notion that the UK economy is 5% smaller because of Brexit to “think about those figures”.
It’s not impossible to believe The Daily Telegraph may be starting to do just that.
An article by Jeremy Warner, an associate editor at the once respected pro-Brexit broadsheet, pours cold water on the whole idea of Brexit creating some kind of economic utopia: How the Brexit dream of Singapore-on-Thames was lost.
Warner lashes Brexit’s political cheerleaders, saying it was their responsibility to “make something out of Britain’s decision to leave the European Union, whatever the obstacles, but they failed. They over promised and under delivered, and the presiding government is now about to reap the whirlwind”.
Anyone puzzled at where all the money is going should take a look at another Telegraph article by Douglas McWilliams: Britain is doomed to forever be America’s sick relation. Among other woes, he points out that from 2016 to Q3 2023 the number of UK civil servants has increased from 417,000 to 529,000 and the number of other public sector administrators has risen from 590,000 to 656,000.
Overall, since 2018 the total number employed in UK public services has apparently increased from 5.4mn to 5.9mn. This is an extra 500,000 civil servants. Assuming an average salary of (say) £30,000 that’s a cool £15bn on the government’s wage bill alone, every year. It doesn’t occur to McWilliams that Brexit might have something to do with it. He simply accuses the government of letting public spending get out of control. After 14 years of austerity this is quite something.
It reminded me of this little exchange between a naïve Dominic Raab and a former permanent secretary at the foreign office, Sir Simon Fraser, at the Exiting the EU Select Committee on 16 November 2016:
Another great Raab clip, this one from 2016. It appears he and and other senior Brexiters took us out of the customs union without understanding any of the ramifications of that – or even seemingly what the customs union is:pic.twitter.com/3JuiS48o3M
— Nick Tyrone (@NicholasTyrone) April 22, 2023
Raab confessed to being “mystified” how long-term, “the net regulatory and civil service burden can end up going up, not down.” He actually believed there would be a “significant countervailing reduction in bureaucracy and regulation as a result of leaving the EU.”
Presumably the man who would later become deputy PM and stand in for Boris Johnson when he was incapacitated with Covid-19 thought all the shiny new post-Brexit world-beating legislation would be conjured up by magic out of thin air and administered by AI, chatbots and unpaid volunteers working from home. Of course, not all the additional numbers are down to Brexit, but I bet the vast majority of them are.
This week we added 19 downsides to the dossier, with food once again the top issue:
Food and agriculture
A poll by Survation on behalf of the campaign group Best for Britain suggests that almost one in five UK consumers are less likely to buy products that are labelled ‘Not for EU,’ a requirement for all British meat and dairy produce from October this year.
The labelling issue is becoming so acute that UK food industry trade bodies are looking at taking legal action against the government over the plans. Food producers claim the extra labelling could add £250mn a year to their costs, disrupting production and adding to inflation, with many having to run two separate production lines for products for the EU and UK.
Fishing continues to suffer with a Jersey-based oyster company losing 75% of its EU customers since Brexit. Chris Le Masurier, owner of the Jersey Oyster Company, told the BBC the amount of paperwork that needed to be submitted often led to mistakes and further delays and that Jersey’s “reputation is being tarnished”. He described the restrictions as “bureaucratic nonsense” which is “ruining” his business.
The trade body Salmon Scotland estimates post-Brexit paperwork is costing salmon farming companies in Scotland an extra £3mn a year. CEO Tavish Scott has complained that the UK government is introducing an electronic system to reduce paperwork for seafood imports into Britain but: “We’re surprised that this still hasn’t been sorted for exporters to the EU.”
Kaleb Cooper, farming contractor and star of the Amazon TV documentary Clarkson’s Farm, claims he now spends “two days a week just filling out forms.” Cooper calls on the government to start cutting red tape and to help secure a fairer deal for farmers in what they earn for their produce.
A man described as Britain’s ready meals king, believes Brexit has created more friction for importing goods, and made it harder to recruit staff. Charles Bigham said that leaving the EU has been “very harmful to British business”, adding: “I haven’t seen a single benefit from it yet.”
A note on the website of the UK’s leading Scandinavian food distributor apologises to customers for shortages of their favourite meat/fish/dairy products imported from Nordic countries. ScandiKitchen blames Brexit and the latest rule changes which came into force on 31 January 2024 which meant that “every single product imported into the UK from the EU that is meat or fish (and some dairy products) has to have a so-called ‘vet certificate’.”
