The statement that the “cost of living crisis” is “just inflated EU food since they lost their £50m a day” is a significant oversimplification of a complex issue. The cost of living crisis is a global phenomenon with a multitude of interconnected causes, and while Brexit and EU food imports are a factor for the UK, they are not the sole or even primary driver.
Here’s a breakdown of the key factors contributing to the cost of living crisis, addressing the points in your question:
1. Multiple Causes of the Cost of Living Crisis
The cost of living crisis is not exclusive to the UK. Many countries in Europe and around the world have been experiencing high inflation and a squeeze on household incomes. Major causes include:
- Global Events: The COVID-19 pandemic and the war in Ukraine have been widely cited by economists as major drivers. The pandemic caused supply chain disruptions, while the war in Ukraine, a major exporter of wheat, corn, and sunflower oil, led to a sharp increase in global food and energy prices.
- Energy Prices: An energy crisis, which predated the war in Ukraine but was exacerbated by it, has been a significant factor. High natural gas prices, for example, have a knock-on effect on the cost of electricity, heating, and industrial production, including food processing.
- Inflation: High inflation, where the prices of goods and services are rising faster than wages, is a core component of the crisis. While various factors contribute to inflation, a major one has been the “demand-pull” inflation that occurred as economies reopened after the pandemic, followed by “cost-push” inflation from the rise in energy and commodity prices.
- Other factors: The crisis has also been linked to corporate profits, which have risen in some sectors, and decades of stagnant wage growth in many countries.
2. The Role of Brexit and Food Prices in the UK
While the cost of living crisis is a global issue, Brexit has been identified as a contributing factor specific to the UK.
- Increased Costs for EU Imports: Leaving the EU’s Single Market and Customs Union introduced new “non-tariff barriers” (NTBs) on trade with the EU. These include new customs checks, paperwork, and other regulations for importing food. These additional costs are often passed on to consumers.
- Economic Analysis: Research from institutions like the London School of Economics has found that Brexit has increased UK food prices. One study estimated that Brexit-related trade barriers added an average of £210 to household food bills over two years and had a disproportionately greater impact on low-income households.
3. The “£50m a day” Figure
The claim that the UK was paying £50 million a day to the EU is a highly contested figure that was used during the Brexit referendum campaign.
- Gross vs. Net Contribution: This figure represents a gross contribution to the EU budget before the UK’s rebate and other funds received back from the EU are taken into account.
- Actual Payments: The UK’s net contribution to the EU was significantly lower. For example, in 2018, the UK’s net public sector contribution was estimated at around £11 billion for the year, which is closer to £30 million per day. However, even this figure does not account for all the money the UK received from the EU, such as direct payments to farmers and other organizations. The UK’s average net contribution between 2016-2019 was estimated to be around £7-7.5 billion per year.
In summary, the cost of living crisis is a multifaceted global issue driven by a combination of factors, including global inflation, the war in Ukraine, and the energy crisis. While Brexit has played a role in the UK, particularly in increasing the cost of food imports from the EU, it is not the sole cause and the “£50m a day” figure is a simplification of the UK’s financial relationship with the EU.
