In a confusing own-goal, Brexit Secretary David Davis has threatened the European Union with extra VAT and customs fees, should it ‘fail’ to hand the UK a good post-Brexit customs deal. The move is intended to scare European manufacturers, & relies on them to pressure their domestic governments to give-in to UK Brexit demands. If extra VAT and customs fees were in-place, European businesses would find themselves on par competition wise, with other non-EU countries, and potentially disadvantaged in the future, if the UK were to strike up new free-trade agreements. However, that’s where the cleverness ends – David Davis has walked into a trap.
Unlike the Conservative party, ministers and trade negotiators around Europe will see right through the bluff, they are fully aware of the low wages and inflationary pressures that the UK currently faces.
Families around the UK have suffered the longest period of sustained wage depression in modern history, since the financial crash workers have seen their real wages decrease by 10.4% on average, a figure only rivalled by Greece. Meanwhile, the general cost of living has been increasing, between 2008 and 2013, the cost of living increased 25%. Between 2013-2017, we’re all aware of the yearly increases in energy prices, rail fairs, and most importantly – our chocolate bars shrinking, termed ‘shrinkflation’. The recent drop in the value of the pound, since Brexit, has added a considerable cost to UK imports. The UK is dependent on imports to feed the nation, rising supermarket costs have pushed inflation to 2.7%, with that figure to go beyond 3% next year, as the Pound reaches parity with the Euro.
All the above is rather technical, but in real-terms, by slapping on more VAT & customs fees, the Conservatives are about to make your weekly shop even more expensive. Perhaps 10%-15% more so. As with all Tory VAT-hikes, it will be the customer who foots the bill.
With the ‘just about managing’ families barely managing to pay the bills, David Davis is willing to make their lives miserable for his own fanatical Brexit games. But his threats don’t stop at your weekly shopping bill. There are hundreds of thousands of UK manufacturing jobs that rely on a smooth customs operation with the EU. Many vehicle parts are made in the UK, and sent to Europe, and vice-versa. A breakdown of the current customs arrangement would lead to lengthy delays in transporting goods to-and-from the UK & Europe, with tariffs and taxes placed on items travelling both ways. Such an arrangement threatens UK jobs, as European manufacturers relocate factories to the continent, to avoid extra red tape and costs. Unfortunately, the Conservative government have failed to diversify our economy, leaving our own manufacturing sector uncompetitive in a trade-war scenario.
In the longer-term the UK would negotiate its own trade deals with 3rd party nations, however such trade deals could take between 2-10 years, depending on the complexity. That would be an average of 5 years of inflation, coupled with stagnating wages, a reality intolerable to those just getting by. Furthermore, the number of trade deals the UK would need to replace the lost European trade would be significant, a tall order for a government who can’t even write a decent manifesto.