Economists for Brexit - "The Economy after Brexit" Summary
Economists for Brexit are a group of independent professional economists who are convinced there is a strong case for leaving the EU due to the regaining of democratic control over economic and other policies by the British people. In their report “The Economics of Brexit”, seven topics ranging from regulation to immigration are tackled by one individual in a concise way - no longer than a newspaper article. This is followed by Professor Patrick Minford and Julian Hodge’s own post-Brexit economic forecast. A short summary of each section is below. Read the full report here.
Regulation – Tim Congdon
The EU’s energy regulations are poorly targeted and hurt global competitiveness.
The EU’s social regulation (e.g. Working Time Directive, Gender Equality Directive) achieve little in practice and increase the costs of doing business and recruiting.
EU financial regulation has hindered London’s status as a global financial capital, its dynamism and its growth.
Literally thousands of ever-increasing regulations on substances and process management disturb established and profitable businesses.
New regulations are often imposed on Britain simply because another country has them, when we are already happy with our own arrangements.
Trade – Patrick Minford
The EU is a protectionist customs union that erects trade barriers and tariffs around itself.
Due to this, agriculture and manufacturing costs are up to 20% higher than they would be in a global market.
The UK could leave, erect no trade tariffs whatsoever and trade at world prices - preferential trade deals may only be a transitional necessity.
We already trade with big players such as the USA or China without a trade deal.
In many areas we could provide direct subsidies with our reclaimed EU funds during the transitional period.
We have free trade with the rest of the world, but our EU trade is subject to protectionism which costs us substantial resources.
Jobs and Investment – Ryan Bourne
EU membership bears no relevance to the labour market, some of Europe’s lowest unemployment rates exist outside the EU (Iceland – 3.2%, Norway – 4.5%, Switzerland – 3.7%) whilst some of its highest exist within it (Greece – 24.6%, Spain – 20.5%).
Trade does not necessitate political union, to say that jobs are linked to membership rather than trade is disingenuous.
Depending on the method of exit there will be restructuring of the economy in the long term, but no overall reduction in employment.
Restructuring would allow advantageous sectors to thrive where they currently do not.
FDI flows would shift towards newly unprotected sectors and would increase overall in the long term.
Immigration – Neil Mackinnon
If immigration continues at its current levels, the UK population is expected to rise by 8 million over the next 15 years.
Most economists agree that free movement of labour is good for the economy.
Unrestricted and uncontrolled migration however, may have adverse political, social and economic consequences.
As an EU member, the UK cannot prevent anyone from another member state deciding to move to and live in the UK.
The migrant crisis has exposed the EU’s dysfunctionality with its inability to respond with a coherent immigration policy.
We must regain control over our borders and decide how to handle immigration as a sovereign democracy.
The City and Financial Sector – Gerard Lyons
The city will face a hard time inside the EU as the UK achieved no veto to protect it from the decisions of the EU and the European Court of Justice.
The UK has a declining ability to influence the regulatory environment of the financial sector.
61% of the EU’s defined benefit pension schemes are held in the UK and 24% in the Netherlands, 20 nations with under 1% of pensions collectively have ten times more say over financial matters than the UK and the Netherlands do.
London’s competitors are now New York, Singapore and Hong Kong – all operate within and influence a global regulatory playing field whereas London no longer can.
London’s global competitiveness is being hindered at the will of its European counterparts.
The UK’s EU Expenditure – Warwick Lightfoot
The UK is third largest contributor to the EU budget, behind France and Germany.
Of the 28 members, nine are net contributors and 19 are net recipients.
Due to current bureaucracy, marginal spending on EU programmes that benefit the UK come at a high net cost to the taxpayer.
Sectors which receive EU subsidies could be compensated by the government with money to spare.
There would be scope for efficiency savings, improved auditing and improved scope to tailor funding programmes to the specific requirements of the UK economy.
The Common Agricultural Policy is indicative of the EU’s inefficiency – representing just 3% of the EU economy but 40% of its total budget.
In the UK, 75% of CAP subsidies go directly to faming, but 80% of that goes to the top 10% of farming households based on income. The subsidy is anti-competition and poorly targeted, benefitting the established few at the expense of small farming enterprises.
Redistribution of EU Contributions – Kent Matthews
What are commonly referred to as “EU funds” are not provided by the EU but by the UK, the EU simply allocates these funds.
The two largest chunks of these funds go to regional development (30% in 2013) and farming and fisheries (60% in 2013).
Price support systems such as farming subsidies distort the market and allow for misallocation of resources, we would be better off phasing these out over time.
In the short-term, our government could match all current support systems at a reduced bureaucratic cost.
For all other funding, there is no evidence that the money is spent in an efficient or economically productive way.
The effect of EU structural and regional funds on GDP is negative in eight EU countries including the UK according to the government themselves.
According to OpenEurope: “Most of the money the UK received went back to the same region from which it came.”
Post-Brexit Forecast – Patrick Minford & Julian Hodge
The forecast is based on Minford’s own model and assumptions.
Minford and Hodge find that GDP growth under Brexit begins to outpace GDP in the non-Brexit scenario in 2017, rising to 3.4% and 2.5% for Brexit and non-Brexit respectively by 2030.
It is assumed that devaluation of the pound will be met with increased interest rates and imports, and that rising long-term profitability, investment and productivity as a result of Britain finding new markets will outweigh losses even in the short term.
Minford and Hodge state that Brexit will be a shock – a good shock.