"The passions released by the outcome of the EU referendum vote have not subsided." Credit: Flickr/threefishsleeping. Some rights reserved.The passions released by the outcome of the EU referendum vote have not subsided: nearly two months have passed, but intense recriminations (“lies, bad faith, stupidity, racism, xenophobia, irrationality, etc”) persist amongst Remainers.
On the other side, there is some unattractive gloating over the absence of the chaos predicted by a chorus of experts: instead, employment is up, unemployment is down, interest rates have been reduced, not increased, consumer spending has surged, the prospect of a recession is receding, the stock market is booming, and so on.
If the campaign itself had been bad-tempered and impatient, it had at least been framed by a broad working assumption of a Remain victory, within which the special pleading of the ill-assorted Leave leaders (Gove, Johnson, Stuart, Grayling, Farage and Duncan Smith) could be treated with a mixture of condescension and irritation.
When I announced myself to openDemocracy colleagues as having voted Leave as soon as my postal ballot arrived, weeks before the June 23rd date, amused puzzlement was the primary response. Having now been joined by more than 17 million other Leavers, I feel I should at least explain why I cited “moral imperative” as my motivation, and place this reasoning alongside the emotional outpourings that have passed for analysis and journalism in the post-vote examination of the Brexit entrails.
My sole concern was the fate of the large minority of UK families whose living standards have become permanently depressed as a result of a surge in net migration from the EU to the UK.
Much of the debate during the campaign addressed the nature of the EU itself — the good and the bad. This played no part in my thinking. My sole concern was the fate of the large minority of UK families whose living standards have become permanently depressed, at least in part — it would seem — as a result of a surge in net migration from the EU to the UK.
Was the only way to stem that flow to vote Leave? Conversely, would a Remain result permanently entrench a phenomenon which has had such different consequences for the well-to-do and the struggling?
What the referendum exposed was a deep split within the UK — between the educated, the skilled, the qualified and the affluent on the one side, and on the other side the under-educated, under-skilled, under-trained underclass that constitutes somewhere between 20% and 30% of the population.
Lambeth scored the UK’s highest proportion of Remain votes on June 23rd; Hartlepool the lowest. Average household incomes in Lambeth are £45,000 per annum; in Hartlepool, £16,000, barely more than a third of that comfortable figure.
According to the Resolution Foundation, 11 million households in the UK – 40% of all households – have seen no real increase in their income since 2002. Successive governments have failed to provide an adequate education (20% of 15-19 year olds are not currently in the education system). Housing starts have barely topped 100,000 a year for a decade in which the population grew by 5 million. The availability of apprenticeships has dropped by 90% in recent years. There is a real danger that another generation will also be consigned to the economic margins.
The losers in the rise of globalism are not always visible to the eye: only in election year has the parallel fate of the US underclass come into focus. Since 2000, every year the top 1% of US earners have seen their incomes rise 23 times faster than the bottom 20%. Look no further to understand the rise of Donald Trump.
In the UK, the underclass has had little opportunity to express its frustrations, with all political parties other than UKIP enthusiastically endorsing the EU, along with open borders and unlimited migration. Only when the question was directly put did the scale of resentment emerge.
What transformed the referendum campaign, at mid-point, was the release of the official migration figures for 2015, showing a net total of 330,000. Cameron’s long-standing pledge to reduce the net number to the “tens of thousands” (“no ifs, no buts”) was in tatters: as long as the UK was part of the EU, that pledge was undeliverable.
John Lanchester has for some time been the persuasive chronicler of financial stories for the London Review of Books. His most recent contribution was a post-referendum lament, penned, as it happens, in Lambeth. In it, he argues that immigrants pay more in tax than they claim in benefits (true enough, though the amounts are not large, anyway), and that most of the migrants last year were students, citing a figure of 169,000.
In fact, that is only true of the non-EU cohort, within which there are nearly 90,000 students from China alone. By contrast, less than 3% of all EU migrants resident in the UK are students — most are low-paid EU workers, including 1.3 million from the ten East European countries.
The most telling statistic in the official report on immigration was the increase in the number of non-UK workers since 2014. There were 5,000 from outside the EU, compared with 224,000 from the EU — 40,000 more than the reported increase in net EU migration. Lanchester loftily comments that the facts about migration “are freely available to anyone who takes an interest in the subject”: a pity he turns out not to be one of them.
Cameron’s long-standing pledge to reduce the net number to the “tens of thousands” (“no ifs, no buts”) was in tatters.
It was Tony Blair who airily dismissed a proposal from Brussels to place a medium-term cap on migrants from Eastern Europe when the EU was enlarged in 2004. If the EU 27 had offered, or Cameron somehow obtained, a repeat of that pledge during the February negotiations, the outcome in June might have been different. He did not try; and they did not have the nous to make the offer, perhaps because he assured them the vote was in the bag.
