Brexit Challenges


Before the government enters into Brexit negotiations there needs to be an informed debate about the trade-offs involved, says Martin Walker, Professor of Finance and Accounting.

During the Brexit referendum, there was a heated debate about immigration. Sadly, the standard of the debate on this issue was extremely shallow, with ‘remainers’ often accused as being traitors to their country, and ‘brexiteers’ accused of being racist.

However, before our government enters into complex negotiations with the EU Involving a trade-off between restrictions on immigration and access to the single market, I think it is vital for the country to understand the issues involved. There needs to be an informed debate about the trade-offs involved.

Four key points need to be taken into account when thinking about this:

*Properly planned and controlled immigration can bring significant benefits to the UK economy as a whole.

*In particular, immigration from the EU countries appears to have contributed more fiscal benefits to the UK than immigration from outside the EU. This is demonstrated, for example, in a paper published in the Economic Journal in 2014 by Christian Dustmann and Tommaso Frattini which finds that “immigrants from the European Economic Area (EEA) have made a positive fiscal contribution, even during periods when the UK was running budget deficits, while non-EEA immigrants, not dissimilar to natives, have made a negative contribution”.

*The costs of immigration tend to be somewhat localised. So some parts of the country have to deal with the costs of immigration while other parts of the country enjoy the benefits whilst suffering few of the costs.

*To some extent, the costs of immigration are aggravated when the speed of immigration is unusually high. It becomes very difficult to plan housing, local services, health services, and the provision of school places in local areas experiencing very rapid increases in immigration.

Mitigating the costs

These four points have important implications both for managing the country and for managing our negotiations with the EU.

First of all the country has to find more intelligent ways of mitigating the costs of immigration. We need to put in place policies designed to ensure that local communities experiencing above average levels of immigration are not damaged.

This requires policies to, among other things, build more houses, increase school places, and improve local hospitals so as to accommodate increases in local populations.

Reasonable limits

Second, we need to explain to our partners in the EU that whilst we are willing to allow reasonable levels of immigration from the EU into the UK, there are reasonable limits on the speed of immigration that our economic and social systems can tolerate. There has to be some sort of emergency brake to limit the speed to immigration into the UK.

In addition, I would suggest that we should insist that any deal that we strike with the current members of the EU on this matter does not include any countries that might join the EU in the future. It would obviously be ludicrous to allow the EU to use the benefits of being allowed to work in the UK to attract new member states.









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