Dr. Rebecca Harding
CEO, Coriolis Technologies
Another week, another set of deadlines. The Governor of the Bank of England, Mark Carney’s, “Fog of Brexit” is unlikely to clear in the week ahead. On Tuesday there should be another meaningful vote in the House of Commons on Theresa May’s Brexit deal. There is every likelihood that she will be defeated, if the vote goes ahead. If this happens, there will be a vote on the 13th March, presumably after Philip Hammond’s Spring Statement, eliminating the possibility of a no deal Brexit and then one subsequently that is likely to extend the Article 50 process and therefore delay Brexit formally beyond the 29th March. Whatever happens, Theresa May’s premiership will have gone past its own “best before” date. By the end of the week, ironically the 15th March, we will know just who in the Tory party in the UK is most likely to stick the knife in: e tu, Boris?
So pity the poor Chancellor’s position at the moment. Predicting what he may will put forward in his statement on Wednesday is a mug’s game. Nevertheless, he is expected to present a positive picture of government tax revenues, and point to the potential of a dividend of over £15bn if MPs agree to Theresa May’s deal. But by the time he stands up to deliver his speech, circumstances will have changed. What his team in the Treasury and the Office of Budget Responsibility have been modelling for the last few months is an economy based on a smooth Brexit transition. This will almost certainly not be the reality by Wednesday.
Can he put flesh on bones of ending austerity in his statement? With the desperate condition in public services – schools, hospitals, the police service, local government to name a few – he certainly needs to. The UK should by now be in a position where it knows the frameworks of its future relationship with Europe; it should have had clear sight of what it needs to do such as promoting exports, sharpening industrial policy, committing funds to regional infrastructures and boosting public spending on education and health. As it is, most economists think that the UK economy’s GDP is between 1.5% and 2.5% lower than it would have been without the Brexit-induced uncertainty.
But there is no likelihood of any boost happening except rhetorically. The only thing that we will know after his statement is that the uncertainty will go on for a lot longer than anyone ever thought possible. The statement will be a damp squib with little more than a confirmation that the UK economy is weaker than it should be, but the government revenues will be strong. At any other time, and with interest rates still historically low, this would be a basis for boosting expenditure.
Voters have a social contract: their government provides for their security economically and protects their security militarily and through the justice system. This has been the case since the 17th Century. But at present, the UK government itself is undermining this contract; it is creating the uncertainty and instability that is the core threat to the welfare and security of its citizens. Failure to address this means that the financially and socially excluded, as well as businesses and households can only expect their decision making to become harder. This is profoundly damaging to the UK, both economically and politically.
Economics would be fine if it weren’t for the politics.
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