In practice, of course, ending free movement — which anyway cannot happen before 2019 — will do no more than avoid exacerbating a largely irreversible situation: few of the 2.2 million EU non-UK citizens working here will return to their country of origin, unless the pound depreciates even more against the euro (and the zloty) than it has in the last two months. Yet if we had been able to apply to would-be EU migrants the points system that we apply to all others, with requirements such as special skills or a pre-offered well-paid job, at least two-thirds of them would never have gained entry.
The Resolution Foundation calculates that stemming the flow now of low-earning East Europeans will lead to only a modest rise in wage rates at the bottom of the UK scale, given the numbers already here. But it is not just a question of competition for low-paid jobs, and the continuing impact of open-ended supply in keeping that pay low. There are also social implications of trying to absorb millions of migrants when spending on infrastructure lags so far behind.
From 1970 to 2000, there was almost no net migration to the UK. That situation changed dramatically in 2004, and the total number of EU migrants in the UK is now 3.5 million (that is, workers, plus families, plus 125,000 students).
In the last five years, state primary schools have experienced an 11% increase in enrolment, equivalent to an extra class of 30 for every school. A significant proportion of that increase comprises children from migrant families – 20% speak English as a second language (if at all).
Last year, nearly 10 million people failed to secure the GP appointment they were seeking: a failure rate that has risen 40% in just four years. Of course, many migrants work in our hard-pressed NHS and other key services, and would qualify for entry under a points system, but not all of those are from the EU, and such workers constitute just 2% of the total migrant population.
Before June 23rd, London’s population was forecast to grow by 16% by 2030, with more than a third of that the direct result of migration. Transport for London predicted that by then nearly all Zone 1 Underground stations would experience rush hour overcrowding equivalent to more than four people inside a telephone box.
"Transport for London predicted that by 2030 nearly all Zone 1 Underground stations would experience rush hour overcrowding equivalent to more than four people inside a telephone box." Credit: Flickr/Axel Drainville. Some rights reserved.For most of the affluent in Lambeth, and elsewhere, open-ended migration from EU countries where the lowest wages are far below the legal UK minimum is a boon. They can avoid most of the societal impacts, thanks to private schools, private health insurance and private transport. Meanwhile, there is an unlimited supply of builders, decorators, window-cleaners, dog-walkers, child-minders and gardeners for those who can afford them.
Lanchester’s neighbours in Lambeth, were, he said, “aghast at the outcome” — something I can confirm personally from a visit to friends in Lambeth immediately after the vote, where “aghast” was the mildest of expressions of anguish from the assembled Remainers.
They quite relished what Lanchester described as “the immediate chaos”: currency plunging (just as the IMF has long urged, for the benefit of the economy), stock markets in freefall (until they more than recovered), “the likely crash in London property” (yet to materialise), and a “quite likely recession” (or maybe not).
Like Lanchester, they believed that “Leave’s arguments were based on lies” — such as the £350 million and Turkey’s joining the EU. A “big lie” that Lanchester cited was that “the UK would be able to have access to the single market without accepting free movement of people from the EU. No country has this arrangement and there is no reason to think it is possible.”
Perhaps Lanchester was the victim of poor editing. In point of fact, some 200 countries have access to the single market without accepting free movement of people from the EU, led by the US and China. Turkey has had a customs union with the EU for twenty years which specifically excludes free movement (I wonder why).
Some 200 countries have access to the single market without accepting free movement of people from the EU, led by the US and China.
What Lanchester presumably meant was that tariff-free access to the single market would not be possible without agreeing free movement. As the majority of Leave voters would be deeply angered if the outcome of the exit negotiations was a continuation of unrestricted free movement, the issue is therefore how we leave the single market: in practice, a choice between World Trade Organisation tariffs (averaging 4% to 5%) governing trade between the UK and the EU; or a variation of that in the direction of freer trade, should the EU 27 manage to agree a proposal to put to us.
Why would the onus be on the EU 27? Because a WTO outcome would be much more damaging to them than to the UK, in that it would almost certainly result in a welcome fall in our trade deficit with the EU (currently running at some £60 billion a year).
Let’s take motor vehicles, where the WTO tariff is 9.9%. Germany sells a million cars a year in the UK. Such a tariff, combined with the long overdue decline in sterling since the referendum, should reduce that volume by at least 10%. Conversely, UK car exports to the EU, enjoying the benefit of a weakened currency, which would neutralise the tariff barrier, would be much less affected. Our annual trade deficit would be reduced by £3 billion, and a similar amount in revenue from tariffs would now be available to the Treasury to spend.
Lanchester correctly notes that trade in goods is only one part of the problem: trade in financial and other services is hugely to the UK’s benefit, and there is a real question as to what limits on access to the single market such services would encounter if the UK refuses to accept free movement of people. Lanchester is ambivalent: maybe “a reduction in the dominance of finance might be a net positive” for the UK in terms a fairer society; and, anyway, the City is “expert at fixing problems” as they arise. But he worries about “passporting” — the current ability of UK-based financial institutions to carry out financial transactions across the EU. After Brexit, “an attack by the combined forces of Frankfurt and Paris” was “likely, highly likely.”
