Lockdown trashed Britain’s economy – not Brexit
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It led to five years of instability. It undermined a string of Prime Ministers and Chancellors. And it stopped businesses from investing. According to Chancellor Jeremy Hunt, Brexit has been a major cause of the woeful performance of the UK economy over the last few years. Really?
If Hunt wants to find the true culprit, he needn’t look far. Sure, the chaotic implementation of the vote hardly helped, but it’s not as if Germany and France are doing much better. It was lockdown, and his own punishing tax rises, that crushed growth.
A conference organised by the left-leaning Resolution Foundation was never going to be a sympathetic venue for a Tory Chancellor. Even so, Hunt probably scored a few brownie points with his audience yesterday by pinning the blame for stagnant growth on our departure from the EU.
Asked about political instability, he argued. “We had Brexit. That led to a hung Parliament; that led to a politically incredibly challenging time…and then we had the pandemic’’. If only the British electorate had voted to remain in 2016, we would be humming along with 2 per cent to 3 per cent growth each year, inflation would be subdued, real wages would be rising, and everyone would be happy.
It may have gone down well with the people in the room. The trouble is, on closer examination Hunt’s argument does not make any sense. To start with, our departure from the EU didn’t lead to a hung Parliament. It was Theresa May’s idiotic decision to call an early general election, followed by a catastrophically inept campaign, that sacrificed the Conservative majority.
And the years of political instability were only caused by a concerted establishment campaign to reverse the result of the referendum. If everyone had accepted the result in 2016, we could have moved swiftly on, and spent our time far more productively figuring out how to make Brexit work.
More importantly, it doesn’t square with the data from across the continent. German GDP over the last quarter after six months of zero growth, and it is forecast to slump into a full-blown recession early in the new year. French growth is slumping back towards zero too. If Brexit is the explanation for our poor performance, then how come the countries that stayed are doing so poorly?
In reality, it was lockdown that crushed the economy. During the pandemic we racked up too much debt, destroyed our work ethic with furlough schemes and home working, and created a backlog in the health service and in other public services that have crippled productive potential.
In its wake, we imposed huge tax rises to try to put the public finances back on track, including deeply damaging corporation tax increases that dented our competitiveness, and undermined the incentive to work with frozen thresholds that have sent tax yields soaring. By trying to blame Brexit all over again Hunt is simply deflecting his own responsibility for our current predicament, and that of his boss, the Prime Minister and former Chancellor Rishi Sunak.
It is a disgraceful evasion, and one that he should be ashamed of. Rather than attempting to distract attention, he should be starting to fix the mistakes we made during lockdown. We need to get people back into the workforce, we need to get companies investing again, and we need to move far faster than we have done so far to embrace the opportunities for deregulation that leaving the EU created.
Blaming Brexit might get you a cheap round of applause from certain quarters, but it won’t do anything to get the British economy back on track again.
