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| The Guardian view on Brexit and the Bank: the challenge of populism | The Guardian view on Brexit and the Bank: the challenge of populism |
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| Bank of England independence, announced just five days after Labour’s 1997 landslide victory, was a tightly kept secret of the kind that Gordon Brown made his trademark. Yet it was almost at once accepted as the last, critical piece of a framework to protect the UK economy from the inflationary tendencies of weak governments on a par with joining the European Community 25 years previously. Today, at a conference marking the 20th anniversary of his coup, Mr Brown added another claim to its significance as a force for stability: only the discipline of independence had enabled him to keep sterling out of the eurozone. | Bank of England independence, announced just five days after Labour’s 1997 landslide victory, was a tightly kept secret of the kind that Gordon Brown made his trademark. Yet it was almost at once accepted as the last, critical piece of a framework to protect the UK economy from the inflationary tendencies of weak governments on a par with joining the European Community 25 years previously. Today, at a conference marking the 20th anniversary of his coup, Mr Brown added another claim to its significance as a force for stability: only the discipline of independence had enabled him to keep sterling out of the eurozone. |
| But like other speakers both before and after him at today’s conference, the former chancellor warned that just as the post-crash recession had played a significant role in Brexit, so might it undermine the case for Bank independence: the argument for taking back control could just as easily be extended to the power of the Bank to set interest rates, and with consequences as devastating. Mr Brown suggested that the answer to economic populism might be to set up a strategic oversight group that included Treasury officials as well as Bank economists. Mark Carney, the governor of the Bank, suggested it was a bigger challenge. The threat was a response to “QE, nationalism, and loss of trust in globalisation”. No central bank could stop Brexit making the UK poorer. Independence is not the same as omnipotence: the challenge it faces comes from events far beyond its control. | But like other speakers both before and after him at today’s conference, the former chancellor warned that just as the post-crash recession had played a significant role in Brexit, so might it undermine the case for Bank independence: the argument for taking back control could just as easily be extended to the power of the Bank to set interest rates, and with consequences as devastating. Mr Brown suggested that the answer to economic populism might be to set up a strategic oversight group that included Treasury officials as well as Bank economists. Mark Carney, the governor of the Bank, suggested it was a bigger challenge. The threat was a response to “QE, nationalism, and loss of trust in globalisation”. No central bank could stop Brexit making the UK poorer. Independence is not the same as omnipotence: the challenge it faces comes from events far beyond its control. |
| Like most other policy proposals that have emerged this conference season, this conversation underlines just how far the crash and a decade of austerity have transformed democratic possibilities. At the same conference, Theresa May set out her defence of the free market in what was claimed to be a rebuttal of the vision Jeremy Corbyn articulated in Brighton. But in truth, while she hardly shares his entire analysis of Thatcherite economics, both the prime minister and the Labour leader each envisage a retreat from free markets by expanding the role of the state in the economy and making corporate governance more accountable. As Mr Corbyn rightly claimed in Brighton, the centre of gravity has moved well to the left of where it has been since the 1980s. They may have very different ideas about the scale; but the direction of travel is the same. The next election may be decided by which of the two party leaders has the better measure of the public mood. | Like most other policy proposals that have emerged this conference season, this conversation underlines just how far the crash and a decade of austerity have transformed democratic possibilities. At the same conference, Theresa May set out her defence of the free market in what was claimed to be a rebuttal of the vision Jeremy Corbyn articulated in Brighton. But in truth, while she hardly shares his entire analysis of Thatcherite economics, both the prime minister and the Labour leader each envisage a retreat from free markets by expanding the role of the state in the economy and making corporate governance more accountable. As Mr Corbyn rightly claimed in Brighton, the centre of gravity has moved well to the left of where it has been since the 1980s. They may have very different ideas about the scale; but the direction of travel is the same. The next election may be decided by which of the two party leaders has the better measure of the public mood. |
| Yet as Mr Carney pointed out, the cost of Brexit – the very shock to the status quo that has given both of them the licence to think afresh – will also have powerful implications for what is economically possible. As if to illustrate the point, as he spoke in London, in Brussels David Davis, the Dexeu minister, and Michel Barnier, the EU negotiator, reported back on the latest round of talks between the EU and the UK. Hopes that Mrs May’s Florence speech last week would act as a laxative on the process were optimistic: the complex negotiations on mutual protection for citizens’ rights, the Irish border or the exit bill have inched forward but the chances of the October council of ministers authorising progression to phase two of the talks, the substantive ones on the future relationship between the UK and the EU, seem no more likely than a week ago. | Yet as Mr Carney pointed out, the cost of Brexit – the very shock to the status quo that has given both of them the licence to think afresh – will also have powerful implications for what is economically possible. As if to illustrate the point, as he spoke in London, in Brussels David Davis, the Dexeu minister, and Michel Barnier, the EU negotiator, reported back on the latest round of talks between the EU and the UK. Hopes that Mrs May’s Florence speech last week would act as a laxative on the process were optimistic: the complex negotiations on mutual protection for citizens’ rights, the Irish border or the exit bill have inched forward but the chances of the October council of ministers authorising progression to phase two of the talks, the substantive ones on the future relationship between the UK and the EU, seem no more likely than a week ago. |
| Other events in Northern Ireland have already reminded Mrs May how tough the world will be beyond the EU. In her speech at the Bank, the prime minister suggested that she might block imports from Boeing in retaliation for the US aircraft manufacturer’s demand for 220% tariffs on parts imported by its parent company in Canada from Bombardier in Belfast. Clearly even a special relationship with the US president is no guarantee of favourable treatment. But there is a message here for Mr Corbyn’s view of the post-Brexit world too: Boeing is objecting to British subsidies to Bombardier of just the kind he appears to think are impossible in the EU. As the row over Bombardier demonstrates, they are perfectly possible; and so is tit-for-tat retaliation from non-EU trading partners. Clearly, whatever the claims of the leave camp – reiterated at the launch of a new free trade thinktank on Wednesday – Brexit is a recipe not for an outward-looking global Britain but an inward-looking, nationalist, protectionist one. This is the tension between rhetoric and reality that will permeate the Conservative party conference next week. It is the fundamental division in cabinet. For 15 months, the real cost of Brexit has been ducked. It is time to come clean. | Other events in Northern Ireland have already reminded Mrs May how tough the world will be beyond the EU. In her speech at the Bank, the prime minister suggested that she might block imports from Boeing in retaliation for the US aircraft manufacturer’s demand for 220% tariffs on parts imported by its parent company in Canada from Bombardier in Belfast. Clearly even a special relationship with the US president is no guarantee of favourable treatment. But there is a message here for Mr Corbyn’s view of the post-Brexit world too: Boeing is objecting to British subsidies to Bombardier of just the kind he appears to think are impossible in the EU. As the row over Bombardier demonstrates, they are perfectly possible; and so is tit-for-tat retaliation from non-EU trading partners. Clearly, whatever the claims of the leave camp – reiterated at the launch of a new free trade thinktank on Wednesday – Brexit is a recipe not for an outward-looking global Britain but an inward-looking, nationalist, protectionist one. This is the tension between rhetoric and reality that will permeate the Conservative party conference next week. It is the fundamental division in cabinet. For 15 months, the real cost of Brexit has been ducked. It is time to come clean. |