If I had been a member of the Conservative and Brexit party eligible to vote in the leadership elections – which Thank God I was not, sir – I would have had to mark my ballot “none of the above”.
In a variation of Mark Antony’s observation that the evil men do lives after them, Boris Johnson and his Brexit have done so much damage to the Conservative Party that only Brexiters stood a chance of being elected.
Rishi Sunak’s coronation has been greeted with relief after the farcical performance of Liz Truss and her henchman Kwasi Kwarteng, but the rot will set in soon.
First of all, let’s be clear that it wasn’t the recent collapse in confidence in the financial markets that jeopardized the conservative party’s reputation for economic competence. That reputation was destroyed not by Truss and Kwarteng, but by the ill-considered decision to hold a referendum on our membership of the EU, and its disastrous consequences.
As Newsweek’s former London bureau chief Stryker McGuire has written, “Virtually all the economic arguments for Brexit have looked misleading at best and cynically misleading at worst.” He added: “Brexit is a kind of original sin that is at the heart of the current UK economy.”
Markets gave their voice to Brexit and the Tories’ reputation for economic competence by starting the pound’s protracted decline immediately after the referendum result. Truss-Kwarteng’s growth plan was the reductio ad absurdum. Sovereignty regained? Oh no it wasn’t. The 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 appeal to the International Monetary Fund in 1976 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 in 1992.
One of the most remembered episodes of the 1970s was the way Healey “came back to the airport” to face the music – the collapse of confidence in the pound – and never went to Manila for the IMF’s annual meeting . But he appealed to the fund for loans that saved the situation. And when he discovered that the Treasury had subsequently revised its economic forecasts — in a more hopeful direction — Healey convinced himself that if the better forecasts had been available in time, he would never have had to borrow from the IMF to calm the markets.
We are being prepared for more austerity measures, although the 2019 manifesto, which Sunak honors, promised that there would be no
He held on to this view until the day of his death, but his senior official, Permanent Secretary Sir Douglas Wass, was not a lover of the markets, but was convinced that they needed to be pacified, whatever the prophecies were.
Which brings us back to the present. Kwarteng did not return to the airport; he flew to the annual IMF meeting. It did him a lot of good! Liz Truss was sharpening her knife while he was gone. And it did her 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 top Treasury job; such people do not rise to high positions by being as foolish as Truss and Kwarteng.
And so to the new Chancellor Jeremy Hunt and even the newer Prime Minister Rishi Sunak – also one of our recent Chancellors. Where in the 1970s there was the prospect of bountiful revenue from the North Sea, there is now the huge blow to the country’s finances from Brexit that Sunak is so keen on.
A recent survey by Peter Marsh of the think tank Made Here Now shows that an overwhelming proportion of British private companies view Brexit as a “disaster”. Former Bank of England Governor Mark Carney has quoted an estimate that while the UK economy was 90% the size of Germany in 2016, it is now less than 70%.
To calm the markets, we are being prepared for more austerity measures, although the 2019 manifesto honoring Sunak promised that there would be no more. The head of the CBI, Tony Danker, has warned of a “doom cycle” of tax hikes and cuts.
And what actually inhibits growth and budgetary flexibility? Well, it is none other than Brexit that has cut productivity by 4% (according to the Office for Budget Responsibility) or to 5.5% (according to the National Institute of Economic and Social Research) with serious tax revenue implications, and about 15% discount on foreign trade.
Brexit is madness. We must rejoin the internal market and the customs union. The PvdA must stop giggling about the issue. Or is Labor worried that if the government were to change its mind, its beneficial impact on the economy would improve the Conservatives’ electoral chances?