How UKIP could seriously damage your wealth (High Peak Liberal Democrats)

How UKIP could seriously damage your wealth

December 9, 2014 2:37 PM
By Kevin Hannon, Chairman of the European Movement's Midlands branch in The Euroblog
Originally published by East Midlands Liberal Democrats

If UKIP gets the UK out of the EU will that reduce immigration into the UK? Yes, it certainly will. But the side effects could reduce much more than the UK population.

The effects of UKIP policy would take time to fully reveal themselves. They involve great risks. They could well unfold as follows.

Phase 1) The UK Economy Wrecked.

Immediately after the UK decides to leave the EU there's a run on the pound sterling, so that we get another devaluation. Devaluation would trigger off price rises of imported goods, most immediately fuel supplies of petrol and gas. Share values, especially of UK firms, would fall sharply; perhaps not as far as an outright stock market crash, but serious nevertheless. Foreign direct investment would cease, as would most domestic investment, and then go into reverse. Many international companies have already said that they will leave the UK if it leaves the EU. They would be joined by many others who have not yet gone public in their views. Foreign trade would drop steeply because the whole future of UK trading relations with the EU (½ our foreign trade) would have been thrown into a legal limbo. There would be negotiations, confusion and uncertainty for years to come to add to the exchange rate volatility of the pound. Pricing of trade goods and services into and out of the UK would become uncertain, hazardous and expensive.

Phase 2) EU Migrants and UK Workers Leave.

With currency, stock market, investment, trade all in turmoil and tumble unemployment would swiftly rise as the economy contracts. We know that almost all EU migrants are in the UK to work: so if the work goes they will go. EU migrants are mainly young, active, mobile people, many are well educated, and with the whole of the rest of the EU to go to. If the UK economy crashes after the Brexit they will return to the EU to find work there. Many non-EU migrants would also leave to find work. And we would have to expect that many young UK workers, especially the well-educated and skilled, with get-up-and-go attitude, will also leave to find work abroad. It's simple and obvious. If the UK economy is in turmoil and contraction, putting millions of people out of work, then many people will leave the UK. That would be a UKIP success.

Phase 3) Drastically Reduced Government Spending.

With a contracting economy, rising unemployment and perhaps millions of tax-payers leaving the country there would be a huge fall in UK tax revenues. At the same time the financial uncertainty about the UK future would force up the cost of UK treasury borrowing. It would be like after the 2008 financial crisis only much worse. We would have the sort of crisis that hit Greece, Spain, Portugal and Ireland, but without the ECB to help save us. The multiple whammy against UK government finances would force the most drastic cuts in public expenditure in modern times. Public services would have to be severely cut.

Phase 4) Pensioners Hit Hard.

Pensions would fall both in size and in purchasing power. Private pensions would fall because the stock market falls would reduce the value of pension funds and their payouts. The state pension would have to be frozen or even reduced because of big cuts in government spending in Phase 3. Smaller pensions would meet rising prices, especially for heating and food, coming from the other direction; result - falling living standards for most pensioners. Poorer pensioners, less well fed, less well heated, being looked after by fewer young people and a cut back NHS. The less well off and people on fixed incomes are usually the hardest hit by price rises and cuts in public services.

What I have outlined are only a few of the most immediate and obvious economic effects we risk from the UK leaving the EU. The long term effects are incalculable but would certainly be serious.

Leaving the EU would be a huge gamble for the people of the UK. We would risk having an enormous economic crisis and contraction. And for what? Our daily contribution to the EU is 30 pence per person. In comparison paying the interest on the national debt is about £2 a day per person and government spending is about £30 a day each. To risk wrecking a national economy for the sake of just 30p a day each would be crazy. UKIP leaflets should have a government health warning on them: "This party can seriously damage your wealth."

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