A budget for growth? Sorry, pull the other one. Below the spin, even the official forecasts are laden with gloom. Funnily enough, it is 50 years since one of Jeremy Hunt’s chancellarial predecessors, Tony Barber, produced a “budget for growth” that really worked – indeed, rather too well. It resulted in the “Barber boom”, when gross domestic product rose by some 6% in real, adjusted-for-inflation, terms in one year.
They don’t come like that any more, which is just as well, because the Barber boom ended in tears. (In truth it was the Heath boom, because the prime minister was really in charge.)
What Europeans such as your correspondent are especially appreciative of when it comes to Edward Heath is not his overambitious growth plans, but his strong championship of our entry to what was then the European Economic Community.
We joined in 1973, with a confirmatory referendum in 1975, deftly handled on Labour’s side by prime minister Harold Wilson. On the Conservative side, few were more passionately pro-EEC than the then up and coming Margaret Thatcher.
Now, the majority of the rightwing Tories who inflicted Brexit upon us consider themselves Thatcherites. They know that Thatcher enjoyed the huge support of her chief press officer, Bernard Ingham. Well, I have news for them: my brother Victor and I had a most interesting lunch with Bernard shortly before he died recently, at the ripe old age of 90.
Ingham himself was an unashamed Brexiter. But he, who knew Thatcher’s views as well as anyone, told us in no uncertain terms that his boss would have undoubtedly voted to remain in the European Union. She fought her – and our – corner in many an EU dispute, but she knew where our economic interests lay; and, of course, she was godmother to the single market.
It is the shadow of Brexit that hangs over current economic policy, and limits the chancellor’s room for manoeuvre. John Springford of the Centre for European Reform estimates that the negative impact of gratuitously imposing trade barriers on our nearest trading partners – via higher import prices, loss of vital immigrant workers, and general uncertainty affecting business confidence – had cost our economy 5.5% of GDP by the summer of 2022.
Our former partners in the single market are – surprise, surprise – faring a lot better because, not to put too fine a point upon it, they too may have problems, but do not believe in self-harm.
Talking of which, I should like to reiterate my wonder at the fact that Rishi Sunak, when arguing the case for the Northern Ireland deal – in which he was supported by Keir Starmer – emphasised that Northern Ireland could continue to enjoy the benefits of being part of the UK and the single market.
If that’s good for Northern Ireland, Mr Sunak and Sir Keir, what about the rest of us, who, in addition to the economic consequences of Brexit, have lost our freedom of movement within the single market we helped to set up? It is surely time that Sunak, whose Brexit position has been shown to be flawed by his own comments, demonstrated his reputation for pragmatism by owning up to the catastrophe.
As for Starmer, on a recent visit to the historical wonders of Cairo, I contemplated the sphinx and wondered just which modern politician came to mind: and yes, it was the Labour leader. He is quite sphinx-like in his attitude towards Brexit; a remainer who rules out rejoining the EU and single market, notwithstanding all the palpable damage from Brexit.
Unfortunately this economy, for which both leaders have mysterious growth plans, is evidently faced with the biggest drop in living standards since 1956. The obvious growth plan, which would restore business confidence, would be to grasp the nettle and rejoin the single market.
Now, 1956 was the year of the Suez disaster – a memory that certainly came back to me in Cairo. That misadventure came to an end when the Americans refused to prop up the pound. It is interesting that American pressure from President Biden seems to have concentrated Sunak’s mind on resolving the Northern Irish impasse on Brexit.
Meanwhile we all await the ineffable Jacob Rees-Mogg’s list of the “benefits of Brexit”. Given the recent banking emergencies in the US and Switzerland, I greatly look forward to Rees-Mogg’s views on the putative benefits of a restoration of the light-touch regulation that brought us the financial crisis of 2008.
Talking of which, a senior banker recently told me that, when the prime minister was suggesting there was a clamour in the City for the relaxation of financial regulation, he – the banker – asked his counterparts in other financial institutions whether they were lobbying for it; nearly all of them said no. He said Goldman Sachs was the exception. This called to mind the wonderful, ironic chapter in JK Galbraith’s The Great Crash, entitled: “In Goldman Sachs We Trust.”
