Rishi Sunak, like his two immediate predecessors, looks like a captain who has never been down to the engine room, or indeed anywhere on the lower decks. He has spent his life swanning about between the dining room, the casino, and the bridge, pausing only to switch from his freshly laundered gold-braided uniform to a crisp tuxedo and a bow tie. He is guilty of thinking the polished brass of the ship’s telegraph is all there is. Now the engine is broken and stuttering, the ship is taking on water and he is struggling to comprehend what's gone wrong.
A few days ago I read a tweet by an American journalist which I think is very apt:
The problem with the UK Tory party is not the personal defects of the captain. The problem is that you’re not eligible for the captaincy unless you agree it was a brilliant idea to scupper the ship in 2016- and can convincingly act baffled why it has been sinking ever since
— David Frum (@davidfrum) October 21, 2022
This morning on the BBC we learn that the hole in the public finances is “eye-watering” and we are all going to have to get used to paying more taxes in the future. A few snippets from the BBC:
"A Treasury source did not put a figure on what they called "the fiscal black hole", but the BBC has previously been told it may be at least £50bn."
"'It is going to be rough,' the source said. 'The truth is that everybody will need to contribute more in tax if we are to maintain public services'."
"The source said, given the scale of borrowing for energy bills support and the Covid-19 pandemic, "we won't be able to fill the fiscal black hole through spending cuts alone".
"The Treasury said: 'Given the eyewatering size of the fiscal black hole, the PM and the chancellor agreed that tough decisions are needed on tax rises, as well as on spending'."
Sunak was an MP in 2015 and campaigned to leave the EU. He would have read or certainly known of the bleak Treasury forecasts made in 2016. There were two, a long-term one and a short-term one. Both pointed to Brexit significantly shrinking the size of the British economy.
The important thing to note is that these dire predictions also included independent forecasts from other economic institutions, with the Treasury’s numbers more or less in the middle. If it was scaremongering, they were all apparently involved in a great conspiracy. But of course, this is precisely what Brexiteers believed, Sunak included.
I wonder what he thinks now as he peers deep into that eye-watering black hole?
The economy is smaller by 4-5% at least than it otherwise would have been without Brexit. This is what the Treasury forecasted in 2016 and what many if not most economists think has actually happened now that we’re out of the EU.
This equates to £100-£125 billion a year in GDP loss and £35-£40 billion in tax revenues. Anyone surprised that we all need to pay more tax to stuff the hole hasn’t been paying attention these last seven years.
Whatever the shock that is coming, don’t forget that it will not be as bad as it might have been because we have already had to endure a lot of painful public spending cuts without which the tax rises would have needed to be even greater.
Brexit is making us poorer.
That should not be a surprise, although for many leave voters it will be. Gove, Johnson, Cummings, Elliot, and Hannan are all guilty of selling the British public a fantasy that will collide with the hard facts of real life in the next few weeks.
Any idea of seeing economic growth this side of the next election can be dismissed as I am sure the OBR will soon confirm. Couple this with the Covid-19 inquiry demanding Johnson and Hancock hand over the Whatsapp messages they exchanged during the crisis, Suella Braverman smearing the government with sleaze and incompetence, rising numbers of refugees crossing the Channel and you can see the beginning of a real disaster for the Tory party.
I was reminded of what happened in Canada in 1993 by a reference to it on Twitter.
Canadian Conservatives lost so badly that they ended with just two MPs. Before the election, the Progressive Conservative ruling party had 156 seats out of a legislature of 295 (52%), a majority of 17. Afterward, they had just 2. We shouldn't forget that when a party in an FPTP system becomes unpopular, they can suffer a huge loss and it’s not impossible for the Tories in Britain to suffer the same cataclysmic result. At the moment they have 357 out of 653 seats (55%). It is not beyond the realms of the possible.
And it would be even more likely if The Reform Party put up candidates in most seats as they are threatening to do.
We can only hope.
