The Guardian view on Brexit and the economy: time to face facts
There must come a time when the cost of Brexit is recognised by a British government, but that day is not imminent. Even when the economy and migration are two of the most prominent topics of debate, a realistic account of the European dimension to those issues is taboo for Conservatives who still wear their epic policy folly as a badge of honour.
Independent observers raise the consequences of Britain’s departure from the EU, as Mark Carney, former Bank of England governor, did on Friday when he observed that it was a factor driving pressure for higher interest rates. Mr Carney went further, pointing out that the UK economy has shrunk relative to similar European states. There is much debate among economists about the best statistical measure to describe that effect, but not much dispute on the underlying fact that Brexit has made Britain poorer, as the remain campaign said it would and the leave campaign denied.
The value of sterling dropped as soon as markets received the referendum verdict in June 2016 and has not recovered. The devaluation did not bring the upside in more competitive exports that might have been expected. Trade with Britain’s nearest and richest neighbours has been sabotaged by withdrawal from the EU customs union and single market. Brexit evangelists made improbable promises of compensation for the loss of frictionless borders with Europe via free trade deals around the globe. The US was the most eagerly anticipated partner. That hasn’t happened. There are no talks in Washington to make it happen.
The real political imperative keeping Britain out of the single market was not trade but immigration. Ending free movement of labour was an axiomatic requirement for “taking back control” of the borders. Talk of an economic downside to that decision was dismissed by Conservatives as part of insidious pro-Brussels revanche. Now Britain faces labour shortages, which limit business expansion, harm productivity and constrain growth. Choking off legal migration routes has brought no political dividend for the Tories. The party’s right wing is still obsessed with border control, focusing instead on small boat crossings and vilifying refugees for daring to seek asylum in the UK.
This too was predicted. Tory Euroscepticism is an unstable coalition of free-trading liberals and cultural nationalists, with the latter dictating the tone of debate and the speed of flight from economic reality. A hunt for scapegoats when the project fails to fulfil its utopian promises is intrinsic to nationalism. That is the grim path down which Mr Sunak’s party is descending, regardless of whether the prime minister himself plans it that way. There is a substantial risk that another cycle of budget austerity will hasten the descent. Cuts to services on top of rising living costs will degrade the public realm and cause anger that the Tories will, if recent history is a guide, address by means of cynical deflection, blaming anyone but themselves.
Mr Sunak is trapped. He cannot give an honest appraisal of the nation’s economic predicament, since doing so would mean abandoning vacuous rhetoric around Brexit “opportunities”, recognising instead that Britain’s severance from EU markets is a wound that needs healing. Austerity 1.0 meant business investment was slow to return to pre-crash levels. However, it was frozen after the referendum, before taking a Covid-sized hit. The upshot is that leaving the EU has caused long-term scarring to the country’s productive capacity and competitiveness. Asinine ministerial denial of that reality is a further deterrent to investment. Economic decline stokes political volatility, which makes recovery harder. That vicious cycle will be broken when Britain has a prime minister who is willing to deal in facts about Brexit and set pernicious fictions aside. Rishi Sunak, it seems, is not that man.