This generic explanation for everything always gets posted to HN whenever the UK comes up in any capacity, but it isn't "fact based economics". Inflation is surging throughout Europe and the world. Trading Economics has a useful map that visualizes it:
Inflation is high because governments printed enormous sums of money to fund lockdowns and furloughs. Helicopter drops of money creates inflation, it's as simple as that. This effect was predicted right at the start of lockdowns and now it's here. Moreover Brexit only actually took effect at the very start of 2020 so there was all of a few months to do anything before COVID hit and the government had no time to actually do much with its new powers.
Honestly, it's very tiring to see these kind of unsubstantiated comments so systematically rise to the top. If you want to prove something is causally linked to leaving the EU you need to prove it, not simply assert it and then declare anyone questioning that assertion is engaged in "denial".
There is no reasonable way of proving casually in a world where we have been subjected to a permicrisis, some of it outside of our control, for the last 7 years. You can't easily separate one element of a multidimensional puzzle which is the state of a whole counties economy.
However, the idea that leaving the biggest trading block in the planet in exchange for a couple of piss poor (by the admission of those people who negotiated them) trade deals with small economies on the other side of the world hasn't damaged our economy is the more extraordinary claim.
It's not particularly extraordinary because the UK's economy is dominated by services companies, and the EU single market never really made progress for services. They only developed and enforced a single ruleset for goods. Attempts were made from time to time to liberalize the market in services but usually failed because it would have benefited the UK at the cost of France/Germany, whereas for goods it was the other way around.
That's why exports to the EU haven't changed much (see my other comment). Imports did fall, but that the UK continues to import from elsewhere so it's unclear why people in Britain should care. The EU lost an export market, the UK didn't really (because the EU rules weren't benefiting that market in the first place).
This is the sort of thing I mean - there are a lot of people who very much want leaving the EU to be a disaster for long term ideological reasons. To determine whether it actually is or not requires a holistic analysis that goes well beyond economics, but at the moment even establishing basic economic facts like "inflation is not caused by Brexit" is apparently hard.
Jeremy Hunt campaigned for Remain and then pushed for a second referendum when his side lost, so it's unclear why you think his anti-Brexit stance is worth remarking on. Are you thinking of someone else, perhaps?
Re: OBR. We're talking about food price inflation. The article you cite in turn cites the OBR, but (a) contrary to what you're suggesting the OBR doesn't have seem to have done any of its own analysis and (b) it only mentions Brexit twice, once about immigration and the other is a single paragraph which isn't about food price inflation. It says:
"Our trade forecast reflects our assumption that Brexit will result in the UK’s trade intensity being 15 per cent lower in the long run than if the UK had remained in the EU"
They don't define what "long run" means and they don't state where this assumption came from. That's the quality of the OBR's in-house analysis: there isn't any. That's not a huge surprise. The civil service has a poor track record of economic forecasting in all respects, but especially on anything to do with Brexit. The government forecast before the vote that voting to leave (not leaving, just voting to leave) would trigger an immediate recession in which between 500,000 and 800,000 jobs would be lost, due to "uncertainty". In fact the economy grew and unemployment fell.
They do then mention the "latest evidence suggests a significant adverse impact on UK trade", and cite two other papers. Both are only about claimed changes in UK/EU trade, not UK trade as a whole. The first ESRI paper relies on such complicated modelling it's not worth spending time on and their abstract asserts a dubious assumption right up front. The LSE paper states:
"Second, the implementation of the TCA triggered a small and only temporary decline in relative UK exports to the EU in 2021. These sharply fell in January, immediately following the introduction of the TCA, but quickly recovered within half a year"
It does say that the UK reduced imports from the EU significantly, but this would be expected given the currency value decline and that the EU external tariffs no longer discourage UK companies from importing from outside of Europe. The UK trade balance hasn't had a sudden improvement so it just means imports are now more balanced w.r.t. ROW.
Why mention Jeremy Hunt? Just the small matter of him being the Chancellor of the Exchequer of the UK govt with a track record of good analysis.
Believe what you want at the end of the day. I would love to have to been proven wrong, but Brexit is an unmitigated disaster to almost every expert worth listening to.
"The National Health Service will face budget cuts, falling standards and an exodus of overseas doctors and nurses if the UK leaves the European Union"
NHS budget has dramatically grown since leaving the EU and so has NHS employment of immigrant workers:
My point is that, as Chancellor of a government which accepts Brexit as a done deal, it is interesting for him to do anything other than shower Brexit with praise. Criticism from within the ranks of the Tory government is significant and a sign of shifting tides. This is the sense in which he 'conceded'. Until recently this was omerta.
As I say, believe what you want, I genuinely want to be wrong as I feel ever-growing despair at what has happened to my country, not least under recent Tory governments. We are a country in decline. I'm now pretty certain of it.
