Brexit and the Economy

Referendum  –  7   days to go

Polls

The FT Poll of Polls:       REMAIN – 44%  LEAVE – 47%.

The BBC Poll Tracker:  REMAIN – 45%  LEAVE 49%

Depending on the pollster those who respond Don’t Know varies between 6-15% – There were 4 polls published yesterday.  3 show Leave ahead by 5% and 1 by 7%.  There is still a recent poll showing Remain 4 points ahead.  It is a “turnout weighted” telephone poll. However, the consensus is that Leave are ahead.


Betting

William Hill:  UK Remain 1/2, UK Leave 13/8, Scotland Leave 10/1

These are fairly typical rates and are largely parallel to the polling


Markets

Sterling and UK Markets are still trending down towards crisis levels, fuelled by the rise of Leave in the polling.  The FT reports that Brexit fears are now also affecting the Euro. Shy News has just reported that the  fear of Brexit is now also impacting on Asian markets.  The US Federal Reserve and other central bankers have similar concerns.  The Brexit impact is likely to have a global effect.


Parade of the Has Beens

Vote Leave has trotted out two former Leaders of the Conservative Party, Michael Howard and Ian Duncan Smith, and two former Tory Chancellors, Norman Lamont and Nigel Lawson, to mount a fairly disgraceful attack on the assessments of the economic impact of Brexit made by the Treasury, the Bank of England the Chancellor, and the Governor of the Bank:-

Senior Conservatives have accused the Bank of England and the Treasury of “peddling phoney forecasts” to scare people into voting to stay in the EU.

Former chancellors Lord Lamont and Lord Lawson and ex-Tory leaders Iain Duncan Smith and Lord Howard said “startling dishonesty” had been displayed.

They said George Osborne’s warning of spending cuts and tax rises after a Leave vote was “born of desperation”.

It is worth recalling some uncomfortable facts about these people:-

lawsonNigel Lawson (now Baron Lawson of Blaby PC) is a former Conservative Chancellor of the Exchequer  having served under Margaret Thatcher from 1983-1989.

Lawson was a key proponent of Thatcherism,  of  what Harold Macmillan called “the sale of the family silver” (privatisation),  a climate change skeptic and the instigator of the 1986 “Big Bang” (the deregulation of the City of London’s Financial Markets) and of the “Lawson Boom” which saw inflation spiral from  3% to 8% in 1988 and interest rates rise to 15% in 18 months.  He now claims that had Margaret Thatcher not vetoed the UK joining the European Exchange Rate Mechanism in November 1985 it might have been possible to do things better.  He also now contends (with some justification)  that the 2007-12 global financial crisis was the result of the Big Bang.  Now aged 86  he is resident in France, see – Nigel Lawson on Brexit: ‘I love Europe! That’s why I live in France. But the EU has no purpose’.

At 84 years, he is plainly now very frail (and possibly also loosing his marbles) but he is from time to time wheeled out as  President of Conservatives for Britain (a campaign to leave the European Union) and now President of the Vote Leave  Campaign.

lamontNorman Lamont (now Baron Lamont of Lerwick PC) is only  74 years of age so he is not quite as gaga as Nigel Lawson has become.  He was Chancellor of the Exchequer from 1990 to 1993 while John Major was Prime Minister.   Lamont  was employed by Rothchilds and is still involved with financial services in the City (see his Wikipedia entry).  On 16 May 1991, Lamont famously stated in parliament that “Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying.

He kept the UK out of the Euro and withdrew from the ERM after assuring the public a week earlier that he would not do so.   He worked to establish the independence of the Bank of England.  He was certainly one of the better post-war Chancellors but he is a convinced Eurosceptic.

IDSIan Duncan Smith was briefly Conservative Leader of the Opposition from September 2001 to November 2003.  He succeeded William Hague very largely thanks to the support of the late Margaret Thatcher but by November 2003 the Conservative Party decided he was incapable of winning an election.

