Will the poorest be better off after Brexit?

Some of the most solid Leave areas were home to the poor, the disenfranchised and the downright fed-up. But will Brexit deliver what they want?

‘YES’

Patrick Minford
Chair of Economists for Free Trade

Patrick Minford

“The fall in the cost of living will benefit lower-income households”

The Brexit plan that the British most wisely voted for offers huge economic benefits besides the incalculable political benefit of self-government. Under this policy we leave the single market and the customs union and pursue a free trade agenda with the rest of the world – including the EU if it will play, and if it will not, we lose very little as we press on liberalising with the rest of the world.

Eliminating EU protection would bring down prices by eight per cent and even more for poorer households, and would galvanise UK competition and productivity. The vast mass of businesses across the board would gain from this, helped already by our Brexit devaluation. On our model of world and UK trade, the permanent gain to our GDP would be four per cent.

Eliminating EU protection would bring down prices by eight per cent

Of course, we get back our budget contribution and we regain control of our borders, saving the taxpayer £3,500 per adult EU unskilled immigrant – with one million of them the cost to the average household is £2.50 a week.

That is the broad picture. But for lower-income households the percentage gains in living standards are much greater. The fall in the cost of living will benefit them because they spend a bigger proportion of their income on food and rent, both of which would fall substantially.

The research we have done at Cardiff University also reveals that the burden of supporting unskilled EU immigrants falls disproportionately on poorer communities where they settle. Furthermore, wages of local workers are driven down by these settlers as they work for heavily subsidised wages (a subsidy from the taxpayer of over 20 per cent).

Bank of England research by Professor Steve Nickell estimated that with the current number of EU unskilled immigrants unskilled wages would be two per cent lower than otherwise across the economy. If we consider that in poorer communities the density of such immigrants is around double typically what it is nationally, then both the cost of support to the local population and the wage effect will be doubled too.

Putting all these estimates together implies that a typical two-person household on 50 per cent of the median income (about £240 disposable income a week) would get a gain of 15.4 per cent in its living standard. The gain to a household on 60 per cent of median income (£300 a week) is 14.7 per cent. This would be a gain of £44 a week from Brexit or £2,288 a year.

Less well-off households will get direct benefits from Brexit worth around 15 per cent of their current income

So Brexit is particularly important to less well-off households for whom free trade and immigration control are especially relevant. Besides participating in a generally more prosperous economy, they will get direct benefits from Brexit worth around 15 per cent of their current income.

‘NO’

Molly Scott Cato
Green MEP for South West England

Molly Scott Cato

“Studies reveal that Brexit will be disastrous on our economy, having the greatest impact on the most vulnerable”

It is one of the sad ironies of the referendum that those who are likely to suffer most from the decision to leave the EU will be those who voted for Brexit. Research earlier this year concluded regions of the UK that voted strongly in favour of leaving the EU are also those with the greatest levels of dependency on European markets and on funding for regeneration.

I believe the strong Leave vote witnessed in regions of high poverty and deprivation was a response to feeling forgotten or left behind. But these are the very regions that benefit most from our membership of the single market and customs union, and receive most from the EU in regeneration funds. It is government austerity, not the EU, that has left so many areas, and the people who live there, struggling.

It is government austerity, not the EU, that has left so many areas struggling

Many low-paid workers now work in what can be called the “screwdriver economy”. The catastrophic decline of manufacturing during the Thatcher era led to thousands of factories being closed and hundreds of thousands of job losses. With many regional economies devastated, the government lured foreign investors to use the UK as an assembly base for onward sale into the EU single market.

Our manufacturers are now highly dependent on this market, and a customs union which means there are no tariffs on the trade of goods within the EU. The Tories’ plan to leave both the single market and customs union could result in companies upping sticks and moving elsewhere in Europe – a catastrophe for many thousands of workers.

DID YOU KNOW…

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Funding from the EU for regeneration amounts to some £8.4bn in the current round (2014-2020). Councils have used these funds to help new businesses start up and create thousands of jobs. Earlier this year the Local Government Association called on the government to guarantee to match what local authorities receive through EU funding after Brexit to protect the poorest and most vulnerable in society. No reassurance has been forthcoming and the country’s poorest regions face uncertainty.

Councils have used EU funds – currently at £8.4bn – to create thousands of jobs

Indeed, information and reassurances from the government are in desperately short supply. For several months I have been pressing the government to release their studies into the impacts of Brexit on at least 50 sectors of the economy.

They have consistently refused to do so, arguing it will weaken the government’s negotiating position with the EU. More likely it is because the studies reveal Brexit will be disastrous on our economy, for jobs and for public services.

Being funded by tax revenues, our public services will be devastated if our economy takes a dive post-Brexit and the Tory government gets its way on turning the UK into a tax haven. This in turn will have the greatest impact on the most vulnerable.

Brexit Britain could leave our economy in recession, resulting in thousands of job losses and lead to skeleton public services. None of this bodes well for the poorest and lowest paid.