Boris Johnson continues no-deal tug-of-war with furious MPs
Business Week: also in the news was global recession fear; aviation woes; and Budget 2020
UK prime minister Boris Johnson accused MPs of “collaboration” with the EU to thwart Brexit.
The bitter rhetoric around Brexit was dialled up this week by parties on both sides of this divisive debate.
Former chancellor of the exchequer Philip Hammond – now confined to the backbenches – said UK prime minister Boris Johnson would be guilty of a Brexit betrayal if he follows through on his threat to take Britain out of the EU without a deal.
Brexit betrayal is something we’ve heard about before, albeit usually from the other side. In Hammond’s case, his suggestion was that while a majority of British citizens may have voted for Brexit, nobody did so with the understanding it would wreck the economy.
“Most people in this country want to see us leave in a smooth and orderly fashion that will not disrupt lives, cost jobs or diminish living standards, whether they voted Leave or Remain in 2016,” he said. “No-deal would be a betrayal ... It must not happen.”
Johnson resorted to familiar tactics. Accusing Hammond and like-minded MPs of “collaboration” with the EU to thwart Brexit, he turned the tables on them and said it was their approach that was making it more likely that the UK would be “forced” to leave with no deal.
In case you missed it, all of this has to do with Johnson’s plan to bypass parliament – either by suspending it or calling an election for the day after Brexit – in the event it attempts to block a no-deal departure.
Labour leader Jeremy Corbyn is determined to stop him, but a cursory canvass of support for the formation of a temporary government that he would lead was dismissed by key colleagues in the House of Commons.
Predictably, US president Donald Trump’s administration is cheerleading calls for a no-deal Brexit, with national security adviser John Bolton promising the UK would be “first in line” for a trade deal should that happen.
That’s despite the fact the executive branch of the US government has no power to strike trade deals without the say-so of Congress. House speaker Nancy Pelosi has consistently said there will be no trade deal if the Belfast Agreement is undermined.
Back home, relations between Dublin and London have seldom seemed so strained. A plan for a meeting between Johnson and Taoiseach Leo Varadkar has been agreed upon but there is no timeframe and, in truth, it is unlikely to achieve very much.
Meanwhile, ING, one of Europe’s larger banks, said a no-deal Brexit would send sterling down to parity with the euro and push it down to $1.10 against the dollar. Ouch.
Major indicators suggest recession is coming
Fears of a global recession – on the horizon for some time – loomed into view this week as stock markets tumbled following bleak data out of major economies, including the United States, the UK, Germany, and China.
More worryingly, there was an inversion of the US Treasury yield curve. The last time that happened was 2007 – just before the last recession – and it is widely regarded in economic circles as a reliable recession indicator.
Indeed, the yield curve has inverted roughly 14 months before each of the past nine US recessions.
Many commentators have blamed Trump’s trade war with China. The president, however, has pointed the finger squarely at “clueless” Federal Reserve chairman Jerome Powell for raising interest rates “too much and too fast”.
Whether he likes it or not, the trade war was blamed for China reporting a raft of unexpectedly weak July data, including a surprise drop in industrial output growth to a more than 17-year low.
China has been embroiled in 10 weeks of increasingly violent confrontation between police and pro-democracy protesters in Hong Kong that has plunged the city into its worst crisis since it reverted to Chinese rule in 1997.
The protests this week led to the grounding of air traffic in the semi-autonomous region, and the clashes raised fears for Cathay Pacific’s Dublin-Hong Kong service, which has carried about 80,000 people to and fro since it was launched two years ago.
Staying with aviation, Norwegian Air announced it is to close its Dublin base and will cease flying from Shannon and Cork on transatlantic routes from next month. The move puts up to 134 jobs here at risk.
Elsewhere, industrial unrest at Ryanair continued as pilots in Ireland voted to strike over two days later this month.
Government has little scope in budget
With less than two months to Budget 2020, Revenue this week published a new set of estimates, including the assertion that more than 100,000 people would pay more income tax from January unless there is an adjustment for inflation.
The bad news is the estimates also suggested there is little scope for making adjustments to tax bands and rates given the amount of money available – just €233 million or so.
Of course, the Government could look to raise some taxes in order to bring in more revenue. One suggestion was a €100 flat-rate increase in property tax to raise €180 million a year.
The report also stated that increasing carbon tax by €10 a tonne would bring in additional revenue of €216 million a year, while increasing duty on a pint by 10 cent would collect a further €68 million.
Despite the tightening purse strings, data from the Central Bank of Ireland this week showed Irish households are, on paper at least, richer than at any other time in the history of the State, hitting a net worth of €772 billion in the first quarter.
However, Irish consumer sentiment slumped to a near five-year low in July with KBC economist Austin Hughes blaming the “Boris blues”, while the value of Irish exports fell by €2 billion between May and June, giving us an adjusted surplus of €4.2 billion.
Finally, the supply of new homes appears to be taking the heat out of the property market with annual price inflation falling to just 2 per cent in June, its lowest level in six years. This compares with 12 per cent a year ago.