Blitz spirit prevails as Brexiteers vow to keep calm and carry on
OECD report paints bleak picture for Britain but idea of second referendum is shot down
OECD secretary-general Ángel Gurría and Britain’s chancellor Philip Hammond: the Paris-based think tank was accused of being “a leading advocate of Brexit pessimism”. Photograph: Matt Dunham/PA Wire
Philip Hammond was taking no questions on Tuesday as he dashed away from a joint press conference with the Organisation for Economic Co-operation and Development (OECD).
“I’m sorry, I’ve got to run,” the chancellor told reporters as he made a hasty exit at the Treasury, leaving OECD chief Ángel Gurría at the podium to talk through the think tank’s biennial health check of the UK economy.
Gurría, on the other hand, had plenty to say on his Paris-based think tank’s explosive intervention in the Brexit debate, floating the idea of a second referendum on Britain’s membership of the European Union.
Forecasting growth of just 1 per cent next year, the OECD report painted a stark picture of Britain’s economic prospects in the event of a “disorderly” Brexit.
But, it said: “In case Brexit gets reversed by political decision (change of majority, new referendum, etc) the positive impact on growth would be significant.”
With the Brexit negotiations at a decidedly delicate stage (when will they ever not be?), the OECD’s intervention was particularly unwelcome in Whitehall.
Although Hammond didn’t hang around to air his views at the press conference, the Treasury issued a swift and somewhat terse response that needed no interpretation: “We are leaving the EU and there will not be a second referendum.”
Leading pro-Brexiteers reacted with fury to the OECD report, which suggested that a no-deal Brexit would slash up to £40 billion from the UK economy by 2019. Britain’s credit rating would be cut, sterling would slump, business investment would freeze and consumer spending would be choked off by rising prices.
Tory MP Jacob Rees-Mogg accused the think tank of being “a leading advocate of Brexit pessimism” which had made a series of “politically motivated and erroneous forecasts”. Fellow Tory Peter Bone labelled the report another example of “Project Fear” – the dire warnings of economic disaster issued in the run-up to the Brexit referendum last year.
Gurría softened the second referendum comments by insisting that he and the OECD are “devoted” to making the Brexit deal “as seamless, as smooth as possible”.
But he had harsh words on Britain’s poor record on productivity, which has made “no meaningful contribution” to output since 2007. And he was unimpressed with the skills of the British workforce, which he said acted as “an anchor” in holding the country back.
The report put forward higher taxes on self-employed people as one way of addressing the productivity problem. It also advocated a cut in benefits to pensioners by doing away with the “triple lock” on state pension payments and instead linking payments to average earnings.
Perhaps mindful of Hammond’s gaffe last week when he described EU negotiators as “the enemy”, Gurría adopted wartime analogies to sum up the UK’s position. “What was it Churchill said? Keep calm and carry on. It’s like the Blitz, except, fortunately, without the bombs.”
For that much at least we can be grateful.
Retirees jump for joy as inflation rises
The OECD may want Britain to dock pensioners’ benefits but there was welcome news for the nation’s retirees as inflation jumped to 3 per cent last month. This is its highest level in over five years and, crucially, the figure on which next year’s rise in state pension payments will be based.
The so-called “triple-lock” on pensions dictates that the annual increase will be a minimum of 2.5 per cent, or based on the September increase in earnings or consumer price inflation, whichever is the higher of the three figures.
So state pensions look set to rise by 3 per cent, a move that is likely to inflame tensions over intergenerational fairness, with baby-boomers enjoying rising benefits and huge increases in the value of their homes while the young, struggling under the weight of student loans and squeezed wages, abandon all hope of home ownership.
Brexit is, of course, behind the increase in inflation to its highest level since April 2012, as the slump in sterling continues to push up the price of imported goods and raw materials.
The cost of living is likely to rise further, Bank of England governor Mark Carney indicated yesterday as he was questioned by MPs on the treasury select committee.
He admitted it was “more likely than not” that he would soon have to write an explanatory letter to the chancellor, which the governor is obliged to do if inflation moves more than one percentage point adrift of the government’s 2 per cent target.
Although inflation is unlikely to stay above 3 per cent for too long, it’s odds on that the central bank will increase rates next month for the first time in more than a decade.
Fiona Walsh is business editor of theguardian.com