Thursday, 21 September 2017

Two optimistic forecasts of the effect of Brexit on the UK if May gets it right.

Consider what happened when we entered the Common Market as it then was in mid 1973. will these effects not be reversible in part or totally? In my view they will to the benefit of the people of the UK.

The most obvious was the rapid rise in food prices as we lost cheap world food produced by efficient Commonwealth farmers and had to buy expensive European food produced by inefficient farmers constrained by restrictive practices and legislation.

I wrote about this earlier in a piece entitled Brexit will benefit the poor. I reproduce it below.

One of the inconvenient facts ignored by HMG in 1972/73 when Heath dragged us into the Common Market supported by the votes of the bien pensants like Shirley Williams and Roy Jenkins later the very well paid head of the EU commission was the forecast that the cost of food would rocket as we lost cheap supplies from the Commonwealth and had to buy expensive European food. I well remember how difficult my friends mothers from our poor part of Edinburgh found it to feed their families in the years 73-76. The poor have to spend proportionately more of their income on food to stay alive than the claret quaffing Jenkins or the great dynastic socialist Williams.

This was no scaremongering. I give the RPI index percentage increase for the years 72 to 76  which clearly shows the effect of Common Market entry on the cost of living.


The cost of living measured correctly by the RPI almost doubled in years following the tabling of the Common Market entry Bill. It set off an inflationary spiral leading eventually to the collapse of the Callaghan government and Thatcher becoming PM.

(Note for Paddy Ashdown & Major Warry these are official government figures and therefore fact not LibDem dodgy forecasts or North's overheated imagination.)

We will see the reverse when we leave the EU as noted in today's Sunday Telegraph in a piece by Edward Malnick sourced from a Labour leave group of economists and therefore opinion Paddy It is entitled:

Poorest families could save £36 per week after leaving EU

The £36 is for the lowest decile. The second lowest decile, 60% of the median  would gain£44 per week. Now these are estimates but I doubt they will be far out.

The second major economic change that took place in 1974 was seaborne trade switched from  deep sea via West Coast ports principally Liverpool to short sea European trade, Felixstowe was just the end of a railway line in 1972. Today it is one of the biggest container ports in the UK. Liverpool was slaughtered helped by bolshie dockers. I was working in Liverpool at the time and it was dreadful to see the demise of a great port but it can and will come back after Brexit. Liverpool is still backed by the great industries of the Midlands and the North West and great links to the Eat American ports. Look at the Cunard building in Liverpool to see what can be done. Already Liverpool is regenerating and this will accelerate.

A resurgent Liverpool will create a real Northern powerhouse. Liverpool was the wealthiest city in Victoria's Empire. The money for the Tate gallery in London came from the Liverpool sugar trade. A huge amount of cotton is still traded through the Liverpool Cotton Exchange. Free trade, not planners will remove the North South divide which so damages our country. Free from the EU our trade will flourish, our wealth increase and social divisions lessen..


Niall Warry said...

The trading picture for 'World trade' since 1974 has changed a great deal so one is not dealing with the same dynamics.

Read Dr North's monographs and learn.

Eric Edmond said...


Eric Edmond said...

If Major Warry and his idol North could produce some data to back up their words I would respect their arguments more.

Niall Warry said...

If you got your head out of your arse and read his monographs with an open mind you might learn something new :-)

I hope you and your wife are still up for lunch in Yeovil despite our differences over the best type of Brexit this country needs to avoid economic melt down.

Blind stoat said...

Dr Edmond, I feel that you are somewhat over-simplfying the ecomomic consequences of joining the Common Market as it then was. Yes, there clearly was an impact on food prices, but membership of the EEC was not the sole cause of inflationary pressures in the mid 1970s - as I'm sure you are well aware.

Eric Edmond said...

I was in the civil service at the time. Heath's government did not believe they could run the country. I do not know if Heath had ever read the Treaty of Rome but many ministers certainly had not. Heath was duplicitous saying joining the EEC did not mean we were giving up our sovereignty. That was a lie on a par with Wilson claiming after devaluation in 1967 that it did not mean the pound in your pocket was now worth less. In both cases the truth was the exact opposite.

Blind stoat said...

Yes, I completely agree that Heath lied and misled both Parliament and the public. But, the fact remains that, even if we had not joined the common market, the UK would probably still have faced severe inflationary pressures in the period 1973-79.

The combination of the spike in oil prices and excessive public (and private) sector wage increases would almost certainly have triggered upwards pressure on prices (including foodstuffs) - with or without membership of the EEC.

Stephen Harness said...

Having to impose VAT (73) and also decimalisation (71) also pushed up prices. VAT had its own burdens. Also oil crisis after oil crisis in the middle east also played a part. That said the EEC was an invasion by stealth and the imposed legislation has resulted in lost industries and more expensive food. Good blog from Eric.

