Presumably some focus group has told the Tory spin doctors that the idea that Brexit will generate a high wage economy goes down well. After all, what’s not to like about the idea that good, honest, hard working British workers are being ripped off by a combination of stony-faced businessmen and cheap Eastern European labour.
And there are very few ideas so silly that they don’t have a grain of truth in them. In this case there are plenty of individual examples and some professions where cheap immigrant labour has prevented sensible automation or has undercut wages.
But in most professions, preventing shortages with foreign labour has also permitted additional growth that has bolstered the economy leading to higher wages on average.
In the more creative and digital sectors, the influx of talented migrants has boosted creativity not only of the migrants but also the indigenous labour force and led to the emergence of what I have called The Flat White Economy which is now the UK’s key economic driving force.
So the idea that Brexit will permit higher wages is largely, though not completely, wrong.
But not only is it wrong, but also (to misquote either Talleyrand or more probably Fouché’s comments about the killing of the Duc d’Enghien) it is a mistake. Most economists know that you can’t vote yourself rich. The only way in which living standards can be improved sustainably is by raising productivity. This can emerge from becoming more skilled or through processes being automated.
Simply raising wages without raising productivity at best leads to higher unemployment and at worst to a strengthening of the emerging price-wage spiral that may require a recession in the middle of this decade to be brought to a halt. Anyone who lived through the 1970s will know that risking a return to such a spiral is especially foolish.
So the spectacle of Tory politicians including the Prime Minister indulging in a species of hate speech against businessmen who are struggling to overcome the effects of lockdown is not only unedifying but also bad economics.
Road hauliers kept the country alive, literally, during government imposed lockdowns, despite being hit with low traffic zones, fines, removal of tax breaks and nearly inhuman Covid imposed restrictions like being held in their vehicles and not even being allowed to leave them to go to the loo.
Ministerial criticism is especially inappropriate in these circumstances – humble apologies would be more suitable. Ministers blaming the road haulage Industry, which has paid £120 million in apprenticeship levies and only received £10 million back in training grants, for lack of investment in training seem peculiarly unfortunate.
I have personal experience of setting up one of the government’s apprenticeship schemes and have seen for myself how the government’s own rules made it unworkable for the private sector.
But Ministers have reserved their worst ripostes for Simon Wolfson, founder of Next. In response to Lord Wolfson’s claim that the country needed more immigration to overcome supply shortages and secure growth the Prime Minister claimed that business had been “mainlining” cheap immigrant labour for years before Brexit.
He hit back specifically at Lord Wolfson, suggesting he wanted “uncontrolled immigration” and added that business hasn’t been investing into skills or infrastructure.
The criticism of Lord Wolfson is factually incorrect. His recent article in the Evening Standard merely echoes arguments that my Cebr colleagues and I have made persistently that the way in which immigration is currently being run in the UK manages uniquely to combine damage to the economy, harshness to those coming to the UK and maximum ineffectiveness as the flow of dinghies filled with asylum seekers arriving in Kent demonstrates.
There are better ways to run an immigration policy without simply allowing everyone in. If the government ran the country as well as Lord Wolfson runs his business we would not have the current problems.
The extent of Ministers’ apparent rage at the business sector that essentially bailed the government out during lockdown suggests a degree of paranoia in government circles.
It wouldn’t be surprising that after 18 months of fighting the pandemic which has imposed considerable stress on those in Whitehall, they have forgotten how much the country owes to the resilience of the business sector.
Often people working in Whitehall dream the illusion that they are the ones who make the country tick, especially if lockdown causes them to lose direct contact with the ordinary businessmen who do the dirty work of actually keeping the economy moving.
The decline of business representative organisations from the days when they were run by household names like Laings, Costains, McAlpines, Cadburys and Sainsburys (I was a mere minion amongst them) often replaced by commentariat chameleons angling for an honour, has added to Whitehall’s insulation from the front-line of business.
Moreover, the challenge that they have chosen for the immediate future, that of achieving net zero, will make life especially hard for the business sector and will also cut real wages anyway.
Some of the government’s announced plans in recent months, like raising taxes on both businesses and employees, and the aggressive pushing of climate change policies without ensuring the necessary infrastructure to make them work, have given the impression that through the pandemic they have lost touch with economic reality.
The attacks on business back up this impression. Unless those Ministers with relatively recent business experience can bring it to bear and shift the government back on course, the risk is that the economy will spiral out of control, with rising inflation from higher wages, shortages and government imposed costs leading eventually to a savage recession.
Like the most useful forecasts, it would be best if the warning is heeded and as a result the forecast is proved wrong.
Douglas McWilliams is Deputy Chairman of Cebr the economics consultancy which he founded. Previously he was the Chief Economic Adviser of the CBI.
