They say that it pays to have friends in high places. As they battle to keep Britain in the EU, David Cameron and George Osborne have been spoilt for ammunition over recent days. Dire warnings on the consequences of Brexit came through thick and fast and, naturally, the Remain camp seized on every one.
The Bank of England raised the threat of recession and soaring inflation, the International Monetary Fund warned of tumbling house prices and Gordon Brown formed a rare alliance with Cameron over the prospect of the third world war.
“For a thousand years, nations and tribes of Europe were fighting to the finish murdering and maiming each other. There is no century except this one where Europe has been at peace,” Cameron’s predecessor at No 10 said in his Remain appeal to Labour voters.
It looks like Project Fear has peaked. But with more than a month to go until the EU referendum, the risk for Remain campaigners is that it has peaked too soon. It’s hard to see how supporters of staying in the EU will fill the next five weeks.
For the Leave camp, on the other hand, the week of Brexit doom and gloom was not necessarily as damaging as headlines might suggest.
When Brexit campaigners say that people like IMF head Christine Lagarde and Bank of England governor Mark Carney should butt out of UK politics, they will doubtless strike a chord with many voters. Furthermore, there are plenty of weak spots to target in the Remain camp’s Brexit warnings.
Firstly, no one truly knows what a UK economy outside the EU would look like. The Bank of England made it clear that in the direct aftermath of a Leave vote it would expect to face opposing forces of slowing activity and rising inflation. The Bank was less clear about how pronounced those forces would be. Whether they prompted a rate cut or rise would depend on their magnitude.
In other words, Threadneedle Street’s policymakers have wisely stopped well short of promising a particular emergency plan because they, like the rest of us, cannot predict the post-Brexit economy with any real degree of certainty.
As for longer-term estimates on how the UK would fare outside the EU, they rely on so many assumptions that they have quickly been dismissed as fantasy economics.
Secondly, what the economists are predicting in the medium term is by no means bad news for everyone. Osborne would have voters believe that Brexit presents a “lose-lose” situation, but that will ring hollow for some businesses and individuals.
If the IMF is right and Brexit hammers house prices, younger people desperate to get on the housing ladder may finally have their chance. If the pound tumbles, exporters who want to be more competitive could get a boost. Of course those businesses would face other challenges as the UK seeks new trade deals. There is also a risk investment into the country could slump. But looking further ahead, who knows what partnerships Britain might form.
Finally, these doomsday scenarios have all failed answer one very important question. What if the UK votes to stay in the EU and the bloc disintegrates anyway? It is not so hard to picture. The spectre of economic crisis continues to hang over the continent. The euro was always a massively ambitious project and has courted collapse before. Now with renewed tensions in and around debt-stricken Greece, fears have returned of a eurozone break-up. With those fears come grave concerns for the whole EU.
It’s not just in austerity-hit Greece that people are angry. Across Europe, nationalism is gaining ground as disenchanted voters turn inwards. So Osborne and Cameron had better hope that no fresh eurozone tensions flare up as the UK’s referendum day approaches.
In the meantime it’s hard to see what more they can pull out of the hat. But maybe they won’t have to. The Remain camp knows Britons vote with their wallets. So from now on, expect a campaign stuck on repeat. Just as he did last week, Osborne and his allies will tell voters over and over: “If we vote to leave, British families will be poorer.”
Banking crisis may have been due to the sin of pride, not crime
Hubris, according to Andrew Bailey, deputy governor of the Bank of England, needs to be added to the list of risks banks face. He was referring to the overweening confidence that can afflict top bankers, driven by their pursuit of profits and bonuses. Bailey did not name a particular bank, but he could easily have been referring to RBS when he described management teams “so convinced of their rightness that they hurtle for the cliff without questioning the direction of travel”.
That is not to say that Sir Fred Goodwin – he still had his knighthood at the time – did not face some resistance. One analyst accused Goodwin of being a megalomaniac for his penchant for doing deals – a turn of phrase that had been forgotten by the time he was chasing the ABN Amro takeover that eventually drove RBS off the cliff. The recriminations are continuing even now, almost eight years after £45bn of taxpayer funds were used to buy RBS shares to cushion its fall.
Last week, the Crown Office and Procurator Fiscal Service said that after scouring 160,000 documents it had not found any grounds to file criminal charges against RBS or its former management. The Scottish prosecution service had focused on the £12bn cash call that Goodwin pulled off in June 2008, just four months before RBS collapsed.
This leads to the conclusion that it was not criminal behaviour that lay at the root of RBS’s demise but, as the official report into its collapse in 2011 put it, poor decision-making. As painful and irritating as it may be for a public stuck with a 73% stake in a loss-making bank to accept, poor decision-making is not a crime.
Attention will soon start to turn to HBOS. City regulators are looking at whether there are grounds to bar those who were at the helm when it collapsed from working in the City. Many former HBOS directors have already defended themselves by saying the financial crisis could not be predicted. The clock is ticking on whether hubris – or something punishable – is to blame.
Now even Russia wants to build us a nuclear plant
The Russians are coming… to a nuclear power station near you. Well, they would be if the decision were up to them: state-owned operator Rosatom is keen to build reactors in Britain.
You might have thought that with a Cold War of words raging between Vladimir Putin and the west over Ukraine, the very idea of a UK Russian reactors was fanciful. The Department of Energy and Climate Change was certainly keen to shoot down Russian hopes, just as it had been to quash speculation last week that the Chinese have a “Plan B” to build Hinkley Point if EDF is forced to bow out.
But nothing seems fanciful these days, given that the only party without a Plan B if EDF goes into meltdown in Somerset is the British government.
