The BoE During the EU Referendum
More than a year after the UK’s biggest democratic vote in recent history, the Bank of England are still cushioning business to prepare for Brexit. Before June 23rd the BoE interjected their professional fiscal view on the potential scenario of Britain voting to leave the European Union. What was meant to be fiscal logic came out as ‘Project Fear’ with the Governor Mark Carney preaching apocalyptic scenarios of the worst of the worst happening on June 24th if the British people vote to leave.
In Early May 2016, the BoE believed that a vote to leave could slide the country into recession. Many saw this unusual intervention of the BoE as in breach of their renowned impartiality. Never in a General Election has the Governor of the Bank of England spoken out against the fiscal policy of a political party, yet in that referendum they felt a sense of duty as the economic elite establishment to warn the people.
By putting its view across the BoE faced a backlash of criticism during and after the EU referendum campaign. The Governor was even brought before a parliamentary committee to explain the role of the bank during the campaign and their apparent ‘pro-EU’ stance.
Now as the Bank of England puts out further warnings about Brexit, like in June 2016, to question Michael Gove, has the UK really had enough of experts?
Warnings from the BoE
Through warnings of Brexit uncertainty Mark Carney and the BoE have moved the growth forecast to 1.7% from its previous forecast of 1.9% made in May. Additionally, the BoE also reduced the forecast for 2018 from 1.7% to 1.6%. This is the economic projection changing due to an alteration in circumstance. It is no secret that UK is not going to be on the steady path of continuous growth had it voted to remain in European Union as many economists predicted.
As the UK enters uncharted territories it makes predictions harder, even as Governor Carney explains, “Brexit is casting the biggest shadow over the UK’s economic outlook” These warnings comes as parliament is in recess, with a Cabinet with different views on how to deal with the momentous task of Brexit. When people voted, fiscal projections were not at the for front of their minds.
People Voted with their Hearts
“Dare to dream that the dawn is breaking on an independent United Kingdom”
These are the words spoken by Nigel Farage in the early hours of the morning of June 24th when Vote Leave had won with 51.9% of the vote. The first area to vote to leave the European Union was Sunderland, which proved one the BoE’s ‘Project Fear’ prophecies correct with Sterling taking a massive hit. The pound plummeted by 4.4% against the dollar.
One of the largest breakdowns in demographics is that the university educated overwhelmingly voted to remain and the less educated in contrast, largely voted to leave. This prompted a whirlwind of comments suggesting that those who voted to leave ‘didn’t understand’, a university degree does not give a Remainer a stronger vote, every voter is equal and every vote counts.
The vote to leave the European Union was not done from an economic perspective but to address a growing political issue in recent years; immigration. Therefore, many choose not to vote in line with the banks and the institutions. Those institutions think that the British electorate simple chose to cut off your nose to spider face.
The BoE in a Post-Brexit Economy
Post European Union the BoE will still play a vital role in our economy. The power to set and slash interest rates that affect everyone’s daily lives is not something that should be bestowed to some government ministers, it should always and is, an independent impartial branch of the fiscal establishment.
How the bank chooses to operate in a post-Brexit economy, and whether or not it intervenes in a democratic process with its fiscal wisdom again is yet to be seen. One thing is for sure that Brexit will dominate politics until all the I’s are dotted and all the T’s crossed. In the words of the European Parliament’s Chief Negotiator, Guy Verhfstadt.
Brexit is a “catfight in Conservative party that got out of hand”, and now we’ve got to clean up the mess.