Brexit: austerity tipped balance towards Leave, new study suggests

Should I stay or should I go? Ptystockphoto

You might think that two years after the EU referendum, there would be nothing more to say about what caused the Leave vote. In fact, it’s only now that we might be getting to the bottom of it. The first wave of research highlighted the economic distinctions between Leave and Remain areas, among other things. Broadly speaking Leave areas are more deprived, have lower income levels and fewer high-status jobs. Voters perform more poorly in education and tend to be older.

As it turns out, however, none of these characteristics made a Leave vote a foregone conclusion. My new paper found that the UK government’s austerity measures since 2010 may in fact have tipped the vote, boosting Leave support by as much as ten percentage points.

With the Brexit process well underway and the Conservative party tearing itself apart over what final offer to make to Brussels, things might have been very different if the Cameron government had taken a different approach to managing the public finances a few years earlier.

The drift right

Both in the UK and other countries, we have seen the links between economic distress and increased support for right-wing political platforms. There is evidence, for example, that people were more likely to vote Leave if they lived in areas whose manufacturing base had been weakened by globalisation. We have seen comparable links between economic hardship from free trade and populist or extreme voting in the US and Germany.

Immigration may well be in a similar category. We know that some forms of immigration have small but detectable effects on labour markets, curtailing wage growth for low-paid workers both in the UK and US. While the effects are generally small, there is some evidence that this increases support for the right among the people indirectly affected – at least in the US.

Similarly, automation appears to suppress wage growth among the low-skilled. We know that historically, labour-saving technological progress has been linked to political unrest – take the Luddites in England in the early 1830s, for instance. The rise of the gig-economy and zero-hours contracts may have similar effects.

Luddites on the attack.

Each of these factors is likely to widen the economic cleavage between the well educated and those at the bottom – academics sometimes refer to this as the growing skill bias in labour markets. The implication for the welfare state is quite clear. To maintain continued public support for free trade and immigration – trends which are generally seen as increasing living standards across the population as a whole – a modern welfare state needs to help those who lose out.

Austerity from 2010

Governments can do this in various ways, from continued investment in education and training to designing a welfare system that can help people make a transition to more useful skills. In the context of the UK, my new paper finds that the welfare state was responsive in this way until 2010.

The benefits payments for those who were increasingly worse off in relative terms had been steadily expanded. With the onset of austerity, this trend came to an abrupt halt. The most vulnerable tended to become more dissatisfied with the existing political establishment and shifted their support to UKIP. The empirical estimates suggest that in districts that received the average austerity shock, UK vote shares were higher than districts that were less exposed – by 3.6 percentage points in the 2014 European elections and by up to 11.6 points in local elections in 2016.

On June 23 of that year, the country reaped the whirlwind. With prominent calls now being made to consult the people again over the exact shape of Brexit and even whether it should continue at all, we are no closer to knowing what the final outcome will look like. All this, it appears, could have been avoided. For the political generations to come, that should be food for thought.