"Criticism from within the ranks of the Tory government is significant and a sign of shifting tides"
Well, the Conservatives officially campaigned to remain and Boris had to kick out dozens of MPs at the last election to even be able to implement the vote at all. Whether someone is a truly reformed Remainer or not has been a question at every leadership contest since. So there's nothing significant or new about Tories disagreeing with Brexit, it's a pretty standard position within the party.
"We are a country in decline. I'm now pretty certain of it."
I am too! We don't actually disagree on that. The GDP/capita trends are pretty clear there, especially when compared to the USA. It's not relevant to food price inflation which has different causes, however.
The difference between us is I think the issues long pre-date 2016, are mostly to do with entrenched social attitudes, were made worse/locked in place by EU membership and therefore that Brexit is a necessary (but not sufficient) condition for reversing the decline. Whereas you see a decline as a recent thing and Brexit/the ruling party as the cause.
That's a book sized topic and I'm probably posting to this thread too much already. Still, go big or go home, right?
The EU enforces a very specific economic and social model which prioritizes geopolitical unification over wealth creation. External tariffs are high, there are many other less obvious protectionist policies in place, regulation is vast/constantly growing, there's a lot of grant dependency and internal subsidies, the EU theoretically doesn't control tax but in practice has taken control of it anyway and now prevents tax competition (see Ireland), and the ex-Soviet states have provided a legal pool of very cheap labor which has systematically discouraged investments in productivity for decades. The Euro creates a whole other set of problems but fortunately the UK avoided that. Because the EU's scope constantly expands this results in the slow strangulation and homogenization of local politics: huge swathes of policy that people care about are effectively off limits and politicians from all parties simply refuse to discuss them at all, knowing that there's nothing they can do or say because the EU will simply overrule them. It was often very unclear to voters why these "black holes" existed or even what they were exactly, because the middle class consensus was that the EU should be beyond criticism and is at any rate an immovable object, the ever-increasing dominance of which was an unavoidable fact of political life best left undiscussed.
The UK's divergence from the USA in wealth terms isn't directly caused by the EU. That's why I say the EU locked in social problems, rather than causing them. The divergence really kicked into gear after WW2. [1]
Post 1945 the USA continued its more explicitly capitalist and libertarian approach, wheres the UK became wedded to the European social model. Compare employment law between Europe and California, recall all the usual HN discussions about why Europe doesn't create tech startups at the same rates, etc. It's all a part of the same package of attitudes that creates those outcomes. Inside the EU divergence from this model towards something more explicitly pro-business is simply not possible, as the Irish have discovered. They were picking up US tech firms and investments like candy due to their low tax model, but the EU preferred to forcibly align everyone on French levels of corporation tax to avoid "harmful tax competition" [2]. It doesn't even control such taxes by treaty, but treaties are largely irrelevant in Europe - the subservience of the political class and fear of EU retaliation means there are no real checks on its power, and thus they were able to bring Ireland to heel anyway.
Outside of the EU the UK can in theory diverge from this approach and pursue a more US style model, eventually perhaps even catching up with US levels of wealth. Certainly that was a big part of the appeal to a lot of the Brexit campaigners. However it isn't on track to do so currently. The social attitudes described above have been a feature of British society for many decades and the Conservatives are effectively a centre-left party dominated by the need for wealth transfers towards the the pensioner demographic that reliably turns out to vote for them. Even if alternative parties appear, alternative social models start to be discussed and attitudes change, it will take a long time to even re-match the USA in terms of growth, let alone close the gap. That's why I think the impact of Brexit will have to assessed by historians over a span of a century or more, in the same way people still debate the impact of the events of the 1920s today.
So - it creates new options. People haven't even been thinking about those options for nearly 100 years, so nothing is going to happen overnight and it may never happen. But at least it will mostly depend on what voters want.
There's nothing fantastical about it. The UK had similar growth rates to the US in the 1980s, it had equal wealth at the start of the 20th century before the wars. Brits and Americans aren't so different. Arguing for being more like the US is therefore the opposite of fantasy economics - the existence proof is right there, sitting across the Atlantic, being very much real and not a fantasy.
This type of shallow, unintellectual dismissal of any thinking outside the EU box is exactly why Remain lost in the end. Describing everyone who pointed out the problems as fantasists, racists etc made the pro-EU side look unclever, unthinking. The "fantasy economics" line was tried over and over, it didn't work because enough people saw through it. The claims of an instant recession were tested and found to be false. Who cares what economists think about Brexit or the EU nowadays? The UK is out and people can see the claims of immediate/total economic devastation weren't true, so there's now potentially a reason to argue for more growth/wealth oriented ways of doing things. Before there wasn't because the EU would stop it anyway, so back then a model more like the US or parts of Asia really was fantasy economics.
It's a fantasy because there is no democratic consensus for a US model as you have admitted. The UK isn't the US at all by any number of key measures - market size, resources, dollar. The Tories ejected Truss when she tried the 'growth' low tax thing because they knew they were heading for electoral (and financial) disaster.
The UK is in a no-mans land outside of a huge market on our own continent and all you can offer is 'we can try new stuff now'.
