Brexit has effects on the economy of Britain. The British government says it plans to pay subsidies to people, especially those under economic pressure. The British government may suffer economic collapse due to Brexit. If UK’s economic collapse happens, the government may remove the € 12 billion subsidies. This cost is more than Britain previously paid to the European Union.
Payments to energy suppliers as local elections loom.
According to Financial Times, The UK looks at payments to energy suppliers to shield consumers from high bills. The UK is exploring a radical intervention in the power market. The government would pay energy suppliers when wholesale gas prices rise sharply. The purpose is to decrease the economic pressure on consumers. Government insiders describe the proposal as “plausible” and “logical”. However, they admit there are also many problems in the program.
In this program, energy suppliers would receive payments from the government when wholesale gas prices exceeded a certain threshold. In this case, energy suppliers would not have to pass the increase on to consumers. Some suppliers say the proposal could be self-funding over several years. Energy companies would have to return money to the government when wholesale prices traded below the agreed level. Johnson faces local elections on May 5 that could decide his political fate. He is looking for “red meat” policies to reinforce his weakened premiership ahead of those polls.
Shielding consumers from the impact of rising energy prices
As it says in Bruegel, the British government is considering offering state loans to energy companies. These companies take on customers from firms that shut down due to soaring wholesale natural gas prices. However, there will be “no rewards for failure or mismanagement. Smaller energy firms will not receive bailouts,” Business Secretary Kwasi Kwarteng said on September 20. The government designed a £500 million fund to help the most vulnerable people pay their energy bills. Another purpose of the fund was to cover food and clothing expenses. On February 3 2022, Rishi Sunak announced £350 for most households to help pay rising energy bills.
As it says in the Guardian, the UK leads the European Union to subsidise fossil fuels. It found €12bn (£10.5bn) a year supporting fossil fuels in the UK. This is significantly more than the €8.3bn spent on renewable energy.
According to Politico, the UK refuses to join the New Zealand-led green trade pact to end fossil fuel subsidies. Britain’s leadership in fighting climate change at COP26 is in question. Britain confirmed it wouldn’t join a New Zealand-led green trade pact. The pact would commit Britain to end billions in subsidies for the fossil fuel sector. Britain currently supports the fossil fuel industry through tax breaks and subsidies. There are tax breaks and subsidies for exploration and research and development to the tune of £10 billion a year.
Brexit economic consequences for the UK
Brexit may result in UK’s economic collapse. According to BBC, the chairman of the Office for Budget Responsibility explained the effect of Brexit on the UK’s economy. He said the impact of Brexit on the UK economy will be worse than the coronavirus pandemic effect in the long run. Richard Hughes said Brexit would reduce the UK’s potential Gross Domestic Product (GDP) by about 4% in the long term. He said forecasts showed the pandemic would reduce GDP “by a further 2%”. GDP is one of the most important ways to show how well or poorly an economy is doing. It measures all the activity of companies, governments and individuals in an economy.
Removal of farming subsidies
Another case I would like to discuss is the Farm subsidy plan. According to the Guardian, the Farm subsidy plan ‘risks increasing the UK’s reliance on food imports. The government’s Scheme to replace EU agricultural payments reflects ‘blind optimism’ and lacks crucial details, say MPs. The EU’s Scheme of subsidies was known as the standard agricultural policy (CAP) and worth £3bn-a-year to UK farmers. This Scheme of contributions was one of the long-running complaints of Eurosceptics. Eurosceptics believed that Britain could draw up its Scheme of payments. They considered it as one of the significant benefits of Brexit. Ministers had said the new Scheme would increase the environmental benefits of agriculture.
The Guardian adds that Environment could benefit from the ‘biggest farming shake-up in 50 years. The Scheme was to end £1.6bn subsidies for farming land in England with funds to improve nature.
The UK government cuts the subsidies when it faces economic problems. The UK’s economic collapse can result in the removal of all offerings. The British government cuts the subsidies under the pretext of different issues. However, the main reason is the government’s economic pressure due to Brexit and its financial problems and disabilities.
According to Politico, Britain’s leadership in fighting climate change at COP26 is in question. Britain confirmed it wouldn’t join a New Zealand-led green trade pact. It means that it will not end billions in subsidies for the fossil fuel sector. According to ODI, the UK is one of the countries claiming no fossil fuel subsidies exist. The European Commission previously found the UK continues to provide €12 billion grants each year.
If the UK’s economic collapse happens, the British government will remove the subsidies. However, it will do that under the New Zealand-led green trade pact or another pretext.