‘There are,” said a former top Treasury official last week, “some strange people in this cabinet with strange ideas.” The speaker was Lord Macpherson, the former Treasury permanent secretary, who during his time at the department now run by Chancellor Sunak had the unrivalled experience of serving Ken Clarke, Gordon Brown, Alistair Darling and George Osborne. Both Macpherson and Osborne were on a “webinar” – yes, a word that is new to me too – hosted by the Strand Group of King’s College London to discuss a report co-authored by a former shadow chancellor, Ed Balls.
Balls is still actively involved in the economic debate, and it was in his capacity as a visiting fellow at Harvard that he was presenting a report on the prospects for a US/UK trade deal. Well, to put it mildly, the Harvard team found precious little for the UK to gain from such a deal. Even if something can, as it were, be trumped up, it would hardly be worth the cellphone from which it would no doubt be tweeted.
Correspondingly, there is quite a lot to lose from the no-deal Brexit that the cabinet seems fixated on. That strange trade secretary with strange ideas, Liz Truss, proclaims that increased overseas trade is essential to overcome the economic hit from coronavirus. But the report concludes that there would be a mere £3.4bn gain from a US deal, compared with a £112bn loss from departure from the EU. At present we do 43% of our trade with what I can still call the rest of the EU, and 15% with the US. All serious authorities on this subject, including the great Paul Krugman – who won his Nobel prize for research on trade – insist that geographical proximity to markets is the most important factor.
Now, I hope, on his performance thus far, that Sunak will prove to be an exception to the Macpherson rule about this cabinet. His massive furlough scheme was, and continues to be, necessary; but, alas, not sufficient. There are going to be millions of victims of the huge rise in unemployment and potential bankruptcies the economy is experiencing, and God knows how much permanent damage. I have a feeling that because we are all so absorbed with the lockdown and the death toll, the full extent of the economic crisis has not yet been appreciated.
When I wrote my last book, Nine Crises, I had no idea of what was yet to come. This depression is gigantic, and only in its beginning. There is a limit to which one can derive solace from the debate about whether there will shortly be a V-shaped or a U-shaped recovery. As Llewellyn Consulting has pointed out, many analysts are so obsessed with growth rates in supposed “recoveries” when what matters are the levels of output. Thus output in the UK – gross domestic product – had only just got back to pre-banking-crisis levels shortly before coronavirus hit town, and had not even reached that level in Italy. Recoveries from recessions take a very long time; a fortiori when it comes to Depressions.
So the cabinet wants to press on with the real Brexit, apparently in the hope that the undoubted short-term damage it will do will be lost in the smokescreen of the virus. Have they not noticed that four-fifths of our imported food comes from the rest of the EU? The panic about food shortages when the virus struck was mercifully short-lived. Why? Because, even now, we are an integral region of the biggest trading group in the world. Just imagine the chaos next January if these strange people are allowed to get away with their strange ideas.
Now, there is, I think, growing support for the idea that there should be a Brexit extension of up to two years in order to effect a reasonable UK/EU trade agreement. But so far, Keir Starmer – while having impressed many of us, including senior Tories, that he has the makings of a formidable leader of the opposition – has been saying that Brexit cannot be reversed and the government has got to get a deal within its chosen timetable.
I comfort myself with the hope that he is being cautious and playing politics. My related hope is that even the strange people with strange ideas are going to recognise reality later in the year. In which context, the Irish foreign minister seems to have given sage advice to the rest of the EU, in suggesting that they should effect a way of letting No 10 off the hook by making it feasible for a two-year delay without allowing it to look like a humiliation.
Finally, since Johnson’s adviser Dominic Cummings thinks he knows everything, I recommend that he re-read Bertrand Russell’s short 1946 lecture Philosophy And Politics, in which he says: “Since, broadly speaking, the distant consequences of actions are more uncertain than the immediate consequences, it is seldom justifiable to embark on any policy on the ground that, though harmful in the present, it will be beneficial in the long run.”
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