IT IS a nonsense that the Prime Minister is involved in a conspiracy with a group of speculators who have bet billions on a no-deal Brexit. So we have been reassured by the Daily Mail. But a conspiracy is not the same as a confluence of interest. Certainly, there are too many coincidences in this latest Brexit twist for us to feel entirely comfortable.
But let us begin at the beginning. A few weeks ago, an online news outlet called Byline Times discovered that investors in City hedge funds had given almost ten times as much to Boris Johnson’s campaign as to Jeremy Hunt’s in the Conservative Party leadership contest. Some of these investors had made hundreds of millions of pounds by speculating on sterling at the time of the original EU referendum result in 2016. Now, it was claimed, these shadowy characters had bet as much as £4 billion that the pound would tumble on a no-deal Brexit.
A Channel 4 documentary alleged that one of the hedge-fund owners, who contributed to Mr Johnson’s leadership campaign, appeared to be aware of the plan to “suspend” Parliament the day before Mr Johnson won the leadership contest.
An investigation by the Financial Times showed that the picture was not so simple. The alleged scandal centres around the practice of “shorting” a currency or share price. Investors borrow shares for a fixed period and immediately sell them, gambling that the share price will fall before they have to repay the loan. But “shorting” can be undertaken for a variety of reasons. It may be that those “shorting the pound” were simply trying to protect their investments against a no-deal Brexit, rather than seeking to exploit it at the expense of the British taxpayer.
Three things have muddied the waters further. First, the Prime Minister’s sister, Rachel Johnson, said on Radio 4’s World At One that “people who have invested billions in shorting the pound or shorting the country in the expectation of a no-deal Brexit” could be driving her brother’s Brexit strategy.
Next, the former Chancellor of the Exchequer, Philip Hammond, wrote in The Times that “Johnson is backed by speculators who have bet billions on a hard Brexit — and there is only one option that works for them: a crash-out No Deal that sends the currency tumbling and inflation soaring.”
Then the former permanent secretary to the Treasury, Nick Macpherson, declared publicly: “Mr Hammond is right to question the political connections of some of the hedge funds with a financial interest in No Deal. They are shorting the pound and the country, with the British people the main loser.”
The detail of all this is highly complicated. But one thing is beyond dispute: the European Union has just introduced a measure called the Anti-Tax Avoidance Directive, which is designed to curb the massive culture of corporate tax avoidance from which many of Mr Johnson’s backers benefit. A Brexit deal that maintained some links with the EU would mean that the new directive could curb their activities and cut their profits. A no-deal Brexit is the surest way of them avoiding the new rules.