Sunday 12th March 2017
Peter Dowd, Shadow Financial Secretary and Labour MP for Bootle
Even in an economic landscape recognised as being undulatingly serene, it would, nonetheless, be difficult to predict what may lay in wait over the brow. In the current tumultuous climate, it is only the brave, the arrogant or the pathologically optimistic or pessimistic who would predict where next for the UK economy, with any degree of precision.
However, that does not preclude those of us in positions of responsibility from putting in our tuppence worth. Indeed, it is almost obligatory but the context must come first.
Alas, I am afraid that the B word hangs like a shadow over my observations. Even the most cursory reader would flush me out if I tried to swerve that one, so I will not bother to (As if matters are not complicated enough, added to the economic potpourri, we now have President Trump. So, I will park that one). Like it or not, virtually everything is linked to Brexit.
A thought comes to mind. The motto of my home town Bootle – Respice, Aspice, Prospice – could be the maxim for the country. It seems to sum up the current backdrop – look to the past, the present and the future.
I think there is agreement that the debate about the economy is set in that context, namely of where we were, where we are and where we expect to be. Regrettably, that is as far as any agreement goes.
However, there is something we can all agree upon. Fairly soon, we will be out of the European Union – lock, stock and smoking barrel. No Single Market, no Customs Union, no European Parliament, no European Council, no Court of Justice, no Council of Ministers and, no doubt, all sorts of other more informal get togethers.
In the meantime, all sides in the debate are determined to ensure that their version of “what next” is backed up with as many “facts” as possible. Regrettably, the word “facts” seem to be a word of unlimited flexibility nowadays. It is virtually useless, in practical terms, given the continued polarisation.
So, for example, one of the “facts” is that the pound is significantly down as a result of the Brexit vote. But another of the “facts” proffered is the pound was overvalued in the first place. No one wants to give ground.
One view expressed by the Governor of the Bank of England, taken by some as one of the “facts”, was the possibility of a “technical recession” as a result of the referendum. As yet, it has not happened.
One of the much used nouns in all the verbiage so far is “uncertainty” – an understatement if ever there was one. Perhaps a re-coined phrase from earlier challenging economic times could be: “We have nothing to be uncertain of but uncertainty itself”
But enough of the context, where next for the British economy?
At face value, the country will have taken back political control of its economy, its legal sovereignty, its regulatory framework, its borders, its culture, its own trade negotiations and its fishing and agricultural sectors. Given that, many believe opportunity beckons. Hopefully, it does.
In the short-term, I suspect there will be no seismic or paradigm shift in any indicators of substance. Undoubtedly, inflation will rise and wages will be squeezed. The current low levels of private investment will meander along and productivity will remain low. It is reasonable to assume tax receipts may flatten and public services will atrophy in line with low public sector investment. A number of financial and manufacturing companies will move away.
Meanwhile, labour shortages in some skilled and non-skilled areas will worsen. Slower incremental economic growth will occur, with regional disparities masking the median position – and much the same for employment levels. In addition to that, disruption of international trade in both goods and services will ensue.
Given such a scenario, however, the question for the longer-term is a different kettle of (repatriated!) fish. Cumulative decrescence in economic growth and health over the next decade is my take on “where next for the UK economy.” In terms of pounds, shillings and pence, that means a deleterious, uneven effect on the living standards of millions of people.
I hasten to add I do not suggest that as part of the economic “facts” of a post-Brexit life. I will leave that to history to decide.