Last week the Bank of England gave its view on the likely impact of Brexit on the UK economy. It was not pretty.
The bank warned that economic growth could fall by 8 per cent and that sterling could lose a quarter of its value; house prices could fall by 30 per cent and commercial property by 48 per cent in the years following a no-deal Brexit, with unemployment almost doubling to 7.5 per cent.
You might have hoped this would trigger some sort of rethink on the part of the Brexiteers. No chance. Instead they doubled down on “project fear”: the name they gave to the unsuccessful efforts by the remain side to persuade people to vote No in the referendum because of the damage it would do the economy.
They also set about undermining the credibility of the bank, which since its inception in 1694 has managed the British government’s money and also the pound, which Brexiteers hold so dear.
Conservative MP Jacob Rees-Mogg accused the bank’s governor, Mark Carney, of a “failure to understand his role”, while former foreign secretary Boris Johnson said the bank had always “got it wrong”.
The Government's response was to dismiss the warnings with their own version of 'project fear'
Former Ukip leader Nigel Farage also threw in his tuppence worth: “Folks, we’ve heard it all before,” he said. “These people can’t forecast what’s going to happen next Thursday, let alone what the UK economy is going to be in 2030.”
The Irish Sea
Reaction on this side of the Irish Sea was much more sober. The bank’s warning was treated with the utmost gravity. The reaction to it was held out as further evidence of both the blind stupidity of the Brexiteers and the mendacious nature of much of the British media.
We were warned about the effect on exporters of a sudden fall in sterling and the Department of Finance worried about the budgetary implications of a damaging Brexit. The sub-text was that we were acting like grown ups.
Fast forward 24 hours and the Irish Fiscal Advisory Council published its review of the 2019 Budget. In its own way it was as damming as anything the Bank of England had to say about Brexit when it came to the mismanagement of the economy.
In its hardest-hitting assessment to date, the budgetary watchdog said the Government had “repeatedly” broken its own budgetary targets and allowed public spending to advance at an unsustainable rate. Its spending targets for 2020 and beyond were unrealistic.
“Repeated failures to prevent unbudgeted spending increases have left the public finances more exposed to adverse shocks, with the budget balance in deficit rather than surplus,” it said.
Council chairman Seamus Coffey said there were “worrying echoes” of the 2000s when a cyclical expansion in tax revenues funded a significant increase in public spending.
“Failures to prevent unplanned spending increases has meant long-lasting increases in spending that are difficult to reverse and that represent a repeat of policy mistakes of the past,” he said.
The Government’s response was to dismiss the warnings with their own version of “project fear” which can best be be summed up as: “Don’t hit me while I’m holding the public services.”
Government spending
Minister for Finance Paschal Donohoe argued that Government spending will only rise by 4 per cent in 2019. But if unplanned spending in 2018 is excluded then spending in 2019 will be up 6.5 per cent.
Taoiseach Leo Varadkar said the Government could not turn a “blind eye” to pressing needs in housing and health. He also pointed out that the fiscal council’s claim that the budget was not prudent differed from the European Commission’s assessment that the budget was compliant with the EU’s stability and growth pact.
You could argue the toss about Donohoe’s maths and Varadkar’s dissembling but what is inescapable is that they are not listening to the one body whose mandate is to ensure prudent economic management to ensure we avoid a repetition of the economic catastrophe that enveloped us in 2008.
A serious lack of prudence is not the same thing as knowingly trashing your economy but there are a number of uncomfortable parallels between the Government’s response to the fiscal council and the pantomime in Westminster about which we feel so superior.
It is frankly worrying to see politicians of Varadkar and Donohoe’s supposed seriousness demonstrating such ambivalence towards expertise. The dismissal of experts is one of the staging posts in the road to populism. But at the same time it would be wrong to read too much into it as their approach has more to do with wining the coming election than usurping liberal democracy.
Perhaps the real takeaway is that Irish politicians are as capable as the their British counterparts of putting their personal ambition and that of their party ahead of the national interest .
They may have different tailors but Varadkar and Rees-Mogg wear much the same clothes.