The controversy behind Brexit is far from over and while the people have voted to disassociate Britain from the European Union, complications continue to surface as the nation moves closer to the exit door. Most recently, dreadful predictions made by none other than the Bank of England have come forth to warn Britain about the consequences of a “no deal” scenario. Though whether this is really to warn or to dissuade remains to be seen, states Thomas Hughes.
So what would happen if the United Kingdom leaves the European Union without an agreement with Brussels? The Bank of England released its own declaration on that matter on Wednesday, November 28, and its projections were rather bleak, to say the least. In its assessment of the different exit scenarios from the EU, the institution projected a decline in the value of the pound sterling by 25% in the event that no deal is struck between the UK and the bloc once the leave takes place.
The Bank of England adds that in the worst case scenario, the British gross domestic product (GDP) would fall by 8% by 2024, compared to what would have been without Brexit. In addition, it warned that the unemployment rate would skyrocket to 7.5%, inflation would soar to 6.5% and real estate prices would plunge by a whole 30%. According to the Bank of England, even if Britain maintains ties to the EU, the GDP would still be reduced between 1.2% and 3.8% by 2024. While the Bank did mention that, in contrast, Theresa May’s proposed Brexit agreement could potentially have a positive effect on the country’s economy, it didn’t hesitate to accentuate the fact that it could only be made possible by keeping the closest relationship with the Union.
Now, does it appear as though the Bank of England has made a neutral and educated assessment of the future, equally weighing all of the options? The doomsday scenario projected for a truly independent Brexit has dominated the headlines and was clearly the central point of its statement. In a nutshell, the Bank has claimed loud and clear: “if you opt for an exit without an agreement, you will suffer harrowing consequences” and the media eagerly picked it up. It has taken a solid political stance on the matter. Considering that national banking institutions should always remain politically impartial, wouldn’t it be problematic if one such bank compromised its neutrality in regards to the decisions of its country?
THE IMPORTANCE OF NEUTRALITY
What those statements do is promote panic among the British people and influence the country toward potentially irrational decisions rooted in a fear of crisis rather than educated analysis. Mark Carney, Governor of the Bank of England, has both supported May’s deal and warned that a “no deal” Brexit could lead the country into an economic collapse worse than the financial crisis of 2007-2008. Amongst the aforementioned warnings, he also stated that in the worst case scenario where an agreement with the EU is not reached, the price of products could rise by 5-10%. In tune with these claims, it appears that the British are increasingly thinking about critical, if not catastrophic, outcomes. Some have even begun amassing strategic stockpiles of food and manufactured goods, concerned by the allegation that if customs reappear between the UK and the EU as a result of Brexit, delays in deliveries may affect a third of food supplies and up to 40% of fresh produce - which is what constitutes European imports into Britain.
Thus when a bank employs its voice to influence the decisions of a country and the sentiment of its citizens regarding a political issue, doesn’t it undermine not only its own neutrality but also its service to the best interest of its nation? The truth is, the Brexit that was voted for by the UK electorate was one without ‘’deals’’. “No deal” is a misnomer in itself, because there was no intended agreement, to begin with. The country sought to reclaim its freedom and independence from the smothering nature of the EU’s policies that restrained Britain’s progress. While Brexit’s opponents shine the spotlight of their arguments on claims of a falling economy and rising prices on products as a result of the leave, the nation would actually see its value-added tax (VAT) on food increase if it remained within the Union. Ironically, most member states who have adopted the Euro and came under the bloc’s reign have seen a rise in their cost of living.
FORMERLY INVISIBLE, NOW POLITICAL
Was the reason behind Brexit not to create a better, most prosperous future for British citizens? The “Leave” vote was cast because a continued association with the EU would mean relinquishing British sovereignty and falling under the autocratic, top-down rule from Brussels. The UK chose not to give up the pound sterling, its monetary authority and gold reserves to the European Central Bank. As a result, the EU has employed all of the resources at its disposal in order to circumvent the UK’s bid for independence. We may now witness attempts to pull at all the stops to derail British sovereignty, from the government joining forces with celebrities to banks promulgating a fear-based rhetoric at the expense of the British electorate. Are those not the tactics of authoritarian subterfuge? Central Banks, institutions that have always remained neutral, if not invisible, have in today surfaced with clearly political statements that unabashedly attempt to undermine the very sovereignty of a country.
While it may be one of EU’s boldest powerplays yet, it certainly isn’t the first time that it has disregarded the will of the people and forced its own interests over those of a constituent nation. The truth is that when the EU wants something, “no” is simply not an option for the bloc and its history is ripe with examples. In 2008, the Irish had put an obstacle in the path of the Lisbon Treaty. According to a 1987 ruling by the Supreme Court of Ireland, any substantial amendment to the Treaties of European Union had to amend the Irish constitution as well, which required a referendum. On 12 June 2008, the Irish electorate voted against the proposed changes of the Lisbon Treaty, with 53.4% against 46.6% and a voter turnout of 53.1%. The EU, however, renegotiated the changes with the Irish government and pushed the vote through in its favour during a second plebiscite on 2 October 2009.
Seven years prior, Ireland had voted down the Nice Treaty, concerned by the obligation to join a common defence policy, yet after further manipulation into a second referendum the treaty was accepted. Similarly, in 2005, both the Netherlands and France had voted against the Treaty establishing a Constitution for Europe. Despite the countries’ rejection of the proposed amendments, the Constitutional Treaty was reiterated as part of the Treaty of Lisbon and implemented anyway. Such practices demonstrate the European Union’s determination to pursue its administration’s interests at all costs, even when they shamelessly go against the democratic will of its member states.
Now, as the UK approaches its withdrawal from the EU, it would seem the latter is doing everything in its power to tighten the grip around the throat of a Britain that dared to shout “freedom!” It manifests in nothing less than authoritarian rhetoric emerging from all over: Members of the European Parliament, mainstream press, United Kingdom MPs, non-governmental organisations and officials, celebrities and social influencers, and even the Prime Minister of the UK. The British electorate had the audacity to vote for a sovereign nation with a strong grasp on its own monetary autonomy, trade and foreign policy. It was a vote to completely leave the political system of the EU, not whether it would have a deal. Yet the bloc continuously strives to change the conversation’s course toward compromise, agreements and consequently, demoralising claims of catastrophic consequences.
A NEED FOR ECONOMIC RESPONSIBILITY
When banks play into that rhetoric, are they really serving the function of assisting the economy and retaining their neutrality? The partiality in such political matters may well be naught more than a convenient smokescreen for further misappropriation and fiscal ineptitude in banking. Perhaps quantitative easing, derivatives and interest rate suppression in the past is what has led them to this point, but to trade neutrality and economic responsibility for political support cannot pave the path that leads to confidence and sustainability. Whereas the political class promotes the fear of disastrous consequences as a result of a “no deal” Brexit, before you cower and align yourself with the “Remain” voters, one must remember that the EU has a strong history of shaping public opinion in its favour and its opposition to Brexit promotes primarily its own interests rather than those of the Britsh people. Banks ought to serve the country and the country ought to serve its citizens, as opposed to a centralised, autocratic administration. EG