Richard Murphy, of Tax Research UK, wrote what follows a week before the result of the EU referendum was known – and predicted recession, with markets and the pound plummeting.
He assumed there would be another renegotiation of our EU membership (there won’t be, according to Mr Juncker) and he also assumed that both David Cameron and George Osborne would be out of a job by the weekend (only Cameron has gone at the time of writing) and any Tory administration that followed would be a ‘lame duck’. In those circumstances:
Recession is unavoidable. Investment in the UK will go on hold during renegotiation. No big business is going to sink millions or even billions into our economy without knowing what the future terms of UK trade might be. In itself this will be enough to trigger recession. Couple that with a planned withdrawal of certain parts of banking (those that need an EU regulatory base) from London and a downturn has to happen. Try as I might I cannot see where the stimulus happens. A sterling fall of 30% in recent years has not boosted UK growth so no one should respond by saying a fall in sterling us the counter-balance to all this. That will only create import induced cost push inflation, which is just about the last sort we want as it serves no domestic purpose at all.
Then, leaving aside the real risk of EU instability as a result of our vote, there is the risk of worldwide recession as global markets suffer the knock on effects of a fall in confidence in a global trading hub. This could be bad enough to make 2008 look like a picnic: that was about finance and this time the threat is to the real terms of trade, and that is much more serious.
The Labour Party would not be keen to seize power at such a time, he argues:
Do not expect Labour to want to take office, I believe they will be happy for blue-on-blue action to continue and for the mess to arises on someone else’s watch. The chance to say after 2020 that what they will have to do is clear up the mess they inherited, with a real justification for attributing blame in this case, will be much too big to resist, in my opinion.
To be honest, I don’t see Labour opting out of office at any time, because the risk posed by any Conservative Government is too great.
Besides, isn’t there enough of a mess already? We’ve had the slowest (and worst) economic recovery since records began, coupled with a ‘vanity’ referendum that has caused upheaval in the value of the pound and the markets and is likely to cause the collapse of the UK as a nation made up of four countries.
Is it possible for David Cameron to have failed more utterly?
There is one sticking-point, as far as Labour is concerned, if Mr Murphy is correct:
The narrative of failure of neoliberalism has to be broadly agreed to challenge the backlash based in ingrained thinking that is still possible.
We know that there are still plenty of neoliberals in the Parliamentary Labour Party who would seek to blindly carry on following that failed philosophy if returned to office – two of them have tabled a vote of ‘no confidence’ in leader Jeremy Corbyn (very much not a neoliberal).
Mr Corbyn has rejected the call to quit, but he’ll need to clear his party of these backstabbers and bring in people who aren’t wedded to a failed and corrupt economic theory before he can hope to institute change for the better in our divided and damaged country.
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