Desperate times create strange bedfellows
Having saved the World in 2008, Gordon Brown is stepping in to save the UK in 2014. He is embarking, with full Government support, on a 30-stop tub thumping tour of Scotland to try and persuade his countrymen that they’re better off staying with the Cameron Highlanders. It’s a shrewd move by Number Ten: people will think, “if it wasn’t for the Union, we’d have this clown in our politics”. There should be a clear majority for the ‘No’ campaign come next Friday.
While encouraging their near neighbours to stay under the post-Glencoe Massacre yoke, the English themselves meanwhile are increasingly keen to break away from the European Union. With the Germans running economic strategy and the Italians in charge of the money, there are plenty of grounds for secession enthusiasm. But Camerlot continues to insist that we are better staying in so we can reform the EU from top to toe. When asked by Andrew Marr at the weekend what made him think this to be even possible let alone likely, the Chancellor George Osborne was forced to fall back on the fact that one of the many new EC Presidents is Polish, and they’ve said they’ll support us.
While I have no doubt that the gallant Poles will, as ever, poke their lances into the Berlin-am-Brussels tanks and give them a damn good thrashing with gleaming swords, The Draper is stretching even British gullibility to the limit with that one. But then, he has created a virtual economic recovery based on QE, banks and bollocks, and even Marr was referring casually to the economy as “in recovery”. The question is, whether the Great Treasury Three-Card Trick can hold until next May. The threats to George here are:
1. Rising interest rates and/or a UK banking failure
2. A stock market collapse
3. Somebody noticing that the manufacturing sector is no bigger than it was in 2010
4. The collapse of the eurozone as a market for British goods
5. The collapse of the World economy as a market for British goods
6. Scotland voting Yes to secession from the UK.
As a man who relishes having his bum a millimetre above the ocean waves in a Force 9 wind, this kind of thing is nothing new for Mr Osborne. What must be concerning some of his colleagues, however, is that all of the above now seem to be on the cards sooner or later.
As the Brits long ago lost the ability or inclination to add up, we can dismiss Number 3 there are most unlikely in the medium term. But Ossie has RBS, markets pumped up by QE, flatlining Europe and Italy talking openly of leaving the euro, the stuttering Chinese slowdown, and now an opinion poll so worrying that they’ve had to Mrs Brown out of the attic in order to scare the living crap out of the kilted ones.
Of these, I suspect a Scottish Yes vote is what Little Squeaky fears most. While Scotland ‘got’ £16.5bn more in UK public spending than it contributed to total UK revenues in 2009-10, this is no longer true, and the Chancellor knows it: Scotland now pays more in tax per head than the rest of the UK. Out of just under £560 billion of public spending in 2012-13, England accounts for £456bn – with just £54bn spent on the Scots.
In short, Scottish secession would give Camerlot a bigger austerity problem than the one they already have.
In the light of this, the Two Gentlemen of Downing Street have chosen big stick and fat carrot: no sharing the Pound under any circumstances, but far more Westminster investment in Scotland. There are three problems with this panicky response: a shrinkage in the Sterling Area may well play very badly for the Pound; investment in Scotland has traditionally been, beyond oil, something of a black hole; and such promises mean more spending, which will further create pressure on the Pound.
As I keep saying, a cheap Pound gives you a head start in exports….briefly. Then, when the time comes to buy the next round of raw materials and food, it bites you in the backside. Also a steep fall in the currency could set off a panic.
Slightly off the radar but also a possibility, Mr Osborne insisted on the Marr Show that we already spend 2% of gdp on defence – a level NATO demanded from all its members last week. This is true for 2013 (it was actually 2.3%) but not going forward: defence cuts by the Government and a rise in UK gdp mean that in 2014 we will spend 1.8% of it making weapons, and equipping the armed forces with technology that occasionally works.
It would take only a worsening Ukrainian situation and/or a Jihadist atrocity inside Britain to blow that way off course. Suddenly, George Osborne is going to have to find in the region of £125bn if he is to keep his word. As he tends to keep his word locked away and out of sight, this won’t cause the Chancellor any insomnia: but it will make him a sitting duck during an election campaign.
My own money is (literally) still on stock market collapses in the short-term and rising rates longer term: these – along with falling tax revenues during a slump – will eventually reduce our gdp and increase our borrowing costs. Then Britain will be revealed for what it really is: bankrupt, and 78% dependent on meaningless paper.
But in the immediate term, watch out for the shuffling of nervous bottoms at Westminster if the next Poll shows an increase in the Yes margin.