Nick Clegg faced a furious backlash yesterday evening as he was rounded on for claiming food prices would jump after the UK leaves the EU.
As a new report reveals the creeping cost of the EU customs union and inflation figures due this morning are set to show price rises running at their highest level in two years, one economist accused the former deputy prime minister of “scaremongering of the worst kind”.
Conservative MP John Redwood added Clegg “has been wrong about all his forecasts” and hadn’t properly “thought through” his claim that food prices would be hit “with a triple whammy of punishing tariffs, customs checks and workforce shortages” after Brexit.
The clash comes as the battle over the UK’s position with regards to the Single Market and the EU Customs Union rages at the highest levels of government. Research by the Economic Policy Centre, published today, look set to fan the flames of that debate, as they show the EU’s common external tariff, which charges an EU-wide levy on imports from outside the bloc, raked in more than £3bn from UK consumers, with one-third coming from import taxes on clothes and food. Only 20 per cent of the collection stays inside the UK, with the rest being sent to Brussels.
The paper also shows 1,500 new tariffs have been introduced since 2009, taking the total number of levies to more than 12,500. Dan Lewis, head of the think tank, said the costs of the customs union hit the poorest consumers hardest as campaigners pointed to the possibility of ditching the taxes on imports from outside the EU to reduce costs for British households.
Read more: What now? The EU and the Single Market
Shanker Singham, director of economic policy at the Legatum Institute think tank also attacked Clegg’s argument. “It’s a ludicrous position to take,” he told City A.M..
He continued: “It’s saying ‘we’ll assume all the worst things happen and none of the best things happen. It’s scaremongering of the worst kind.
“The UK, out of the EU, has an opportunity to do what it cannot inside: eradicate the common agricultural policy (CAP) and common fisheries policy (CFP). The reduction in food prices from actually having a competitive market in agriculture, which we have not had since we joined the EU, will far outweigh any effect of the change in the value of sterling.”
The Institute of Economic Affairs also argued UK consumers would be better off after breaking free of EU agricultural regulations, while Syed Kamall, chair of the Conservatives’ delegation in the European Parliament told City A.M.: “Food should end up cheaper in the long run outside the EU’s CAP if people no longer have to pay twice through higher taxes and higher prices.”
However, economists said consumers should prepare for a period of rising prices over the short-term as a result of sterling’s depreciation. Yael Selfin, head of macroeconomics at KPMG warned the sharp rise in inflation, which is expected to approach three per cent by the end of next year, would be a “permanent” hit to consumer’s purchasing power. She added: “Quite a lot of people will be able to buy less with what they have.”
Vicky Pryce, an economist at the Centre for Economics and Business Research (CEBR) also said rising prices would leave a longer-term scar on UK consumers: “In some areas we might end up paying slightly less [for food imports] ... but what you’ll probably see if the pound continues to be weak is anything we gain from leaving the EU will be lost, since the weak sterling completely offsets any gains that we would be getting.”