We voted 'Leave' – what now?
Created on Friday, 24 June 2016 12:28
The votes are counted and the UK has voted out of the European Union. Scaremongering campaigns and spin aside, what does the decision actually mean?
Here’s a plain English guide to some key issues.
EU membership cost £188 million pounds a week, not the £350 million touted by the ‘Leave’ campaign. But that money will now be available to the Government.
With the currency plummeting to 1985 levels, foreign goods are more expensive to buy, which will push up inflation, but our goods are cheaper and more attractive for foreign companies to buy. This may well lead to high levels of unemployment, which will also seriously affect the UK economy. Energy prices, a key part of most household budget considerations, will rise, and that will in turn affect other parts of the economy.
House prices have fallen, which is bad news for homeowners but good news for first-time buyers. This is not necessarily a direct result of the decision to leave: due to uncertainty in the short term and the poor currency rate, fewer people will move house.
The Bank of England’s response will determine many factors. If they raise interest rates, mortgages would rise, by around 1%. Rent costs would also rise due to both demand and increased landlord costs. But if they decide to cut mortgage rates, such forecasts would be wide of the mark.
Suggestions that families ‘will be £4,300 worse off’ are meaningless. That figure was based on a Treasury calculation that the economy would shrink by 6.2 per cent, with that figure then divided by the number of households in the UK. This is obviously not exact science. Every household in the UK, as with every area of the UK, will be affected differently.
We’ve seen dozens of different projections about wages, with figures such as ‘£780 a year worse off for typical workers’ and ‘3% worse off’ and so on. While we remain in the EU (which we will for two years) such predictions are simply that, guesses.
If economic growth is slower outside the EU – and there is no evidence as yet to suggest it will be – the welfare budget, which takes up 28% of the Government’s budget, will almost certainly be affected. This means some families relying on benefits will see their income fall.
In terms of migration, there are ‘tentative proposals’ being discussed to ‘fast-track the removal of African migrants’. Any such discussions are at a very early stage, and it’s unclear what other proposals are in place, or what might happen.
We’ve also read lots of things about human rights being affected. The fact is that the European Court of Human Rights is separate from the European Union. On the other hand, we will soon no longer be bound by judgements from the European Court of Justice.
You probably heard the phrase ‘taking back our borders’ being bandied about by the ‘Leave’ campaigners. The truth is that this was a matter that could’ve been dealt with whilst the UK was in the EU. There may now be a move to increase security at different points, but the relevance of this issue to EU membership has been overblown.
However, we may now see bendier bananas and beefed-up hoovers. The EU outlawed ‘abnormal curvature’ of fruit and vacuum cleaners ‘with an input power of more than 1600w’.
The truth is that there are so many interlinked and unresolved factors at play, and such levels of uncertainty, that it’s impossible to meaningfully calculate many outcomes. New individual trading tariffs will need to be agreed, almost certainly after lengthy and argumentative negotiations. The 27 EU member countries can drag their feet over all kinds of existing arrangements. There are lots of issues that will need to be resolved over the next two years, and no-one could be expected to understand all the permutations.
In summary, there is, and will be, economic uncertainty for the foreseeable future, and the Bank of England will act at some point in an attempt to limit damage or move the economy in the right direction. Jobs, wages, house prices, energy prices will all be huge issues. Beyond that, a lot of it’s guesswork.