Before Gordon Brown gave the Bank of England independence for
setting interest rates, it was the Chancellor who decided this key economic
figure, an important lever in controlling growth and therefore the 'feel
good' factor. It's essentially the economy's 'accelerator'. In fact, this was the main reason for taking it out of
political control. Rates would invariably fall to help the governing
party speed up economic growth and win elections. Afterwards, they would mysteriously rise to rein inflation back.
Boris is doing the complete opposite, he is slamming on the brakes by threatening a no deal Brexit, something which the vast majority of economists think will be disastrous, and then going for an early election in 2020.
He has talked about getting the economy 'going gangbusters' with an emergency budget, aggressive tax cuts, changes to stamp duty and so on, before Halloween when we crash out of our 40 year trading relationship on the worst possible terms. Tax cuts cost money which we would have to borrow. But borrowings are paid for by future earnings and he is planning to put huge tariff and non-tariff obstacles between ourselves and our biggest customer, thus stifling our earnings potential! It is economic insanity.
To make matters worse, both Johnson and Hunt are both knowingly talking the pound down. Every time there is a hustings event or a press conference or an interview where they reemphasise that we are leaving on 31st October with or without a deal, the pound ratchets down a bit more. Yesterday, BoJo's team suggested they were seriously looking at proroguing parliament in the middle of October and preparing a Queen's speech for early November (HERE). The pound lost 0.9% against the dollar on foreign exchanges.
There is a race on to see if the penny will drop inside the Tory party before the pound reaches parity with the Rupee. Against the Euro it fell below 1.11 - have a look at this graph from the BBC website for Sterling v The Euro over the last three months. It doesn't bode well does it?
We have all lost a few quid because the value of our assets is now worth about 6% less than in April. Petrol and diesel will increase again soon because crude oil is priced in US dollars.
Sooner or later the winner of the Tory leadership race will realise he is only damaging our own economy. You cannot buck the markets.
Among figures released by the ONS yesterday showing unemployment in the UK was broadly flat with a small decrease, unemployment in Yorkshire and Humberside actually increased by 20,790 and in Selby & Ainsty by 190. The economy may have been resilient over the last three years leading to critics saying it was all scaremongering but now we are on the brink it doesn't look like scaremongering now. It will be all the harder to claim Brexit was innocent of blame when the economy hits the buffers at exactly the same moment that we are supposed to be leaving the EU.
Even Jeremy Warner in The Telegraph thinks we're headed for an economic shock (HERE).
Sir Ivan Rogers gave evidence to the Foreign Affairs Select Committee yesterday (see it HERE) where he once again pointed out that he personally warned both Theresa May and Boris Johnson that what they were aiming for was impossible. To us of course, this isn't new, Rogers has said it before. Of the three objectives set out:
- Leave the single market and the customs union
- No hard border in Ireland
- No regulatory divergence between NI and Great Britain
Only two (any two) were actually achievable as I covered in a post in January (HERE). I don't suppose a career diplomat like Sir Ivan takes pleasure in seeing his advice rejected and then come horribly true but if anyone in this mad Brexit affair can say 'I told you so' it's him.
The last of the leadership hustings takes place tonight and the winner (BoJo) will be announced officially next week. May will carry out her last PMQs on Wednesday and then go straight to Buckingham Palace. The fireworks will begin soon afterwards.
To give us a prelude of how things might turn out, Johnson's record as mayor of London comes under scrutiny (HERE) in The Guardian where just a few 'vanity projects' are said to have run up a bill of nearly £1 billion. When he's First Lord of The Treasury in a week's time, our national debt, at record levels can only go one way.
