Britain outside the European Union will enjoy much cheaper imports. That’s one of the threads running through arguments for Brexit.
Outside the high walls of the EU’s economic fortress, we can scour the Earth for the cheapest stuff on offer, buy it and and bring it home to consume, saving ourselves billions of pounds.
This policy fits well with a country that is coming to terms with low productivity growth and with it, only stumbling increases in average wages. Low productivity and low wage rises are with us until at least 2023, according to the Treasury’s economic forecaster, the Office for Budget Responsibility (OBR), in a report accompanying the budget.
The Institute for Fiscal Studies, in its role as chief budget watchdog, warned that the OBR analysis showed that average wages would still be well below their 2008 level in the middle of the next decade, when adjusted for inflation.
What better solution is there, when earnings are flat, than to ditch the EU’s punitive tariffs and make the monthly salary go further?
Trade secretary Liam Fox has talked about the benefits of tariff-free meat from South Africa, wine from New Zealand and chicken from the US. It would cut the price of the weekly shop and mean that wages stretch further.
Fox, who has stayed out of the limelight since he was ridiculed for launching a new board of trade with only himself as an official member (though he did emerge this month to defend the benefits post-Brexit of chlorinated chicken imports from the US), believes that Britain’s entrepreneurial spirit has been strangled by the EU and its protectionist tariffs.
A lower exchange rate is the spur for growth, but has the knock-on effect of increasing inflation. And that is killing growth at the moment. However, the effects can be mitigated by taking away the tariffs and allowing globally-sourced cheap stuff onto supermarket shelves.
Of course, this presumes that British businesses remain strong enough to benefit from their newfound freedom to trade with whoever they want.
If Fox had listened to the Bank of England’s chief economist Andy Haldane, he would know about the UK’s reliance on a small proportion of highly productive companies and the long tail of largely unproductive “zombie” ones that tick along without making much money or paying their workers much in salary, pension or other benefits.
He would have looked at official figures last week showing that Britain has seen a stupendous growth in the number of graduates – from 24% of 21 to 64-year-olds (not in education) in 2002, to 42% in September. Yet, more than one in three (37%) of those who graduated more than five years ago are languishing in non-graduate jobs. Almost half of those who graduated in the last five years are in non-graduate level jobs. This is not only a waste of talent, skill, and potential, it means that Britain is far from ready to compete.
And the problem is not just confined to those who succeeded academically. Teenagers looking for a route into the jobs market via apprenticeships have been turned away in their droves since the government brought in its new levy system.
The levy acts like a tax on employers who get the money back when they take on an apprentice. But employers report that they simply don’t understand the way the levy works and all the paperwork that goes with it.
A 59% fall in those taking up trainee posts since the scheme was launched should shame Greg Clark, the business minister who will on Monday outline his plans for a new industrial strategy. It’s a racing certainty that he will ignore this fact as he lays out his meagre plans for a railway line here and a widened road there.
Education is a key element of the UK’s infrastructure. So when just 48,000 people started an apprenticeship in the final three months of the educational year to July 2017, compared with 117,800 in the same period a year before, it is easy to see that he has a mountain to climb.
Fox will no doubt argue that his drive for trade deals would increase the demand for skilled staff and that fact – almost on its own – would create the demand and the training needed to generate a skilled labour force.
The trouble with this argument is that there are huge time lags between winning new business and being able to meet the customer’s requirements with better trained and managed staff.
And as long as the zombie companies have poorly trained managers and under-skilled staff, is it any wonder that the banks are reluctant to lend them more money? Much better to lend it on property.
Which brings us back to the budget. The chancellor, Philip Hammond, made sure that property continued to give a better return than investing in the real economy after he cut stamp duty on homes worth less than £300,000 for first-time buyers and promised to support some extra building.
The share prices of all the major developers and the big estate agents jumped. Was there any cash to help apprentices earn more than £100 a week or to help employers deal with an apprentice system in crisis? No. But don’t worry. The UK’s economy is like a coiled spring, ready to go.