Eric Edmond said...

I agree with Mr Harness and Mr Stoat. Heath was a disaster as PM

Stephen Harness said...

All is well. May has spoken. Adrift without a paddle or compass.

Niall Warry said...

May has spoken to save a Tory rift before the conference - period.

George Gray said...

Dr Edmond, you are of course correct in principle to argue that EU membership restricted our access to Commonwealth imports and thus had an effect on food prices, but may I offer some friendly and hopefully constructive advice and suggest that the years 1972-76 are not actually the best ones to back up this argument and that in fact you should be using figures from the years immediately afterwards?

Why do I say this? Well, because in 1971, thanks to some very skilful and persistent lobbying by those plucky Kiwis, who were so rightly horrified at the prospect of losing their major export market overnight, the so-called Luxembourg Agreement was signed, putting in place a transitional arrangement (where have we heard that before?) for the period between the UK's EU entry at the start of 1973 and going up to 1977.

Under the Luxembourg Agreement, quotas were put in place gradually reducing New Zealand's dairy exports to the UK each year up to 1977, as a percentage of the minimum guaranteed NZ dairy exports to the UK previously agreed in the 1966 UK-NZ Trade Agreement. In the case cheese, the reduction was steep (90% of the 1966 figure in 1973, 80% in 1974, 60% in 1975, 40% in 1976 and down to 20% by 1977), but in the much bigger and more important butter sector, the initial reduction was actually much less severe (96% in 1973, 92% in 1974, 88% in 1975, 84% in 1976 and still as high as 80% - amounting to 136,000 metric tons - in 1977).

The agreement was renewed several times for NZ butter after 1977, but with ever-further reductions in the quota. Thus it is after 1977 - or at the earliest from about 1976 when the quota was dropping towards the four-fifths level - that we see the inflationary effects of ever greater restrictions on NZ butter really start to kick in.

If one therefore consults the detailed RPI, food sector by food sector, for the period 1969-1982, the price in new pence for 250g of imported butter is very interesting in several respects:

1969 9.7p
1970 10.1p
1971 14p
1972 15p
1973 12p
1974 13p
1975 17p
1976 23p
1977 30p
1978 34p
1979 38p
1980 44p
1981 46p
1982 50p

This shows, first of all, that there was considerable inflation in the price of imported butter in the three years before EU entry, but the price actually dropped by 20% in 1973 and did not show a huge increase in 1974, when, as you show, inflation was running generally at 19.1%. At the end of the UK's second year in the EU, imported butter cost 2p less per 250g than it had cost in the year immediately prior to EU entry - but this was not so astonishing when you consider that at that point we were still allowed to import 92% of the amount of NZ butter that we had been allowed to import prior to EU entry.

But then, as the quota continues to be reduced, the price begins to shoot up. In 1975 it is still only 2p more than in '72, but look at that '76 figure. Now things are really beginning to tell. But - and here is where I think it is more instructive to use the figures from 1976 onwards rather than the figures leading up to 1976 - from 1976 to 1978, the overall RPI was on a downward spiral -

1975 - 24.9%
1976 - 15.1%
1977 - 12.1%
1978 - 8.4%

But now cross-reference those figures with the figures I gave earlier for butter imports. In the same period, 250g of imported butter went from 17p in 1975 to 23p in 1976, 30p in 1977 and 34p in 1977, exactly doubling in just three years while the rate of inflation generally, though still high, was coming down rapidly.

As Mr Harness points out, there were many other factors at play besides food prices in the huge inflationary spiral during the years that you quote. But in the years immediately following that, the rate of inflation was falling and yet things like imported butter were rising sharply in prce, and that is why I think it is a more effective to focus on that latter period to make a strong argument about the consequences of EU entry on food prices.

G said...

I've just spotted a typo in my previous post - line three of the third paragraph. It should read "in the case of cheese", not "in the case cheese".

I would be keen to hear your take, Dr Edmond, on the points I've made. As I wrote previously, my intention is to bolster your overall argument, which is correct. I just feel that tactically the figures from the years 1976 onwards provide better weaponry against those who would seek to oppose that argument.

George Gray said...

I don't know why my keyboard signed me up as "G" in that last post, I thought I'd typed my full name. Will leave the initials to James Bond's superiors and try again :)

Eric Edmond said...

Thank you Mr Gray for your helpful and full reply. EYour methodology is correct and I would that others tried as you do to support your argument with proper data.

I must confess as someone who lived through these years these prices set of an inflationary spiral that lasted into the Thatcher years.

I well remember the All Blacks rugby tour of the UK in late 72 early 73 when Heath was selling us out and the Kiwis in the crowd chanting give em the E E C and they did.

It was a sordid sell out of a country whose young men had fought and died for us in two world wars orchestrated as is happening now by the FCO. Awful!