In this short article, Oxford macro-economist, Simon Wren-Lewis explores how Brexit will constrain a future Labour government.

Source: mainly macro: How Brexit will constrain a future Labour government

This is a good article and well worth a read. It’s worth dwelling on the massive tax increases that a future Labour government will need to levy to meet their commitments to increased public spending. But on the back of a worst-case Brexit outcome, this could be truly draconian.

Simon Wren-Lewis concludes:

‘The hard truth is that any deal which avoids serious economic costs for the UK is going to make most of the 52% pissed off. And they will remain pissed off until either we reduce immigration, with the economic costs that will bring (less schools, less hospitals, higher taxes), or senior politicians start being honest about the benefits of immigration’.

Imagine three Brexit outcomes:

1. Best Case
2. Median Outcome
3. Worst Case

So if we get, a Far-Left Labour government post Brexit the new outcomes become:

• Best Case Brexit + Increased public sector spending financed by higher taxes
• Median Outcome Brexit + Increased public sector spending financed by higher taxes
• Worst Case Brexit + Increased public sector spending financed by higher taxes

But as Simon Wren-Lewis concludes politicians need to start being honest about the benefits of immigration, otherwise everybody is going to be unhappy with the economic consequences.

Thoughts?