Mark Carney once again proved himself to have the brassiest of brass necks this week when he claimed that Liz Truss had turned Britain into “Argentina on the Channel”. The former governor of the Bank of England also criticised “far-Right populists” and Brexiteers for having a “basic misunderstanding of what drives economies” during a typically self-serving speech in his native Canada.
With Argentina having become a byword in recent years for economic crisis, the reference was intended as a slight on the mini-Budget drawn up by Ms Truss and her chancellor Kwasi Kwarteng last year. Speaking at the Global Progress Action Summit in Montreal, Carney hit out at the “misguided view” that reducing taxes and government spending leads to economic growth – and accused Brexiteers of wanting to “tear down the future”.
But isn’t it more a case of Brexiteers wanting to recreate the past, pre-Carney world of economic growth over managed decline?
During his tenure as governor from 2013 to 2020, the UK’s GDP growth rate struggled at around 2 per cent a year, before falling to 1.6 per cent in 2019 before lockdown caused it to drop to minus-11 per cent in 2020, according to World Bank figures.
Carney says he doesn’t believe cutting taxes and government spending leads to growth, but where exactly has his “values-led” economic approach got us? Certainly, today we are now being taxed more than ever for an overly bloated state delivering increasingly inadequate public services. Oh, and growth is still virtually stagnant.
Yet it is little wonder that Remainer Carney feels so emboldened to make such remarks. Britain might not be the Singapore-on-Thames that many Brexiteers wanted but it isn’t Argentina, either. The fact of the matter is that we have quietly become a very European country in terms of tax and spend – and like the rest of Europe, it’s failing us (not that Carney and Co would care to admit it).
Perhaps the most striking thing about Sir Keir Starmer’s suggestion that Britain would not diverge from EU rules if Labour wins power at the next election is not that he’s once again betrayed his pro-Remain sympathies. The Labour leader made the intervention in Montreal on Saturday, when he was speaking at an event hosted by Canada 2020, a centre-Left think tank whose advisory board is chaired by none other than Mark Carney. “Actually, we don’t want to diverge,” said Starmer. “There’s a lot more common ground than you might think.”
As I wrote in last week’s column, the Labour leader has repeatedly proved that he cannot be trusted to respect the referendum result, and this is yet more evidence of it.
Perhaps the most troubling aspect of his pledge to improve relations with Brussels by sticking to the bloc’s standards is that we might not even notice. Despite Boris Johnson’s “take back control” promises, his government and subsequent administrations have done little to diverge from the EU.
Lord Frost won us huge new freedoms as part of his Brexit deal. We now have the power to do almost anything we like.
But what have we used these freedoms to do? Scrap the “tampon tax”. Across a swathe of areas, very little has changed. Immigration is even higher, our laws are increasingly European, and our fiscal policy is increasingly European, too.
Johnson had Iain Duncan Smith’s report, The Taskforce on Innovation, Growth and Regulatory Reform (TIGRR), outlining how Britain could seize new opportunities from Brexit with its newfound regulatory freedom, on his desk for months and failed to act on it.
Rishi Sunak has made a few small changes in areas like freeports, but the truth of the matter is that we have done precious little to gain a competitive edge on our European counterparts. In fact, with Chancellor Jeremy Hunt’s corporation tax rise and refusal to scrap the tourist tax, we are probably less competitive than we were before Brexit.
We have also regressed when it comes to rejoining the Horizon science programme, when we could have branched out on our own or pursued closer collaboration with the US, Switzerland, Japan and Australia instead.
So if Starmer does want to get closer to the EU, it’s not as if we would be giving up a brilliant independent science policy or radical deregulation of labour laws, or some world-enviable 15 per cent rate of corporate tax.
Hunt’s declaration on Thursday that tax cuts are “virtually impossible” at present was also revealing. Admitting that high debt interest payments have left him with little “fiscal headroom” for giveaways, he said: “If you look at what we are having to pay for our long-term debt, it is higher now than it was at the Spring Budget.
“I wish it wasn’t, it makes life extremely difficult, it makes tax cuts virtually impossible, and it means that I will have another set of frankly very difficult decisions.”
Of course, he’s right to say that debt is constraining our choices. But that doesn’t seem to be constraining public spending. The Government spent vast amounts of money to help to deal with the effects of the Covid-19 pandemic in 2020-21, so the total increased by more than usual in that year. It then fell back in 2021-22, but began to increase again immediately afterwards; in cash terms, total spending in 2022-23 was higher than it had been during the pandemic.
Spending as a proportion of GDP went up to 53 per cent during the pandemic, higher than at any point since the Second World War. Yet forecasts now suggest that spending will only return to around 45 per cent of GDP by 2024-25 – which is still at the upper limit of what it has been for the preceding four decades.
So if you take Starmer’s comments at face value, all he is really saying is that Labour has the same pitiful ambition for Britain as Carney and, seemingly, our high tax and spend government. Yet still they mock Brexiteers for aspiring to something better than this economic torpor.
Who on earth would blame Leavers – or any voters, for that matter – for wanting to “tear down” a future of more of the same? Carney doesn’t have a pot of gold at the end of the rainbow any more than France, Germany or Italy do right now, which are all in such a crippling stasis that his so-called “far-Right populists” are poised to take over, following the lead of Giorgia Meloni, who is already in power in Italy.
The depressing truth at the heart of all Starmer’s peacocking around France and Montreal this week is that, if he does crush Brexit, he will find that the ground has been prepared for him.