If Rishi Sunak fears for the deficit, why does he back Brexit? | William Keegan

My Irish mother taught me always to “try to see the good in people”. Alas, with this government it’s a bit of a problem. George Osborne and his needless austerity programme was bad enough. But this lot are taking bad government to new depths.

Last week was very much Chancellor Sunak’s show. His speech on Wednesday was preceded by so many media leaks that very little came as a surprise. But I fear that behind that ingratiating smile lies an insouciant cynicism that, whatever it achieves for his almost naked ambition, will do this country no good at all.

In a nutshell, Sunak is a Brexiter in hock to a once-great political party that, to all intents and purposes, is now the Brexit party. Even the “levelling-up” public spending measures on infrastructure are intended primarily not for the good of northern England, but for the disillusioned northern former Labour voters who were taken in by the false prospectus of Brexit.

And they are accompanied by a squeeze on the incomes of public sector workers who were regarded during the initial phases of the Plague as “essential”, but are evidently not so essential as to avoid being financially penalised.

The wonders of Brexit are falling apart in plain sight for those who have eyes to see. But we have a chancellor whose friends say he has been a Brexiter since the age of 18 – before the word was even coined – and who tells us that “the major impact on our economy is coronavirus”. His biographer, Lord Ashcroft, tells us that Sunak says he “has done the numbers”, which makes one wonder which numbers – presumably the number of Brexiters in the Conservative party whose support he would need to succeed the egregious Boris Johnson.

The fact of the matter is that neither Johnson nor Sunak is, to use their in-vogue word, levelling with the British people. It is common knowledge in Whitehall – not least in Sunak’s own department – that Brexit, with or without a “deal”, is a wholly unnecessary economic disaster. The official estimate is that without a deal, national income would be lowered by 7.7% over 15 years, and even with a deal the hit would be almost 5%. Meanwhile, well before the new year, the administrative nightmare of Brexit preparations is producing five-mile queues of lorries outside Dover and chaos in other ports.

The spin that Sunak has “done the numbers” calls to mind the old joke about the punter who does the numbers: “I follow the horses. (Pause.) Unfortunately, the horses I follow also follow the horses.”

Think about it: hot on the heels of the adulation he received for allowing government borrowing to do “whatever it takes” to alleviate the economic and social hardship caused by lockdown, Sunak now finds himself losing some of that popularity as he warns of budgetary restraint to come. Yet he is willing the country on to go ahead with Brexit, which would severely damage the economy’s capacity to generate tax revenue.

Frankly, both Brexits are “hard”; it is just that no-deal would be even harder. Either way, by championing Brexit, our chancellor is a party to a process that is guaranteed to remove a huge chunk of the economy whose taxable capacity would make it easier for him to cut government borrowing in the future.

At which point we come to the man who is not afraid to tell it as it is. I refer to the governor of the Bank of England, Andrew Bailey.

Older readers may recall that I was one of the few commentators to have reservations about the granting of monetary independence to the Bank of England in 1997. However, Bailey’s intervention in the public debate last week is, to my mind, a major event that justifies the independent status of the Bank.

Bailey, a career Bank official, takes the responsibilities of the monetary policy committee’s brief seriously. The Bank has to keep a close eye on inflationary trends, and on financial stability. It also concerns itself with the health of the City of London and financial services – the latter being a major employer, counteracting to some extent the terrible impact on employment that the running-down of British manufacturing has had over the years.

The looming chaos at the ports in the new year, and the impact of Brexit on the prices of the vast quantity of food we import from the continent, must be a serious worry to the MPC, with its counter-inflation brief. And the casual way in which the government has treated the threat to our financial sector from Brexit must worry a governor concerned about financial stability.

By saying that no-deal would be even more damaging to the economy in the long run than coronavirus, the governor is manifestly at odds with the chancellor, and good for him.


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