One thing I’ve never seen mentioned much in this campaign is how wage compression is causing tax receipts to be depressed, and that this is making it harder to get the budget deficit eliminated, and stop the seemingly never-ending pile up of debt.
Our membership of the EU forces us to operate an open-door immigration system to 27 other countries. Anyone with an EU passport can freely come to live and work in the UK with no restrictions. When the people coming to live here have skills we are short of and work after they settle here, there isn’t a problem. That’s good for the economy and for our society. But it’s when we allow unlimited numbers of unskilled people who all need to be housed, and have their health and other public services provided for, that we are presented with a problem.
Productivity failed to grow for seven years between the second quarter of 2008 and the second quarter of 2015. There is no precedent in economic history for anything like this. In a normal recession-recovery cycle, productivity would be growing by at least 2 per cent a year on average by now. This would in turn lead to average wages going up, and tax receipts as well. The end result would be a falling budget deficit, leading us to be beginning to pay off debt. And it is our children and grandchildren who would have to shoulder the burdens of those debts if we foolishly allowed them to continue piling up.
But we’re nowhere near getting to a budget surplus. The budget deficit was still over £70 billion last year. It’s barely halved since it peaked at more than £150 billion six years earlier. It’s not because the economy has failed to grow. The economy has grown, and is several percentage points above its pre-recession peak, unlike other countries such as Spain, Italy, Portugal and of course, Greece.
The economy is growing but failing to produce corresponding tax revenue. This has meant the Government has had to implement more austerity on top of its original plans. In his last two Budgets and the December Autumn Statement, George Osborne is implementing an additional £40 billion of austerity per year by 2019-20, none of which he planned for. This has never been mentioned by either side in this referendum campaign. The mainstream media seems content to forget all about it, as though it didn’t matter or was separate. But when tax receipts keep falling short, necessitating more austerity endlessly, how can we ignore this? How would it be responsible to turn a blind eye?
Markets are about demand and supply. If there is an oversupply of something then the price falls. In this case, it’s labour of which there is an oversupply of. The unskilled parts of the labour market, and others too, are being flooded with excess supply. This is driving down wages and causing tax receipts to keep falling short. If this isn’t stopped, the Government will implement another round of austerity, and then another, and then another. At that rate, we might never balance the budget until the 2030s. And what state would our public services such as the social care system, schools, policing and the NHS for example, all look like after such a hammering on their budgets? It doesn’t bear thinking about.
The “In” campaign want you to think that uncontrolled immigration is an inevitability that we must accept. But life doesn’t have to be this way. There is an alternative. The “Out” campaign favours the adoption of a points-based system so that we can select who comes into the country on the basis of skills. This would end the discrimination against non-EU citizens that exists in the current system. We would instead have an ethical system that would be fairer, more practical, more sustainable, and better for the economy and for society too. We could ensure wages and tax receipts go up and those nightmarish budget deficits come down and the pile up of debt halted. All we need to do is to step out of the dark and leap into the light. Vote to restore common sense to our immigration system. Vote to LEAVE the EU in the referendum on June 23rd.