Brexit to fire starting gun on decade of economic disruption, says major report

It comes as the civil service union says Theresa May does not have courage to admit Brexit difficulties 

Joe Watts
Political Editor
Thursday 29 December 2016 01:07
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Prime Minister Theresa May
Prime Minister Theresa May

Brexit will fire the starting gun on a “decade of disruption” with the UK being hit by a perfect storm of economic uncertainty, an ageing population and volatile jobs market, a major report has concluded.

The Institute For Public Policy Research (IPPR) think tank said the decision to leave the European Union had delivered a “profound shock” to Britain. It claimed this could see the country into lasting lower growth.

The Government’s ability to deal with the challenge was also called into question, when the head of the senior civil servants union said Theresa May lacked the courage to admit the severe Brexit difficulties she faces.

Theresa May refuses to rule out making payments to the EU after Brexit

But the left-of-centre IPPR’s report said that while the country is still reeling from the impact of Brexit, a rapidly ageing population would put unprecedented pressure on its ability to deliver services.

Exceptional advances in technology may make a small number of people very wealthy, it said. But increasing automation was set to risk some 15 million jobs and inequality was also set to soar more generally.

International factors such as diminishing US power, climate change and rocketing demand for dwindling natural resources would further exacerbate pressures at home, it added.

“By 2030, the effects of Brexit combined with a wave of economic, social and technological change will reshape the UK, in often quite radical ways," said the report's author, Mathew Lawrence.

“In the face of this, a politics of nostalgia, institutional conservatism and a rearguard defence of the institutions of 20th century social democracy will be inadequate.”

He added that Britain would be left “defending sand castles against the tide of history” unless it pursued a more progressive political and economic reform agenda.

Painting a grim picture of the years ahead, the report argued that Brexit was likely to exacerbate longstanding economic weaknesses in the country, such as its low productivity rates. Along with significant new barriers to growth, it would mean future governments will rely on a weaker currency as the key to retaining competitiveness in the 2020s, it said.

At the same time such an approach will increase consumer costs and hit living standards, the IPPR said. Overall, it argued that growth is expected to be lower, investment rates worse and the public finances weaker as a result of the decision to quit the EU.

It came as Dave Penman, general secretary of the FDA, the civil servants union, said the Prime Minister’s inability to talk openly about the complexity of Brexit was putting huge strain on Whitehall.

Mr Penman, who represents some 19,000 members, said: "It is pure politics that is defining the Brexit debate and forcing May to say this is not a big, difficult job, and it is all in hand.

"Ministers lack the political courage to admit how complex and time-consuming this will be."

As he argued for more resources for the civil services, he said: "When anyone pops their head above the parapet ... and says this is going to take a long time and it’s complex, they are immediately shot down and accused of betraying the will of the people.

Theresa May refuses to comment on suggestions Brexit deal will take 10 years

"The politics around Brexit are the biggest risk to Brexit. The Government is clearly in a situation where they are trying to deny the complexity of it."

Other exacerbating factors would disrupt Britain’s future for years to come, including its ageing population, the report said.

The number of people aged 65 and over is predicted to rise by a third by the end of the next decade, imposing new strains on an already cash strapped system. The funding gap for adult social care is expected to hit £13bn by 2030-31, the report said.

Meanwhile, “exponential” improvements in new technologies in the workplace, such as artificial intelligence systems and machine learning, will radically change the way people work, putting two-thirds of current jobs – 15 million – at risk of automation, it claimed.

While the report said it would not end “work as we know it”, who benefits from the changes and who loses out would depend on politics, which was likely to become increasingly assertive after decades of a liberalising consensus.

While there was the potential to create an era of widespread abundance, the changes could also usher in a “second machine age” resulting in radical concentrations of economic power, it said.

It also predicted that work is likely to become more insecure and more freelance, while inequality is set to increase sharply with the wages of high-income households forecast to rise 11 times faster than for those on low pay.

All the changes will take place against an international backdrop of growing uncertainty, as the American hegemony which underpinned the post war international order fades and the global south rises in economic and geopolitical importance.

Mr Lawrence said: “Britain’s progressives should be ambitious, seeking to shape the direction of technological and social change. We must build a ‘high energy’ democracy that accelerates meaningful democratic experimentation at a national, city and local level, and also in the marketplace by increasing everyone’s say over corporate governance, ownership and power.”

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