I can accept the vote as long as there is an honest discussion about the consequences. What I can't accept is lines like 'Who cares what economists think about Brexit or the EU nowadays?'. Going back to my original point, Brexit has poisoned economic discourse.
That's not what fantasy means. If it were, then just 7 years ago you could have said there was no democratic consensus for leaving the EU and that it was a fantasy to suggest it. But that wouldn't have been correct.
My point is that in order to build democratic support for a policy you have to be willing to put in a lot of effort and campaign for it. In the EU there was no point in doing that, because even if you won a democratic victory (an election, referendum, etc) then it didn't matter, the EU would overrule you and the voters, the end.
Yes, Liz Truss tried to do the easy bits of pro-growth policies without the hard bits of actually cutting spending. That doesn't work and she was quickly replaced. The shadow of lockdowns is a long one and the country will be much poorer as a consequence regardless of what politicians do. Nonetheless, I doubt anyone is trying to claim that the new higher tax levels are going to reverse the UK's economic decline.
The UK is not in a "no mans land", that's the sort of emotional catastrophising that this thread is full of. It's a big country and still sells to the EU just as it did before - see my other comments. Exports haven't actually fallen at all because the much vaunted single market wasn't really a single market for the UK's companies anyway so leaving it didn't make much difference.
We all want honest discussions of the consequences. That's why I'm posting on this thread in the first place. Blaming global lockdown/furlough-inducted inflation on Brexit isn't honest economic discourse. Neither is simply insisting on deference to academic/civil service economists, who have been consistently wrong about it.
Compared to recent years it's a bit of volte face for a Chancellor to say something like this, I'm not really thinking about the pre-Boris purge era where of course, things were different. Anyway, I don't want to get stuck on this point. It was a throwaway observation and hearing Hunt say this in his current role stood out, and I felt it was moderately significant politically. The weather is changing. Give it 5 years and I think you'll hear murmurings about rejoining the single market. I really do. Public opinion will get there, although it's way too soon politically for that right now.
I don't lay the entire blame for our decline at Brexit's door, I too think it has been decades in the making. For me though, Brexit was a singular moment of lunacy, and many of the morbid symptoms our politics have displayed in recent years, the terrible quality of leaders, the hard right wing creep in some sections of the govt, the sheer reality-ignoring stupidity, does seem to have a Brexit link. But no, I don't think everything was great pre-Brexit. The lunatics took over the asylum is probably more how I see it. Now we have 'grownups' in charge, I'll concede that much, but I find this new project a grim re-run of the Cameron era. Another ideologically motivated choice to slash the state to address a mythical fiscal hole. I dread to think where we will end up after this latest round of austerity. It's truly grim.
If you read my comment you will find no link between Brexit and inflation.
Rather that Brexit had undermined the discourse about how to manage the economy. I gave two specific examples of how this is happening. This is clearly relevant to any discussion of the U.K. economy.
Printing money only leads to inflation, if it ends up in hands that spend it, which didn’t really happen.
We have massive supply side issues though: extreme gas prices in Europe, raised gas prices in the rest of the world and raised oil prices in the world because of the Ukraine war. Extreme electricity prices in Europe because of failing French nuclear reactors. Missing parts from China because of a continuing zero-covid strategy there.
It's both: the UK printed money on a vast scale and then gave it directly to people via cash transfers, whilst simultaneously shutting down things it might have got spent on. It was being handed out so easily that they estimate £17 billion were lost to fraud alone. Spending on furlough was approx £70bn, and the population of the UK is only officially 67.3 million so that was basically cash handouts of ~£1000 to every single man woman and child in the country.
As a consequence, savings broke records over the pandemic period [1]. Now restrictions are gone that money is flooding into the economy as everyone tries to buy things. Simultaneously supply chains are still recovering and energy/gas supplies are limited, this is true. Nonetheless, you can't print thousands of pounds per person and not expect that to create large price increases.
I'm quite sure the OP was responding to the assertion that the UK was declining, not that current inflation is just a UK specific problem (though I could easily point to some Brexit specific issues that have made it worse than that which other countries are experiencing)
I hope this clarification has made you feel less tired.
The OP was responding to the article not another comment, and the article doesn't make any generalized claims about decline, so I don't think they were responding to anyone's assertion but rather making their own.
https://tradingeconomics.com/country-list/inflation-rate
Inflation is high because governments printed enormous sums of money to fund lockdowns and furloughs. Helicopter drops of money creates inflation, it's as simple as that. This effect was predicted right at the start of lockdowns and now it's here. Moreover Brexit only actually took effect at the very start of 2020 so there was all of a few months to do anything before COVID hit and the government had no time to actually do much with its new powers.
Honestly, it's very tiring to see these kind of unsubstantiated comments so systematically rise to the top. If you want to prove something is causally linked to leaving the EU you need to prove it, not simply assert it and then declare anyone questioning that assertion is engaged in "denial".