Now OECD adds its concerns about the risks of #Brexit
This morning the Organisation for Economic Co-operation and Development (OECD) gave its assessment of the impact of Brexit on the UK. The economic consequences of Brexit: a taxing decision adds the Paris-based club of rich democracies to the list of international (and domestic) institutions warning of the risks of voting to leave the UK.
The list of bodies endorsing the TUC’s initial assessment in January that Brexit would pose a massive risk to jobs and investment (as well as workers’ rights) is overwhelming. It’s not surprising that, when Leave campaigner Kate Hoey MP was asked by Andrew Neil to list any reputable study suggesting we’d be better off after Brexit, all she could manage was “um…”
The most interesting feature of the OECD assessment is that it stressed that there are a number of different ways in which Brexit would damage the British economy. The likely reduction in trade with the rest of Europe is obviously the key problem, but the OECD also warned of impacts resulting from reduced foreign direct investment, skill levels, migration, business confidence and so on. That suggests that not only would jobs get scarcer, they’d also get worse in terms of quality, as productivity — already nothing to write home about — would get even worse.
There is always an element of crystal ball gazing to economic forecasts, but the way that advocates of leaving the EU pounce on the variations in the predicted outcomes overlooks the central point: they’re all bad. In the OECD’s case, they predict that Brexit would cut between 3.3% and 5.1% off GDP by 2020 and between 2.7% and 7.7% off GDP by 2030. All of those predictions are really, really bad news, especially for ordinary workers who would be hit harder than the well-off.
On trade alone, the OECD predict that — until a post-Brexit Britain could negotiate trade deals, which could be 5–10 years away — the UK would be covered by the base rules of the World Trade Organisation, meaning more expensive imports reducing our cost of living and more expensive exports meaning our goods and services become less competitive, a toxic double whammy.
The trade union movement doesn’t share all of the assumptions that inform the OECD analysis. There isn’t as much in it about the impact of jobs as there would be in a TUC assessment. But again, advocates of leaving the EU shouldn’t take much comfort from that. The OECD argues that reductions in trade would affect the supply-side of the economy and that would feed through into reduced household income. But we would argue that the impact of worse terms of trade would have its primary impact on levels of demand, which would feed through into lost jobs and lower incomes. Weaker social provision and reduced worker protection would exacerbate the hit on incomes and feedback to the economy through lower consumer demand. The result is the same — we’d all be poorer.
The bottom line in the OECD’s analysis is that the average household would be between £1500 and £5000 worse off every year by 2030. I wonder if Leave’s rich backer Arron Banks would find that a ‘bargain basement’ price for leaving the EU, too.