FIDDLING WHILE ROME BURNS?

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FIDDLING WHILE ROME BURNS?

Philip Hammond seems to be taking his cue from the Emperor Nero whose reputed response to the sack of Rome was to pick up his fiddle and amuse himself while ignoring the chaos around him.

On 20 June, Mr Hammond gave his customary annual speech to the City of London at the Mansion House dinner.  He started by thanking the outgoing Governor of the Bank of England and continued: “And for me, too, there is now just a hint of uncertainty as to what the future may hold”.

If there was a hint of uncertainty before the speech, it seems doubtful if there was still one by the time he sat down.  It will be astounding if the future for him holds anything other than political oblivion.

For his speech gave the appearance of his being unaware that Theresa May has resigned as Prime Minister, that there is a leadership contest in progress between Boris Johnson and Jeremy Hunt as to who should lead the Conservative party, and that both contenders have publicly stated that the Conservative party is unlikely to have a future unless they deliver Brexit by 31 October.

This was a speech that firmly nailed his Remainer colours to the mast.  A speech that made clear that if the Conservative party was headed towards a hard Brexit, he would vote against it.  He did not actually go as far as to say, “Better a Jeremy Corbyn government and the UK remaining within the EU, than an independent Conservative led Britain”, but that was the clear impact of his speech.

How about, for example, “My approach to Brexit has been shaped by the simple observation that no one, however passionate their views on Europe, voted to be poorer – so a successful Brexit is  then yes eyes of the electorate must be a Brexit that protects Jobs, Businesses and living standards” and later

“As I said in the Spring Statement, if we leave the EU in a smooth and orderly way, the fiscal headroom I have built up means an incoming Prime Minister will have scope for additional spending or tax cuts …  But there is a caveat: a damaging “No Deal Brexit” would cause short-term disruption to our economy, soaking up all the fiscal headroom we have built and more …  and while fiscal and monetary policy interventions could help to smooth our path to a post-No Deal Brexit economy, both would only be temporary … and neither could prevent the economy being permanently smaller, than if we leave with a deal.  So there is a choice: either we leave with No Deal … or we preserve our future fiscal space – we cannot do both”.

There are an awful lot of assumptions here disguised as facts.  Firstly, people voted in the referendum on the question Parliament chose to ask them.  It is disingenuous to now say, in effect, I can ignore what the people voted for as we deliberately asked them the wrong question.  Unlike apparently, Mr Hammond, I neither possess a crystal ball nor the ability to read the minds of my fellow citizens.  But I suspect that many people did indeed vote to be temporarily poorer in order to escape the increasing all-encompassing grip of the EU Commission and its monolithic bureaucracy over more and more aspects of our lives.  Indeed, I suspect that most realised that leaving the EU would create a temporary problem, but felt it worthwhile to accept that.

I also suspect many would take issue with “a damaging No Deal Brexit”.  No one, including Mr Hammond, has the faintest idea of what will happen if we leave the EU without a deal.  Of course, I suspect that, faced with a choice of Deal or No Deal, most would prefer a deal provided that it is on vaguely satisfactory terms.  But if the signals from Brussels are to be believed, that choice is unlikely to be available.

Of course the EU is an important market for EU goods and services.  But there is no reason to believe that without a deal that market will completely dry up.  Nor is there reason to believe that if imports from Europe falter because we impose high tariffs (which we are extremely unlikely to do) UK producers will not sell more in the UK.  It also needs to be borne in mind that 53% of UK exports of goods and 75% of exports of services are not to the EU.  We currently sell to Asia around 50% of what we sell to EU countries and Asia, particularly China, is a growing market.  And do EU manufacturers actually want to impose high tariffs against us?  We buy from the EU around 4 times what we sell to them, so a No Deal Brexit will cause problems for them as well as us.

And if, as many believe, there are huge untapped markets for British goods outside Europe, it is by no means clear that a Deal with the EU which commits us to excluding from the UK, say, US goods because they conform to US rather than EU regulatory standards, is really in our best interest.  I don’t know.  But neither does Mr Hammond.

And if Mr Hammond is unequivocably opposed to a No Deal Brexit, whether a damaging or a non-damaging one, perhaps he ought to explain why he has spent so much of taxpayers’ money over the last couple of years preparing for the eventuality.

The second factor that prompted this article was a parliamentary statement on 25 June by Jesse Norman, the Financial Secretary to the Treasury.  He tells us that “the government will publish draft clauses for the next Finance Bill … on Thursday 11 July 2019, along with accompanying explanatory notes, tax information and impact notes … and other supporting documents”.

This looks like another way to waste taxpayers’ money.  It is a safe bet that, come the next Budget, it will not be either Mr Hammond or, indeed, Mr Norman, who delivers it.  It is also a fairly safe bet that whatever Brexit may bring, it will not be “Business as Usual”, so the next Chancellor of the Exchequer will need to bring in a Budget that reflects the new circumstances.  That Budget may or may not follow suggestions that Philip Hammond has previously put forward.  It seems more likely than not that it will not reflect his current intentions.  It is surely not reasonable for Mr Hammond to seek to tie his successor’s hands by trying to force onto him the many controversial ideas that he has threatened in the past.

ROBERT MAAS