The economy
The Resolution Foundation, in a new report, claims that by the end of 2023, the UK’s goods trade had shrunk to levels not seen since 2015. Author Emily Fry says it’s not just part of a general slowing of goods trade around the world because the UK’s goods exports and imports have contracted far more than any other G7 country, by 13.2% and 7.4% respectively since 2019. During 2023 the EU’s share of goods imports and exports had returned to its pre-Brexit level.
Fry’s research was backed up by another trade expert, Dr Rebecca Harding who told CityAM that the UK’s new free trade agreements, excluding the new agreement with the EU, “capture relatively little of our international trade-based GDP”. Since leaving the EU Britain has become “a less trade intensive” economy, she claimed, adding that in the post-Covid world, states have become “more protective” of their interests, approaching deals “in a more strategic way”.
Northern Ireland
To hammer home the point about rising numbers of civil servants, a report in the Belfast Telegraph suggests Northern Ireland will face “capability and capacity” issues when examining new EU laws and assessing their consequences.
Before Brexit, thousands of Whitehall civil servants examined the impact of new EU laws but now a far smaller team of Stormont officials will be tasked with doing the same thing since much EU law still applies in Northern Ireland. I assume this will mean recruiting yet more staff.
The new president of the British Veterinary Association (BVA) in Northern Ireland has pledged to keep up the fight against a pending EU blockage of 51% of veterinary medicines coming into NI from GB. A grace period agreed with the EU after Brexit comes to an end in 2025. Dr Sharon Verner, elected last week, says if the issue remains unresolved, it could see Northern Ireland lose access to up to more than half of veterinary medicines.
In what the Financial Times calls a “damning 200-page ruling” the high court in Belfast has ruled that a key element of the Northern Ireland Troubles (Legacy and Reconciliation) Act 2023 breaches the European Convention on Human Rights. Mr Justice Colton also found “no evidence” that the legislation would promote reconciliation, as it is intended to do. The ECHR continues to apply in Northern Ireland through the Windsor framework and the 1998 Good Friday agreement.
Government
The outgoing first minister of Wales, says Brexit has left Wales poorer and cut off from the world. Speaking in Brussels, Mark Drakeford said the government’s claims that it had replaced EU grants with national funding were not correct.
“It’s just not the truth. We were repeatedly given a cast iron guarantee that Wales would not be a penny worse off for leaving the European Union – but we’re over a billion pounds worse off since Brexit.”
His words echoed those of a Labour backbencher, in the Welsh Assembly. Huw Irranca-Davies, during a debate in the Senedd constitution committee, cited evidence from witnesses that the role of devolved governments in UK-EU decision-making has diminished. He said:
“Our ability to influence decisions that have a real extraterritorial impact on people in Wales today has not simply been diminished, it’s been removed.”
James Evans, a Conservative, who represents Brecon and Radnorshire, also raised concerns about Wales losing its voice in governance arrangements.
The Financial Times reports that UK regulators like the Food Standards Agency (FSA) are ‘lagging behind’ the US, Australia, Canada and New Zealand on approval times. The FSA has managed to complete only 63 regulatory approvals out of the 450 applications submitted since January 2021 and lists more than 1,500 other “incomplete applications” that are yet to join the queue.
One UK producer of synthetic pork products is now considering moving to the US in order to start scaling up production.
A report by the recently dismissed chief inspector of borders and immigration David Neal, claims that staffing problems at Stansted have become worse since Brexit, with Border Force officials revealing that their casework had increased by 400% since the UK left the EU.
Education/Culture
Figures from Enroly, a self-service technology processing student enrolment at UK universities, show a sharp 37% fall in the number of international students taking up postgraduate places. Vivienne Stern, the CEO of Universities UK, representing more than 140 universities, said:
“Its findings are further confirmation that policy changes by the government are already having a significant impact on international student demand – and we are now at serious risk of an overcorrection.”
This is a significant issue for UK universities who increasingly rely on tuition fees paid by overseas students.
Brexit has been blamed for delays to a major £45mn refurbishment at Paisley Museum, said to be a “world-class visitor attraction”. Dr Victoria Hollows, CEO of OneRen, the trust responsible for culture in Renfrewshire said delays had been caused by “the impact of Brexit on securing specialist workers and materials, as well as the economic after effects of the pandemic and war in Europe”.
Manufacturing
The head of trade policy at the British Chambers of Commerce has claimed the UK’s electric vehicle industry faces another “cliff edge” when a delay to Brexit tariffs on vehicles traded between the UK and EU ends in 2027. Issues around the “rules of origin” requirements are unlikely to be resolved Bain said, “unless there’s a huge change in the pattern of where UK and EU car manufacturers are sourcing the batteries.”
The UK is the only European country not in the Pan-European Mediterranean (PEM) Convention on Rules of Origin – because of sovereignty you know.