Oddly, he does not mention the new EU Directive, MiFID2 (Markets in Financial Instruments Directive 2), which comes into force in January 2018, and allows non-EU entities the benefits of passporting provided their regulatory processes are “equivalent” to those of the EU. Many (but not all) in the City believe that this will alleviate the problems of access, if not eliminate them: MiFID 2 will have been incorporated into UK law before Brexit, making “equivalence” almost automatic.
Of course, even establishing a WTO-based trading relationship with the EU 27 is not entirely straightforward. And most economists predict that a WTO-based outcome to Brexit would lead to a significant reduction in our GDP over a period of time, as compared to potential growth under various “free access, free movement” scenarios — Paul Johnson, of the Institute for Fiscal Studies, suggests as much as a cumulative 4%.
Most Leavers shrug their shoulders, not because they necessarily disbelieve such forecasts — it is almost inevitable that the uncertainties over future trading arrangements with the EU after exit will slow down some current economic activities — but because they see the problem of foregone GDP growth as a problem for the Haves, not the Have Nots.
Of course, they may be wrong, Sod’s Law not having been repealed. An economic slowdown and a rise in unemployment (as anticipated by the Bank of England) could scarcely leave the Leavers untouched. But their logic is a simple one, which Lanchester half gets. Other Remain commentators are still stuck in anger mode.
The liberal press in the US — the New York Times, the New Yorker, Time, the New York Review of Books — has been wholly uncomprehending of the support for Brexit, which is seen as not only self-destructive, but hostile to the progressive agenda in Europe. It was therefore no surprise to find one of the most hysterical articles about the referendum in the New York Review’s summer issue (August 18th) — though penned, as it happens, by the UK’s Jonathan Freedland.
Freedland announced the result as “the greatest crisis since 1945” for the UK, that would feature an “economic nosedive”, “1% GDP contraction in 2017”, “trillions wiped off global stocks”, “each day a cancelled contract or scrapped project”, with the “UK coming apart”, condemned to “penury outside the single market” and “a future of irrelevance.”
One day — perhaps already — Freedland will be embarrassed by the absurdity of this diatribe. So far there has been no economic nosedive, no cancelled contracts or projects, no likelihood of independence referenda in Scotland (the economics and the polls say “no”) or Northern Ireland, and a surge in stock markets. The IMF is forecasting higher GDP growth for the UK in 2017 than for Germany, France or Italy. As for “irrelevance”, the UK remains one of the G7, a veto-wielding member of the UN Security Council, the world’s fifth largest economy, its fourth strongest military power and (somewhat amazingly) its second strongest sporting country.
The NYR also commissioned a piece from Zadie Smith, which included a claim that “billionaires” own most of the UK’s television (and thereby influenced the outcome with their anti-EU propaganda). This is doubly daft. The only “billionaire” with a significant stake in UK television is Murdoch. Sky’s share of viewing is about 5%; Sky News’ share of news viewing is even less; and anyway all UK news services are required as a condition of retaining their broadcast licences to observe the requirement for impartiality.
Remain commentators are still stuck in anger mode.
Fortunately for the NYR, it also ran a brief article by Mervyn King, the former Governor of the Bank of England, who revealed his own guess: that “the effect of EU membership on the level and growth rate of national income in the long run will be much less than either camp would like to claim”. Joseph Stieglitz, the left’s favourite US economist, has just published a very similar assessment.
It was interesting — and puzzling — that Freedland referred back to 1945 as a year of “crisis”. For most on the left, that was a year of triumph – victory in the war, Churchill despatched, a huge Labour majority in the Commons, the precursor to a wave of public ownership and public welfare initiatives.
Equally curious was the failure of Lanchester and Freedland to celebrate the collapse of the posh boys, exposed as liars and bullies. Cameron asserted before he started his negotiations for a “new deal” that the UK could thrive outside the EU, and promised to deliver whatever outcome the voters chose. He then campaigned all-out for Remain, and resigned within hours of the result.
Osborne’s dire threats simply embarrassed his supporters — Will Straw, campaign director for Remain, described his warning that the average household would be £4,300 per annum worse off if Leave won as suffering from a “specious specificity”. No-one believed his threat of an emergency budget, including higher taxes and more cuts in public spending, if Leave won. As it turned out, he, his budget, his fiscal rule and the whole conceit of austerity were unceremoniously booted out by Theresa May on her first day as PM.
Of course, none of us who voted Leave could have imagined such a serendipitous outcome. My own conclusion – that on moral grounds I could simply not vote Remain – is yet to be put to the test. May’s first public pledge was to work for the whole of society, including the Left Behinds. We shall see.