domingo, 27 de novembro de 2016
Philip Hammond boosted by Brexit black hole
Philip Hammond boosted by Brexit black hole
The UK economy will take a £122 billion hit. But the chancellor of the exchequer could be forgiven for enjoying himself.
By ALEX SPENCE AND CHARLIE COOPER 11/23/16, 11:40 PM CET Updated 11/25/16, 4:25 PM CET
LONDON – For a man informing Britain that its economy will take a £122 billion hit, Philip Hammond could be forgiven for enjoying himself.
The chancellor of the exchequer, known in political circles as “spreadsheet Phil,” broke the news to MPs that the cost of Brexit, as measured by the increase in government borrowing needed to mitigate against its effects, will be a cool £59 billion over five years.
In the first major economic announcement from the government of Prime Minister Theresa May, the chancellor delivered a gloomy message, revealing that Britain’s economy is set for a period of lower than forecast growth, higher borrowing and a squeeze on household finances.
Yet Hammond could relish the occasion. Despite the miserable figures calculated for the Treasury by the independent Office for Budget Responsibility (OBR), Wednesday’s Autumn Statement, a budget in all but name, will strengthen Hammond’s hand in the battle over Britain’s withdrawal from the European Union.
On the most basic level, Hammond’s dull but competent performance boosts his own authority within government. He’s a novice chancellor, but he projects grown-up competence at a time when the nation craves reassurance. What’s more, such grim figures underline Hammond’s argument that Britain can’t risk a “hard” departure from the Union.
Reckoning with reality
The chancellor has been on the back foot since his appointment following June’s referendum.
The economy hasn’t performed as badly as some analysts — notably those in the Treasury, under Hammond’s predecessor George Osborne — predicted. Britain hasn’t tipped into recession. To Euroskeptics, this so-called “Brexit bounce” is evidence that the U.K. can thrive outside the Union.
The measured statement, from the cabinet’s leading “soft Brexit” voice, looked like a shrewd exercise in managing the country’s expectations.
“It’s a reflection of the resilience of the economy and that Brexit is not proving to be the economic catastrophe many on the Remain side were predicting,” Suella Fernandes, the MP who led a group of 60 Euroskeptics in calling last week for a clean break from the single market and the customs union, told POLITICO.
All summer, Euroskeptics voiced frustration at the so-called “Bremoaners,” who, as veteran Euroskeptic backbencher John Redwood said of the Treasury, continued to look at everything through “ridiculously pessimistic Brexit glasses.”
The OBR projections make it difficult to argue that the British economy looks anything other than fragile — and many ordinary people who voted for Brexit stand to be the worst hit.
Perhaps the most eye-watering statistic to emerge from the OBR’s 271-page forecast, was the £22o billion additional borrowing by 2020, compared to the OBR’s pre-referendum projections. Significantly for a budget that was supposed to help working men and women, real earnings growth is projected to slow to almost zero next year.
“We are in for a long decade of austerity,” said one minister on the soft Brexit side of the debate. “Hardcore Brexiteers see any reckoning with reality as subverting the Brexit argument. Talking about the fiscal debt pile getting worse is not something they want to hear, but that’s the reality.”
The measured statement, from the cabinet’s leading “soft Brexit” voice, looked like a shrewd exercise in managing the country’s expectations, as well as a warning to Hammond’s hard-line colleagues pushing for a withdrawal from the single market and customs union that Britain can ill-afford such a leap in the dark.
“He’s going to dish the medicine and call it as he sees it, not play politics with it,” said the minister, speaking on condition of anonymity. “He is hamming up the ‘spreadsheet Phil’ image because that is his protection in the cabinet.”
With the deteriorating public finances giving Hammond little wiggle-room, there were few of the vote-grabbing policy treats that previous chancellors such as George Osborne and Gordon Brown liked to sprinkle through their Budgets and Autumn Statements.
To the extent there were concessions, they were targeted at blue collar workers, those “just about managing” now known in Westminster as Jams: £1.4 billion for 40,000 affordable homes, banning letting agents’ fees, a reduction in the rate at which benefits are withdrawn from people once they start working.
Some Tory MPs — especially those who, like both May and Hammond, backed remaining in the EU — worry that many people voted to leave not just as a way of thumbing their noses at the political classes, but in the hope it would deliver money in their pockets. Left behind by globalization, these voters believed (and were told during the campaign) that they would get cheaper homes, more money for health services and shorter waiting lists for schools and public services if Britain left the EU because there would be fewer immigrants competing for resources.
“Brexit won’t deliver those things. How are the public going to feel when they discover that?” said one senior Conservative MP.
Downing Street hopes the Jams strategy will ensure that Brexit voters feel like something has improved, despite a tight budget.
Others doubt such measures will make much difference in the long run.
“The government is traveling without a road map on Brexit and has now provided no more than a few pea shooter tweaks to alleviate the plight of people who are feeling the pressure,” former Deputy Prime Minister Nick Clegg told POLITICO. “The idea that anything in this Autumn Statement could in any way materially offset the very real squeeze that is now impending for household finances and public services is self-evidently laughable.”
Clegg said he was “extremely worried” by Wednesday’s figures.
“These official forecasts have been horribly wrong this year, and there is no sign that they are learning their lesson and focusing on the data” — Professor Patrick Minford
In his view, anything other than a soft Brexit will be catastrophic for the livelihoods of families struggling to get by. “I hope we will dodge the bullet but the underlying figures from the OBR just add to my concern that we are in a more perilous position economically over the next year or two probably than at any time since the 2008 crash,” he said.
Doubting the forecasts
Euroskeptics cast the OBR — and, by extension, Hammond himself — as too pessimistic. The Economists for Brexit group, co-chaired by Boris Johnson’s ex-economics adviser Gerard Lyons, was strident in its criticism.
“These official forecasts have been horribly wrong this year, and there is no sign that they are learning their lesson and focusing on the data, rather than vague guesswork about emotions,” said Professor Patrick Minford, co-chair of the group. “The irony is that much of this so-called uncertainty in the U.K. economy is, in fact, being driven by these pessimistic forecasts making worse-case assumptions.”
On Minford’s analysis, Britain’s GDP would grow by 4 percent over the long term if it leaves the single market and strikes its own trade deals under World Trade Organization rules.
The OBR didn’t seem entirely sure of its own assessment, adding huge caveats to its forecasts.
Its assumptions about Britain’s post-Brexit trading arrangements, the confidence of overseas investors, business investment, and the impact of the fall in sterling on consumer prices, were all uncertain.
“There is little by way of precedent to guide the assumptions that have been factored into our forecast, so invariably future forecasts will need to be revised as we learn more about how policy will change and how the economy will respond,” their outlook said.
Britain is heading down an uncertain road, and nobody knows exactly where it will lead, or how much pain it will suffer along the way. As for Hammond, he’ll walk that road with a little more spring in his step. At least for today.