Duncan Smith has long been a Neoconservative, a Eurosceptic and a fully paid-up member of the Nasty Party.  He was replaced as Conservative Leader by Michael Howard.  He returned to the back benches until David Cameron was misguided enough to make him Secretary of State for Work and Pensions in which office he has set about wrecking the UK pensions and benefits system with a considerable degree of success.  He resigned in March 2016 and is (of course) a Vote Leave supporter.

 Hopefully, all those who are pensioners, or disabled, or who have needed  to rely on the benefits system  will reflect on the indignities Duncan Smith has foisted on them and take care to vote Remain.

HowardMichael Howard (now lurking in the Lords as Baron Howard of Lympe , CH,  QC, PC) was briefly Conservative Leader of the Opposition from November 2003 to 2005 until he resigned after losing the 2005 general election and was replaced by David Cameron, now the Prime Minister. Howard  held office under Margaret Thatcher bringing in the much hated Poll Tax, and indulging in Trade Union bashing.  Under John Major he was one of the worst Home Secretaries in living memory operating under the slogan “prison works” –  which, of course, it still does not.  

His reputation fell through the floor when he refused 12 times to answer the same question from Jeremy Paxman on BBC Newsnight and when his Minister of State, the more liberal Ann Widdecombe told the House of Commons that “there was something of the night about him”.    When John Major resigned in 1995,  Howard stood as a candidate for Conservative Leader and came 5th out of 5 candidates.  He only became Leader of the Opposition in succession to Ian Duncan Smith in 2003 but then lost the 2005 general election (largely because he ran on an anti-immigration campaign devised by the notorious Lynton Crosby) and he was eventually replaced by David Cameron.

Anybody who is minded to believe these “has-beens” ought to bear in mind that the assessments of the Treasury and the Bank of England coincide with those of the Institute for Fiscal Studies, the International Money Fund, the OECD and just about every other respectable source.  These “has beens” are not impartial – they are trying to get people to discount sound advice from independent experts on the likely financial consequences of a Brexit vote.   If further evidence were needed, it is sufficient to read the Financial Times:  Brexit: Central banks brace for vote(£) –  Just about all the Central Bankers around the world are worried.


Bernard Jenkin and Mark Carney

BjenkinBernard  Jenkin MP  has held several shadow posts but has not held office.   He was chairman of the Public Affairs Committee in the 2010 Parliament and in the 2015 he has chaired the Public Administration and Constitutional Affairs Committee.  He was involved in the MP expenses scandal and ordered to repay expenses claimed in relation to a second home.  Jenkin was one of the “Maastrict rebels”  who defied the party whip to vote against the Maastrict Treaty.

Unsurprisingly, he is now a director of Vote Leave and he has seen fir to write to the Governor of the Bank of England.  A copy of the letter is to be found here on the BBC Website.   The Governor’s  polite and firm response  is to be found in PDF format here on the BBC Website.


Monetary Policy Committee

The Bank of England’s  Monetary Policy Committee publishes a minute of its deliberations on the Bank of England web site  when it announces its interest rate decision on a Thursday.  Today’s minutes are here in PDF format and include the following passage:-

“As the Committee set out last month, the most significant risks to the MPC’s forecast concern the referendum. A vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy. Households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise. Through financial market and confidence channels, there are also risks of adverse spill-overs to the global economy. At the same time, supply growth is likely to be lower over the forecast period, reflecting slower capital accumulation and the need to reallocate resources. Sterling is also likely to depreciate further, perhaps sharply. This combination of influences on demand, supply and the exchange rate could lead to a materially lower path for growth and a notably higher path for inflation than in the central projections set out in the May Inflation Report. In such circumstances, the MPC would face a trade-off between stabilising inflation on the one hand and output and employment on the other. The implications for the direction of monetary policy will depend on the relative magnitudes of the demand, supply and exchange rate effects. The MPC will take whatever action is needed, following the outcome of the referendum, to ensure that inflation expectations remain well anchored and inflation returns to the target over the appropriate horizon.”


 

Other central bankers have said much the same.

If the Vote Leave campaign were hoping to intimidate those who have a duty to warn about the gathering storm resulting from a Leave vote in the referendum, then their attempts to silence the warnings have failed  and the comments from the geriatrics involved in the Vote Leave campaign do not count for much either.

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