Brexiters and Remainers both fail to grasp the challenges facing
Britain by Tom Kibasi
The deal to leave the EU will shape Britain for decades to come. Will we
confront our problems? Or attempt to muddle through (where both sides of the
Brexit divide are taking us). Britain needs fundamental changes but we must first openly acknowledge our problems.
Remain failed to understand the reality of daily life for many people
and communities in modern Britain or that the current economic model is not
working for many people. Free movement of labour enables the low skill, low
productivity, low wage economic model imposed on much of the country, which (combined
with the cultural and identity challenge of large-scale immigration) has created
such discontent. It is not progressive to fail to invest in skills in this
country, while plundering poor countries of nurses or doctors or carers and
then approaching immigration as if people were commodities to be bought up on
the open market.
Leave saw Brexit as a magical solution to all of Britain’s problems,
along with fake promises on the NHS and immigration, and still argues we can
enjoy all the benefits of membership, such as frictionless, tariff-free access
to the single market, without any of the burdens. It has never mattered to them
that leaving the EU will make it harder to confront Britain’s economic and
social problems.
The Chancellor still focuses on top-line numbers, ignoring multiple
symptoms of a distressed economy that stretch back for decades. Our national
economic policy needs to be pro-growth and pro-economic justice.
Investment drives wealth and prosperity, but as a proportion of the
economy has been declining for 25 years, lagging behind comparable countries in
the west, and miles behind fast-growing economies in the east. People expect
that that business will invest in order to create good quality jobs, but investment
needs political stability and unfettered access to the single market of 500
million people, and Brexit undermines both.
Issues
Cheap and plentiful EU workers led firms to add more low cost jobs instead
of investing in plant, machinery or new forms of automation to drive up
productivity. Some businesses prefer to return more cash to shareholders than
to invest. British companies have become net savers rather than borrowers.
Low investment leads to low productivity, and then to low wages. Since
the financial crisis, the British economy has stalled, leading to stagnation in
living standards for the majority of households.
We have a massive trade deficit. If countries are keen for a free trade
deal with Britain (a debatable point) it is because we’re an importer, not an
exporter. The import/export difference is now 6%, financed by expanding debt
and selling off British assets.
Household inequality is high. The incomes of the richest 10% of
households are 11 times those of the poorest 10%; in France and Germany, the
difference is seven-fold, and in Denmark it is five-fold. Over time this
creates an enormous gap in wealth as well as income.
Our economy is profoundly regionally imbalanced. London is the
wealthiest region in Europe and, with the south-east of England, accounts for
40% of national output. All other UK regions lag behind most other regions of
northern Europe, and have below average productivity.
These problems are all of long standing, and not temporary weaknesses
in an otherwise sound model, showing that fundamental reform of the British
economy is needed.
We need to prepare ourselves for a decade of disruption, as changes
have the potential to reshape our economy and society – for good or for ill,
depending on the quality of our response.
During the referendum campaign, Remain made no attempt to show why and
how it might be easier to confront the challenges in partnership with our
neighbours than alone, how Britain has shaped the EU, or how we might better
influence its future. With better leadership, the EU might have been
transformed into a safe harbour in an era of profound challenges from
globalisation.
Drivers of change
Exponential improvements in new technologies, accelerating computing
power, machine learning and artificial intelligence, automation and the
“internet of things” have extraordinary power to utterly reshape how we live
and work, to reorganise our social, economic and political institutions and to redistribute
power and reward in society. Without deliberate policy, technological change is
likely to increase the share of rewards to those who have capital, whilst
diminishing the rewards that go to workers for their labour. Moreover, the
rewards for the highly skilled will continue to accelerate whilst diminishing
for everyone else.
Demographics. The UK population is set to become Europe’s biggest
country, with more people than France by 2030, and more than Germany by 2040.
At the same time it will age significantly, with a 66% increase in those over
the age of 75, bringing huge challenges in housing, health and social care. By 2030,
the working age population will grow by just 3%, but those over 65 will
increase by one third.
Economic power continues to shift eastwards. By 2030, emerging
economies will account for half of global output, up from a quarter today.
Nearly 60% of global middle-class consumption will come from Asia, and 17 of
the top 50 cities by GDP will be in China. The shape of global institutions is
likely to shift considerably.
Human activity is the dominating influence on nature consuming resources
at 1.5 times the ability of the earth to replenish them. A radical economic
response is needed in the coming decades to mitigate and reverse environmental
damage. The transition towards a low-carbon world is crucial to the vision of
an economy fit for the future.
Do we embrace greater international co-operation? As capital flows and
firms operate across borders, so there will be a greater premium on nation
states working together in the future. That positive case for the EU was never
really put to voters, and Brexit makes this path significantly harder.
If the fast pace of change means that it will be the ability to respond
rapidly and flexibly to change that will matter, then Britain might be better placed
to prosper outside the clunky framework of European regulations and
institutions.
The IPPR Commission on Economic Justice
The IPPR Commission on Economic Justice brings together leading figures
in British public life to address the persistent problems and ensure that
Britain is ready for the future challenges, with the goal of rewriting the
rules for the post-Brexit economy.
The politics of the future will belong to those leaders who are
prepared to face up to our present problems and future challenges and to
articulate a new destination for our economy and society.
Tom Kibasi is Director of the Institute for Public Policy Research and
Chair of the IPPR Commission on Economic Justice
https://www.theguardian.com/commentisfree/2017/mar/11/brexit-kibasi-ippr-article-50-referendum-remain-leave