Watching Alastair Campbell smarting about Brexit on the BBC’s Question Time panel last night made me smile. He can carry on about lying politicians, but if it weren’t for a massive miscalculation by his old boss, I am not sure that Leave would have won the 2016 Referendum. It was Tony Blair’s decision to allow immigrants from the former Soviet bloc countries (A8) which joined the EU in 2004, to move to and work in the UK, that drove many working people to vote to leave the EU.
Most of the other wealthy EU members restricted employment of workers from A8 countries, which was allowed under the EU’s Accessions Treaty of 2003. They probably had a better idea about the disparity of wages between their countries and the new ex-soviet member states. Even EU countries such as Germany, which only allows access to its social security system after five years of employment, limited eastern EU immigration so as not to disrupt their jobs market.
It is strange that a Labour Party Prime Minister didn’t think about what this immigration would do to the incomes of his own supporters. Maybe he thought his programme to increase university education would turn the whole UK population into lawyers and accountants so we would need to import low skilled workers? Maybe his advisors told him that as few people from the wealthy EU countries had moved to the UK, this would also hold true for the new Eastern EU countries. Trying to predict the future based on the past is always difficult, but impossible if the statistical population has changed dramatically. Had Blair’s advisers calculated the after-tax wages in the A8 countries and adjusted for cost of living differences, they might have realised that their estimates of annual net A8 immigration of between 5,000 to 13,000 was out by miles. Between May 2004 and June 2006, 427,000 A8 workers had registered to work in the UK. Almost one million A8 immigrants had arrived by the end of the Blair/Brown government in 2010.
In terms of Blair Government dodgy dossiers, the Report that predicted 5,000-13,000 net annual immigration takes some beating, even by Campbell. But Government ministers believed it. Home Office Minister Beverley Hughes told MPs: “The number coming here for employment will be minimal.”
By the time of the Brexit referendum in 2016, the A8 immigrants had been joined by immigrants from Bulgaria and Romania (A2) in 2007, then by many unemployed Greeks and Italians after the collapse of their economies in 2009/10, and finally by Croatians who joined the EU in 2013. Incredibly, in 2016 the Cameron Government thought there were 3.5 million EU citizens living in the UK but as of 31 March 2023, 7.2 million EU citizens have applied for UK settled status. That is more than 10% of the UK population. And while their estimates were better than the Blair Government’s estimates, the Cameron Government was still out by a factor of 2.
Reasons for Leaving
I volunteered to do telephone canvassing for Vote Leave in the run up to the Referendum in 2016. They used a random dialling system similar to those used by insurance companies for cold calling. This was eye opening. I spoke to people all over the country – from truck drivers to factory workers to dinner ladies to retired bank managers. I supported Brexit from a macroeconomic perspective, since I knew all about the EU’s rigid, one size fits all, regulatory system. I quickly discovered that my economic knowledge was unnecessary for the task of selling Brexit.
Most of the people I spoke to had already decided that they were going to vote leave and they knew why. The idea that they were influenced by Russian bots or a big red bus is laughable. Listening to people’s personal experiences of having their wages undercut by eastern EU immigrants, their chances for promotion and employment security removed, all while their collective bargaining power was destroyed, was a revelation. Most claimed they hadn’t had a pay rise in 10 years and said if they asked for one, their employers threatened to replace them with an EU immigrant who would work for less.
Many Remain supporters were employers rather than employees, who benefited from cheaper labour for their businesses or for their lifestyles such as cleaners and nannies. Lord Rose, the Chair of the Remain Campaign, let this cat out of the bag in a debate before the Referendum, correctly stating the economic fact that reducing the number of workers from the EU would increase the price of labour – something he saw as a negative. The Press shortened his statement to something like ‘Rose claims Brexit will increase wages’ and called it a gaffe. This was not a gaffe, but it was something that every Leave voter I spoke to while telecanvassing already knew.
Thus, without Blair’s spectacular miscalculation as to how many people would immigrate to the UK under the EU’s free movement of people, I doubt that Leave would have won the referendum. While many Leave voters wanted their sovereignty back, a lot of people just wanted a pay rise or a promotion and knew that only stopping unrestricted immigration would enable this. And this was not racist, almost all of the A8, A2, Croatian, Italian and Greek immigrants were White Caucasians, as are 85% of the UK population. The problem was the excess supply of labour driving down wages.
Some Remainers never change
On Wednesday the ONS published the UK’s inflation figures for May. Although the headline figures were unchanged, the CPI for goods fell while the CPI for services increased. An increase in service CPI will mainly be due to an increase in wages. This is a good thing. This gives employees more money to pay their own bills and not have to ask for government assistance via Universal Credit, or to pay their energy bills, or even their mortgages.
After 15 years of depressed wages, the UK’s golden period of a cheap service economy appears to be over. Now UK workers can strike for higher wages without fear of being replaced by someone who will work for less, and workers from train drivers to hospital staff have been doing so. The growth in average regular pay was 7.2% in February to April 2023 – the largest growth rate outside the pandemic period (Apr-Jun 2021).
So, it was revealing to read in The Daily Telegraph on Thursday 22nd June 2023 7:24am, that former Conservative Chancellor in Theresa May’s Government, Lord Hammond, had told LBC in an interview that ‘relaxing immigration could help deal with record rises in wages across Britain by creating more competition for jobs and lowering workers’ ability to push for pay increases.’
Hammond wants to use immigration to lower workers ability to get pay increases! This probably shouldn’t be so shocking considering the May/Hammond Government spent three years trying to frustrate Brexit. But as a former Chancellor, Hammond should know that the government expects to spend £230 billion on benefits in 2022/23.
Importing unlimited numbers of workers may be good for employers, but UK taxpayers end up footing the social and economic bill for inadequately paid labour. Leaving aside the demands on housing, infrastructure, energy and healthcare, the cost in taxpayer-subsidised low wages alone is staggering. The Universal Credit standard allowance starts at £292.11 per month for a single person under 25 and goes up to £578.82 for a couple over 25, plus an additional £315 for a child born before 2017 and another £269.58 for children born after 2017 and £269.58 for each subsequent child. You can claim back 85% of your childcare costs if you are working, up to £646.35 for one child and £1,108.04 for 2 or more children. There are many more payments listed on the Universal Credit, ‘what you’ll get’ website. There is also a new ‘Cost of living Payment’ for low-income households of up to £1350, apparently over eight million low-income households received this support in 2022. I could go on, but I suspect you get my point. Taxpayers should not be subsidising employers. The government needs to lower its welfare bill: only higher wages which take people out of the benefits system will do this.
Both the Conservative and Labour parties seem happy to take money from companies which they claim are making excessive profits by imposing windfall taxes; but they are strangely reluctant to let employees lower a company’s profits by getting higher wages, even when this would also lower the Government’s welfare bill. If wage demands are too high, then companies will employ fewer people or mechanise, which lowers employment, causing wages to fall.
Markets have a way of finding an equilibrium if they are allowed to work. Government interference in the labour market has been an expensive and failed experiment which should not be repeated.