Boris Johnson’s no-deal bluster has put Leave voters’ livelihoods on the line

Jeremy Hunt (remember him?) infamously said he would go through with a no-deal Brexit even if it meant telling business owners their companies would go bust. Likewise and on a much bigger scale, our new leaders are clearly prepared to plunge Britain into recession as a trade-off for delivering Brexit by 31 October. New research suggests that, just like with Hunt, the sacrifice would not be theirs.

The last economic slump delivered the deepest cuts to the incomes of richer households. However, the next recession will hurt lower-income families the most, according to a report released on Monday by the Resolution Foundation. These, of course, are precisely the voters who chose Leave in the greatest numbers.

These families would also be hit the hardest by sharp rises in food prices that would follow a no-deal Brexit, according to a prominent academic writing in The Lancet.

Last week, the Bank of England became the latest institution to warn that the chances of a recession have risen, putting the probability at one in three – and that’s assuming we leave the EU with a deal in October. We will have to wait until September to find out what the bank thinks the impact would be from a chaotic departure. But it did say that in that case GDP growth would be even slower than the feeble expansion it predicts for this and next year.

Moody’s, a credit rating agency which scores how likely a country is to repay its debt, has been quicker off the mark, saying in July that Britain would indeed fall into recession if it crashed out of the EU. The government’s spending watchdog, the Office for Budget Responsibility, has also said as much and warned the economy may already be entering “a full-blown recession”.

The Resolution Foundation, for its part, has calculated that the risk of recession is at its highest since 2007, while the National Institute of Economic and Social Research sees a 30 per cent chance GDP will decline over the course of 2020 and suggests that this probability will be higher if Britain leaves without a deal.

In its report, the Resolution Foundation lays out four main reasons why the next economic slump would heap pain mostly on poorer households.

First, research into past recessions has shown that unemployment always rises most for lower-income workers.

Second, to cope with the downturn that followed the financial crisis, low- and middle-income families drew down on their limited savings and now nearly 60 per cent of this group have nothing put aside, up from just over 40 per cent shortly before the crisis.

Third, the social security safety net cushioned the impact of the 2008-09 recession on lower-income households. For example, for the poorest 10th of the population, the fall in income from employment was more than offset by a boost from the tax and benefit system.

“We can’t rely on the application of the same level of government support for lower-income households in the next downturn – particularly given the nature of the benefits squeeze that continues to be delivered as part of the austerity package,” the foundation says.

We certainly can’t rely on that in a country headed by Boris Johnson, who has consistently supported cutbacks on welfare spending and whose most expensive promise so far involves tax cuts that would benefit high earners.

Finally, the Resolution Foundation says poorer families have less scope to reduce spending on non-essentials if their incomes drop. They already did this during the last economic slump and haven’t been able to loosen the purse strings by much since then.

What’s also different about today is the fact that many of the tools used to fight the last recession, such as steep interest rate cuts and quantitative easing, have been mostly depleted.

It is a distressing accumulation of evidence, and the cavalier Brexiteers who are championing no deal must be aware that the lower-income households most vulnerable to consequences from a no-deal Brexit are also those who mainly voted Leave in the referendum. Multiple studies have shown this.

According to a December 2016 report by NatCen, typical Leave voters had an income of less than £1,200 per month, which corresponds to the poorest fifth of the UK population in the Resolution Foundation report.

A study by the Joseph Rowntree Foundation published in August 2016 said the poorest households, with incomes of less than £20,000 per year (or under £1,700 per month), were much more likely to support leaving the EU than the wealthiest households.

Research by University of Warwick published last year found that voting Leave was associated with receiving benefits and low educational attainment, among other characteristics.

There is a caveat: the Leave vote was also partly driven by what NatCen calls “affluent Eurosceptics” – middle-class, Conservative voters with anti-welfare views. The rough equivalent of this group in a 2017 study by Ipsos Mori is described as “culturally anxious Leavers” who are older, concerned about immigration and relatively well-off.

The “well-off and older” description can certainly be applied to Johnson’s cabinet, a quarter of which is made up by actual Leave campaigners. Luckily for them, it looks like their personal finances won’t suffer much from any Brexit-induced recession.

The same can’t be said for the majority of Leave voters, conscripted by the likes of Johnson and Michael Gove in 2016 to add electoral heft to their dash for the EU exit. When recession bites, the pain will be real, and the blame should be shouldered by the architects now in No 10 and in the cabinet.