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Paul Vallely: Market turmoil can be traced back to Brexit

21 October 2022

Even voices on the Right acknowledge this fact, says Paul Vallely


Liz Truss and Kwasi Kwarteng, then Chancellor, on a visit to Berkeley Modular in Northfleet Kent, last month

Liz Truss and Kwasi Kwarteng, then Chancellor, on a visit to Berkeley Modular in Northfleet Kent, last month

THERE have been so many U-turns recently that you might be forgiven for having missed this one. The Daily Telegraph ran a piece at the weekend headlined: “Project Fear was right all along.” In it, the paper’s assistant editor, Jeremy Warner, concluded that the disastrous failure of Trussonomics was a direct consequence of Brexit.

Mr Warner, a respected business commentator, wrote that the “downbeat predictions by the Treasury and others on the economic consequences of leaving the EU, contemptuously dismissed at the time by Brexit campaigners as ‘Project Fear’, have . . . turned out to be overwhelmingly correct.” Indeed, the warnings by Remainers “if anything underestimated both the calamitous loss of international standing and the scale of the damage that six years of policy confusion and ineptitude has imposed on the country”. The Brexit revolution has “ended up eating itself”.

This is quite an admission. Of course, more neutral observers knew this already. The Office for Budget Responsibility says that Brexit will cut Britain’s GDP by a hefty four per cent. The Financial Times says that this means £100 billion in lost output, and £40 billion less revenue to the Treasury a year. Pre-Brexit, the British economy was 90 per cent the size of Germany’s; now, it is less than 70 per cent. Even the UK’s Brexit hardline negotiator, Lord Frost, has admitted that quitting the EU appears to have hit goods exports by five per cent. Jacob Rees-Mogg, the minister for so-called Brexit Opportunities, has switched from speaking about the economy to abstract talk about sovereignty and control.

This is of more than historical interest. Project Fear was trotted out by Liz Truss during her leadership campaign when Rishi Sunak warned that Trussonomics would force mortgage rates up to seven per cent — an uncannily accurate prediction that Ms Truss dismissed as “scaremongering”.

But the consequences run much deeper. Sir David Normington, the former Permanent Secretary at the Home Office who later served as the Commissioner for Public Appointments, this week traced the current crash of the pound and rocketing interest rates back to Brexit. “What’s happened is that the Conservative Party has never completely recovered from Brexit. It has been divided amongst itself. Remainer MPs were cleared out by Boris Johnson and there’s been a trend under both Boris Johnson and Liz Truss to appointing only the people who agree with them.”

Why does this matter? Because, he says, it “has reduced the quality of the people who are available to be the leaders of our political system. And so I think we are suffering from a group of second-rate politicians.” Second-rate seems generous to describe Ms Truss and Kwasi Kwartang, a pair of ideologues who did not understand the importance of pace or sequencing.

Given all this, the arrival of Jeremy Hunt as Chancellor — despite his somewhat chequered political history — feels like a definite step in the right direction. So is the resignation of Liz Truss as such a disastrous prime minister. Whether it will be enough to save their party from electoral oblivion remains to be seen. The Conservatives need to be seen to have changed not just policies, or even Prime Ministers, but values. They need to recover a sense of integrity and respect for the institutions that underpin our democracy and public life. Trust is easily destroyed, but takes a long time to repair.

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