The kindness of baffled strangers won’t save us from Brexit

Mark Carney

Mark Carney: unlikely to be happy with what has happened to sterling.
Photograph: Jose Luis Magana/AP

We Remainers must not give up. The future of this country, and indeed of Europe, is far too important to accept the argument that we are bad losers and “it is time to move on”.

It cannot be repeated often enough that on the evening of the fateful day, 23 June, when the initial results of the referendum seemed to be going against him, Nigel Farage declared that, if the result were to be 52% for Remain and 48% for Leave, then there should be another referendum.

Once Theresa May became leader and appeared to put the three most prominent Brexiters – namely David Davis, Boris Johnson and Liam Fox – in, as it were, poll position, the more optimistic Remainers placed their hopes in a conspiracy theory: May was being fiendishly clever, the Brexiters would get bogged down in mission impossible, and sense would prevail as they fell at various fences.

However, as the prime minister has made crystal clear at the recent Tory party conference, her obsession is with immigration and she is perfectly happy to sacrifice our membership of the single market to appease the anti-immigration lobby. She appears to have bought Davis’s line that Britain can happily negotiate all manner of trade agreements through membership of the World Trade Organisation, blissfully ignoring all the trade experts who point out that this process would take 10 years. After all, they are only experts, and one of the most prominent Brexiters during the campaign told us what to think of experts.

I write as the pound plumbs new depths. There is real panic out there, as fund managers scratch their heads and wonder why a once-great nation can have a prime minister who on the one hand speaks grandly of a new industrial strategy and on the other hand is prepared to undermine it by putting investment and jobs at risk through obeisance to the pipe dreams of the Brexit brigade.

The hard truth is that the British economy is an integral part of the wider European economy, and much of “British” industry is foreign-owned by corporations that take the view that Britain’s membership of the single market and the customs union makes it an ideal base for investment.

It is not for nothing that there is a growing fissure between the Brexiters and the Treasury. If the chancellor, Philip Hammond, is prepared to point out in public that people did not vote to become poorer, goodness know what he and his officials must be telling the Brexiters in private.

Both the Treasury and the Bank of England were criticised for the alarms they raised during the referendum campaign, and short-sighted Brexiters are crowing that, so far, the roof has not fallen in. Or, as the man said toppling from the skyscraper: “So far, so good.”

One reason why the economy seems in better shape than feared is that, knowing what it was up against, the Bank of England took countervailing action to steady the markets. It was cheap for the prime minister to take a potshot at governor Carney in her conference speech.

Which brings us back to the run on the pound. I have seen some sterling crises in my time, and the media keep referring to Black Wednesday in 1992 and the “pound in your pocket” devaluation in 1967. But what this reminds me of is the 1976 crisis, when the Labour government lost the confidence of the markets and had to resort to borrowing from the IMF in humiliating circumstances.

The principal parallel is this: there was a balance of payments deficit and a Treasury view that devaluation would be helpful to exporters. At present some people, including Sir Jon Cunliffe (one of the numerous “deputy” governors of the Bank) seem perfectly happy with what has happened to sterling. Well, Cunliffe should be careful what he wishes for. I should guess, from his public pronouncements, that Mark Carney takes a different view.

When he quoted that great line from A Streetcar Named Desire about the kindness of strangers, he was well aware of the problem of financing the balance of payments deficit should the confidence of strangers collapse. Collapse it has, partly as a consequence of the referendum itself, and partly because May has frightened the horses with her glib announcement that, in effect, she and her fellow Brexiters are prepared to take actions which will almost certainly do lasting damage to the economy.

The rest of the world has woken up to this, and so has the chancellor. Indeed, one poll indicated that 66% of the British public were opposed to the prime minister’s eccentric judgment, and, faced with the choice, would prefer continued access to the single market to drastic controls on immigration. Hammond is fighting to bring some sense into the rest of his cabinet colleagues. If he fails, then … who knows? In such an eventuality, if I were in his shoes, I would contemplate an honourable resignation.

Meanwhile he has an autumn statement on 23 November. In order to deliver a convincing plan, he will need to fit in with the forecasts due from the Office for Budget Responsibility. But in order to provide him with convincing forecasts, the OBR needs to know what this shambolic government’s policies are – real policies, that is, as opposed to conference rhetoric. Time to re-read Joseph Heller’s Catch-22, methinks.

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