The stock market likes continuity and clear projections and in the aftermath of a Leave vote there will be a period of unavoidable uncertainty. This is why business come out for remain; they don’t like change that is beyond their control and they don’t want any kind of uncertainty no matter how temporary. So we will see short term nervousness after a Leave vote. Some investment may well be delayed. The response of the Chancellor of the Exchequer to this would absolutely not be a panic inducing “emergency budget” with a catastrophic set of huge tax rises and budget cuts. That would be economic insanity.
The hypothetical measures set out by George Osborne as he stood alongside former Labour Chancellor Alistair Darling include 2p on income tax and a 5 percentage point rise on inheritance tax, and petrol and alcohol duties. Transport, the police, and local government would be cut by 5%. There would be cuts in pensions and defence. Spending on the NHS would be “slashed’.
This emergency budget would be a disaster. It would simply add to the uncertainty and panic and aggravate the economic shock. As several economists have pointed out, it is the opposite of the appropriate reaction. Aside from trying to reassure and calm in the market in any way possible, the Chancellor, whomever it should be, would stimulate the economy, invest strategically and perhaps cut taxes.
This was the exact response of Alistair Darling to the Great Recession so it was clearly disingenuous of him to endorse this policy as he claimed that he was “much more worried now” than he was when the banking system of the Western world collapsed in 2008. Of course we know what his ulterior motives are; it’s all part of the campaign.
George Osborne too is simply playing his part as a Remain campaigner. However, he is the acting Chancellor of the Exchequer and this act of economic vandalism is deeply irresponsible and disqualifies his from the job. In any job outside of government he would be charged with gross misconduct immediately. Throughout the referendum campaign he has allowed his roles to blend into each other dangerously but this is a step too far and is likely to be a career ending act of desperation.
George Osborne knows that his emergency budget would inflict a severe trauma of the economy at exactly the wrong time and cause a ripple effect across the Eurozone. He knows it would be an inappropriate moment to cut spending and raise taxes. As Jonathan Portes, from the National Institute of Economic and Social Research, said yesterday: “It is entirely the wrong response to a Brexit shock”.
If anything we will see a stimulus enacted to cushion the shock and see us over the initial reaction. If the Chancellor believed his own economic forecasts he would be borrowing heavily now while costs are at an historic low in order to prepare for potential turmoil. He has not done so. To ride out the period of uncertainty we will borrow and invest. Then British and European leaders will, after talks, look to calm and reassure the markets by setting out the intention to maintain trade and business continuity and manage the transition of Brexit. Any reaction will be short term and we are in a good position to cope with it.
The Chancellor should be performing his role of state above his role as a campaigner. This would mean promising the British public that he would do everything he can to cushion the initial shock and protect the economy with every tool at his disposal. Instead, he has promised a “punishment budget” by signalling his intention to inflict a fiscal shock on the British economy. He is no longer fit for the job and should be removed whatever the result of the vote. He has certainly proved that he is not in any way qualified to be the prime minister of this country.
Now that 57 Conservative MPs have promised to block this budget along with Labour it is clear that this fantasy punishment budget will never happen. Not that the Chancellor has any intention of doing so, he is simply a barefaced liar willing to add to the economic uncertainty and damage the British economy to intimidate the British public into voting the way he wants. He has disgraced his office and he has disgraced himself.
The Government is now in a state of collapse. Its authority has totally disintegrated. If we remain there will likely still be a big changes. If we vote to leave the Government will be brought down. We will need a new Government able to unify and work with other parties in order to begin planning the massive task of leaving the European Union with everything that entails. The House of Commons will need a consensus Brexit plan, to put together a negotiating team and plan the building of a new British state. It is a grand project.
This shambolic referendum campaign has been far from free and fair and many have been taken aback by the sheer deceitfulness and amorality of the Government’s conduct. This punishment budget, however, has gone above and beyond. The Chancellor of the Exchequer has basically told the public that if they vote a certain way the Government will commit economic suicide. For the leaders of a strong, growing economy it is an astonishing act of vandalism. It will be interesting to see how the public will respond to such transparently ludicrous threats.
This post was originally published by the author 16 June 2016 https://thescepticisle.com/2016/06/16/george-osborne-has-disgraced-his-office-and-is-no-longer-fit-for-the-job/