Pound collapse not due to ‘hard Brexit’

Claims that the collapse in the pound is due to Mrs. May's opting for a 'hard Brexit' are just the latest in a series of false narratives cooked up by the establishment institutions, says John Redwood.

I find I have to spend a lot of my time explaining why so many of the conventional views, pumped out by the establishment institutions in the UK, are false narratives.

The latest false narrative is that the pound has fallen owing to Mrs May's decision to go for "hard Brexit". As many of us have explained there is no such thing as hard Brexit. Vote Leave made crystal clear we would leave the single market when we left the EU as they are part of the same Treaty, and the continentals see freedom of movement and budget contributions as a key part of the single market. It should therefore be no surprise to markets, several months later, that we will be leaving! The issue was and is what access we will have to the single market. Again it is quite obvious we will have decent access, as they need decent access to us. I think we will get tariff free access, but if they want WTO level tariffs they will suffer much more than us, and we will get a boost of substantial tariff revenues on all our imports of manufactures from them which we could spend on other economic improvements at home. Services are of course tariff free.

The pound fell sharply on Thursday. This was four days after Mrs May made her wrongly named "hard Brexit" speech. If the cause of the fall was the market's ignorance of the obvious until she spoke, then surely the fall would have occurred on the Monday immediately after the speech?

Today I want to just remind you of some of the main false narratives and their accompanying soundbites, that have distorted our public debates in recent years.

In the first decade of this century the government assured us they had found an end to "boom and bust". No matter how hard we tried to explode this nonsense, it was commonplace as a view. This complacency lay behind the egregious errors made in allowing banks and government to rack up huge debts which proved unsustainable.

Throughout the Brown and Coalition years we were told that the Bank of England is independent. I have recently produced a couple of articles on this site showing what nonsense that was and still is. The Bank was very politicised through much of the period 1997-2016 and subject to several changes of direction from government and Parliament instructions.

During the crash the Labour government successfully blamed the banks for the crisis. Whilst some of the commercial banks made bad judgements or misbehaved, the largest errors were errors of central Bank and Treasury policies, deliberately bringing solvent banks down through starving them of liquidity, and refusing to use bail ins and other techniques to resolve their problems.

The Coalition economic strategy was characterised as cutting public spending to eliminate the deficit in a Parliament. 80% of the work of deficit reduction was said to be spending cuts. Yet every year real spending rose a little, and the government relied on large tax revenue increases to pay for the extra spending and get the deficit down. They fell well short of eliminating the deficit in the Parliament.

The Opposition always characterised everything the government did as austerity policies, yet the areas of cuts were relatively modest. It is true some of the welfare cuts were ill judged and allowed a more general narrative to be written which was not true. Meanwhile spending on pensions, welfare overall, EU contributions, overseas aid the NHS, education and others went up. Nothing was attempted on the scale of the damaging cuts in Greece, Ireland, Spain and Portugal under EU controls, where big reductions were made in spending. The left in the UK never seemed too keen to condemn these.

Now we see the false narrative that everything that goes wrong is caused by the Brexit vote, and everything which stays good just means we have not yet seen the impact.