Take back control? It is the markets that are sovereign on Brexit Great Britain | William Kegan


If I had been a member of the Conservative Party and Brexit party eligible to vote in its leadership election – which thank goodness I was not, sir – I should have marked my ballot “none of the above”.

In a twist on Mark Antony’s observation that the harm men do lives after them, Boris Johnson and his Brexit deal so much damage to the Conservative party that only Brexiters stood a chance of being elected.

The Coronation of Rishi Sunak was greeted with relief after the wacky performance of Liz Truss and her sidekick Kwasi Kwarteng, but the rot will soon set in.

First, it should be noted that it is not the recent collapse of confidence in the financial markets that has threatened the Conservative Party’s reputation for economic competence. That reputation was destroyed not by Truss and Kwarteng, but by the rash decision to hold a referendum on our EU membership, and the disastrous consequences.

Like Stryker McGuire, the former London bureau chief of Newsweek, wrote“Virtually every economic case for Brexit seemed specious at best and cynically misleading at worst.” He added: ‘Brexit is a kind of original sin that sits at the heart of today’s British economy.

Markets voted on Brexit and the Conservatives’ reputation for economic skill as they began the pound’s long decline just after the referendum result. Truss-Kwarteng’s growth plan was the reductio ad absurdum. Sovereignty regained? Oh no it wasn’t. Brexiters were not sovereign: the financial markets were.

The markets forced the devaluation of the pound in 1967 under Prime Minister Harold Wilson and the 1976 recourse to the International Monetary Fund under Prime Minister James Callaghan and Chancellor Dennis Healey. They also forced the ignominious exit of the pound from the Exchange Rate Mechanism on Black Wednesday of 1992.

One of the most memorable episodes of the 1970s was how Healey “turned around at the airport” to deal with the music – the collapse of trust in the book – and is never went to Manila for the IMF annual meeting. But he had recourse to the loan fund, which saved the situation. And when he discovered that the Treasury had subsequently revised its economic forecasts – in a more optimistic direction – Healey convinced himself that, if only the best forecasts had been available in time, he would never have had to borrow. to the IMF to calm the markets. .

He remained true to this vision until the day of his death, but his senior official, the Permanent Secretary Sir Douglas Wass, although not a lover of the markets, was convinced that they had to be pacified, whatever be the forecasts.

Which brings us back to the present day. Kwarteng did not turn back at the airport; he flew to the annual meeting of the IMF. It did him a lot of good! Liz Truss sharpened his knife while he was away. And it did him a lot of good… If the two had listened to Sir Tom Scholar’s warnings about their plans, instead of firing him, they might still be in office. He succeeded Wass in the Treasury’s top job; these people don’t get to high positions being as stupid as Truss and Kwarteng.

And so to new Chancellor Jeremy Hunt and even new Prime Minister Rishi Sunak – also one of our recent Chancellors. Whereas in the 1970s there was the prospect of bountiful revenues from the North Sea, now there is the huge blow to the nation’s finances from Brexit that Sunak holds so dear.

A recent study by Peter Marsh of the Made Here Now think tank reveals that an overwhelming proportion of UK private businesses view Brexit as a “disaster”. Former Bank of England Governor Mark Carney cited an estimate that while in 2016 the UK economy was 90% the size of Germany, it is now less than 70%.

To calm the markets, we are preparing for more austerity, even if the 2019 manifesto, which Sunak affects to honor, promised that there would be no more. CBI chief Tony Danker warned of a “catastrophic loop” tax increases and spending cuts.

And what is really holding back growth and fiscal flexibility? Why, it is none other than Brexit that has caused productivity to fall by 4% (according to the Office for Budget Responsibility) or up to 5.5% (according to the National Institute for Economic and Social Research) with serious impact on tax revenue, and some 15% on foreign trade.

Brexit is madness. We need to re-enter the single market and the customs union. Labor should stop dithering on the issue. Or are Labor afraid that if the government changes its mind, the beneficial impact on the economy will improve the Tories’ electoral chances?


Comments are closed.