Don’t blame Brexit for shortages It was lockdown that drove out foreign workers

The driver of the immediate trends seems to be a lack of actual drivers — truck drivers, in particular. Where did they all go? Once again, the stuffed Brexit bear is wheeled out — but he is not very scary. Foreign labour was not scared out of Britain due to an abstract legal change; it was driven out by the Government’s lockdown policies in response to the pandemic, which shuffled many from their jobs onto a souped-up dole. Many realised that the dole is better where they came from on the continent, especially relative to the cost of living, and so they left.

Data published by the ONS shows this clearly. Between January and April 2019 — when Brexit was but months away — around 200,000 visa applications were being registered in Britain. In January and February 2020, after Brexit had happened, these numbers held up. But in March and April, as the lockdown set in, they collapsed to zero. European citizens making applications for the EU Settlement Scheme collapsed, too, from around 350,000 in January 2020 to around 50,000 in April. It wasn’t Brexit.

The truck driver shortage is hitting my home country of Ireland too — a nation that not only stayed in the EU, but has spent the last few years reminding everyone who will listen that they stayed in the EU.

On top of the exodus caused by lockdown restrictions, the lockdown also delayed the process of replacing those drivers with new ones. So if you apply for a driving test today, you will not get a date for at least six months. Given that many people fail the first time around, it is not unreasonable to say that it could take up to a year to get a licence in today’s Britain — more if you add on the time it takes to do lessons. This has led to a shortage of new drivers.

All these issues are a product of lockdown policies, unprecedented interventions in Western economies and societies outside of wartime.

Market economies tend to be pretty good at getting food on the supermarket shelves and fuel in petrol stations, if left to themselves. That last part is key: if left to themselves. Heavy-handed interference in market economies tends to produce the same pathologies we see in socialist economies, including shortages and inflation. That has been the unintended consequence of lockdown.

When they started last year, what was most striking to me — cursed as I am with an economist’s brain — was that there was no discussion of the collateral damage they would have on the economy, not just immediately but down the line. As the weeks rolled on and it became clear that the lockdown was no one-off intervention, I looked to my Left and to my Right, expecting a phalanx of economists to come out warning of the dangers to the economy. But the cavalry never arrived.

It soon became clear to me that economists had, for the most part, undertaken a swift change of career. They were no longer concerned with GDP growth, employment or inflation — instead they became armchair epidemiologists, experts on the fashionable subject of viruses.

Polling of 44 academic economists by the University of Chicago at the start of the lockdowns asked whether “comprehensive policy response will involve tolerating a very large contraction in economic activity until the spread of infections has dropped significantly”. No respondents disagreed, and while there were some notable dissidents in the world of economics, they were mostly extreme free-market types who had burned their brand in 2008.

Today we are starting to see the effect of such drastic policy interventions. It began with a massive shock to GDP in 2020 — the biggest on record. Now shortages and inflation are emerging. Soon we will see growth expectations fall — watch those stock markets carefully. We are finally paying the price for all those weeks spent at home on Zoom.

What is to be done? The politicians — having wielded too much power for the last 18 months — are tempted to play policy whack-a-mole. They talk about micromanagement of whatever is in the headlines. Shortage of young lads with driving licences? “No problem,” they say, “we will draft the squaddies.” Not enough foreign drivers? “Let’s tinker with the visa system.”

Wise policymakers should resist these temptations, which are a bit like when a person cannot face up to big problems in their lives, so instead they focus on minutiae. What happens is that the big problem tends, inevitably, to fester and worsen.

We see this sort of response in socialist countries a lot. In 2013, Venezuela was facing a shortage of toilet paper due to the heavy-handed government interferences in the economy. Instead of reflecting on their economic policies more broadly, the Venezuelan government used the army to seize a toilet paper factory. Needless to say, this did not precipitate the end of shortages in the country — but it certainly precipitated an exponential increase in censorship and repression.

The big problem in Britain, and one that risks leading us into chaos, is the massive interference in our work and personal lives that the Government now seems to regard as normal and reasonable. Every time an app pinged a person working in a coffee shop over the summer, and they had to take time off to sit around watching Netflix, the economy became that much less efficient.

Every driving licence not issued renders the economy that much less able to deliver the goods. When companies issue vaccine mandates to their staff — which has started to happen — and a certain percentage walk out the door, the number of workers in the labour pool shrinks. (If the US is anything to go by, that will include quite a few lorry drivers.)

The solution is as simple as it is blunt: stop the interventions and do your best to repair the damage done. Otherwise we are risking our prosperity. We are risking it to inflation, to low growth, to sluggish returns in our pension funds, to unemployment — you name it, if it sounds bad, it’s probably in there.

Many of the Tories in government appear to have PPE degrees from Oxbridge. If the economists could not resist the temptation to become armchair epidemiologists, then we can surely forgive the politicians for not drawing out the macroeconomic consequences before they locked down the country. But if they took anything from those degrees, please let it be the simple notion that every action has a cost associated with it — there is no free lunch. The economic costs of so-called non-pharmaceutical interventions have yet to be weighed against the public health benefits in any serious way.

The reality is that we will probably have to pay for the interventions of the past 18 months no matter what we do from now on. But how long will we remain indebted? From where we currently stand, perhaps we could pay off the piper in a few years if we quickly wind back the interventions. But if we keep blundering along down this path, we could end up running up such a tab that it can never be repaid. Just ask Venezuela.

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Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics

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