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The Bank of England was wrong – Brexit didn’t break Britain

GOVERNOR Mark Carney looked and sounded like a condemned man when delivering the Bank of England’s quarterly inflation report to the media today.

As well he might. He has made no secret of his opposition to Brexit. Many MPs have not forgotten his injudicious and, in some respects, inaccurate forecasts in the weeks before the June 2016 EU referendum.

Back then, in what could only be seen as a pincer movement with the Treasury, he reckoned that in the event of a Leave vote, the British economy would go into recession, unemployment would rise and consumer demand would fall.

Many people could only get poorer, happily in line with the then chancellor George Osborne’s Treasury’s gloomy guesstimates.

For good measure, the Bank of England’s “worst case” scenario was that voting to leave the EU could slash GDP by 8 per cent within a year, drive the value of sterling below that of the US dollar, ramp up inflation to 6.5 per cent and cut property values by almost a third.

That “worst case” scenario turned out to be a “nutcase” one.

Although the pound’s exchange rate has declined on the currency markets and economic growth has slowed, there has been no increase in unemployment, no decline in consumer demand, no recession and no general drop in living standards.

Carney’s subsequent claim that his predicted recession would only have been a “technical” one is risible. Either the British economy was going to shrink in two consecutive quarters, or it was not. What we know for certain is that it did not.

Undaunted, the governor was at it again yesterday, promoting “project fear” as though he and his bank’s monetary policy committee have been right all along.

Now he wants to scare us into believing that there is a one in three chance of Britain going into recession after Brexit, deal or no deal with the EU.

Yet in revising down the bank’s notoriously inaccurate forecasts of economic growth, he had to acknowledge that Brexit is not the only factor that will affect Britain’s future economic performance.

The rest of the world may also be of some significance, which is where the majority of our foreign trade now occurs.

Carney also had to accept that real wages are at last rising steadily with no significant impact on inflation, while consumer demand is not so reliant on borrowing and debt as it has been in the recent past.

Of course a “no-deal” Brexit would be disruptive, especially when the last Tory government has done so little contingency planning for it, in the hope that Britain would remain tied to the EU single market if Brexit could not be overturned.

What was most worrying about Carney’s presentation yesterday, though, was his determination that, come hell or high water, the Bank of England’s top priority will remain keeping the 2 per cent lid on inflation.

But what else should we expect of a governor whose previous career included a lengthy stint with those doggedly neoliberal and pro-EU fixers and falsifiers Goldman Sachs?

It would be good to imagine an increase of one in the unemployment figures even before Carney quits Threadneedle Street in January 2020. Unfortunately, Prime Minister Johnson might replace him with someone even worse.


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