The economy is collapsing. Yet I can’t recall a government so devoid of a plan | Will Hutton

WElcome to Britain, May 2022 – and One of the most toxic and dangerous economic moments I can recall. Last week, the Bank of England forecast inflation exceeding 10% and forecasted negligible growth for the next two years, toppling into months of recession, accompanied by the savings squeeze on living standards. This is serious enough, but less remarked and more important than the 10% devaluation of sterling over the past three months.

This is a reaction to the economic trap in Britain, intensified by the implosion of our EU trade post Brexit and the Brexit-induced fall-away inward investment. If sterling’s fall continues, the Bank of England’s policy choices will be even grimmer.

At the moment, it expects that interest rates to peak at a manageable 2.5% before inflation starts to fall to 2% in 2025. But that depends on an end to sterling’s decline. If the bank has to reassure its financial markets about its inflation and staunch the pound’s continuing weakness (why would anyone buy it?), Interest rates could rise even higher.

The economy will be forced into deeper recession, with parts of the already visible strains becoming more intense.

The market would have been more reassured if it had been clear that the government had a strategy, a program, a plan. The problem: The government is clueless, hanging on to two quasi-religious shibboleths that cannot be shed. In its eyes, the hard Brexit it negotiated is a sacred achievement that can only be impeached, not crisis. Its faults cannot be acknowledged. Second, Thatcherism has such a standing to address any purposeful action that the economy’s weaknesses are deemed “unConservative”.

The government’s economic understanding is thus childlike: free markets, low regulation, low taxes, balanced budgets and cheap disposable labor as drive to the alchemy of 21st-century economic growth.

These attitudes of uselessness have been in plain sight over recent weeks. Called to Brainstorm Responses to the Cost of Living Crisis, Ministers After Enlarging the Number of Children’s Caregivers Can Look, Urged People to Claim Benefits Really? In the meantime, our borders on EU-imported products on checks will be deferred until the end of 2023 with no reciprocal relaxation of UK exports to the EU.

To ram home our weakness, Boris Johnson was reduced to pleasing Softbank, the owner of our hi-tech jewel arm, to float the company in London rather than New York. This is the $ 40bn acquisition made weeks after the Brexit to Tory and Brexiter applause, a sign that Britain is “open for business”. Those who warned us it was opportunistic asset-stripping and Softbank’s promises were worthless were Remoaners over-attached to Project Fear. Exim Arm to Float in New York rather than Diminished Brexit London.

Brexit Tories Understand Modern Capitalism Or How To Manage It. Ensuring that inflation does not become self-feeding and entrenched requires more than interest rate hikes and boosterish bluster.

The markets need a confidence-generating plan to restore economic growth, animating investment and productivity.

The working population needs to know that the government will have to defend their back to the cost-of-living crisis of living standards, thus triggering wage claims over heading off aggression. There is none.

While the new German government is vigorously pursuing a twin-track strategy of driving the net to zero and creating a new digital economy, we have nothing to do with the markets. Leveling up, creating globally competitive cities in every region and nation, could have such a strategy, one that could plausibly be double the GDP. It should be made front and center of the government’s economic policy, along with a drive to net zero. Instead, it was vetoed by the chancellor to hold his piggy bank to protect tax cuts in 2024.

Nor is there any strategy on living the cost. There is more than enough scope, even before windfall taxes. The Office for Budget Responsibility projects that will cost the government three years in excess of its target of a balanced budget of £ 31bn. The chancellor could make a targeted annual cash payment of £ 500 to each of the 10m hard-hit households reliant on the benefits of food, heat and clothes. If he had a do-it-yourself restoration, this total bill would have been £ 10bn – more comfortably affordable and more affordable to breathe.

The industrial strategy should be revived and renewed, but focused on the new economy of “intangibles” where intellectual property, knowledge, digitization, brands and human capital are king. We Need to Build Companies from Running a Smarter Competition Authority to Better Banks, and Investors Who Get the Intangible Revolution – and How to Drive It.

Where economic reality lies. Modern economies are densely interrelated, with supply chains that cross borders. Britain has very few corporate “primes” that lead to their sector, but it does have a number of medium-sized companies whose business is being part of a wider supply chain.

Membership of the single market with common regulatory standards is easy to make. Now, as Ulrich Hoppe, director general of the German-British Chamber of Commerce said last week, Brexit Britain is the cut-out of these supply chains because of the hassle-meeting common standards. Out of the EU and strategy-free, deindustrialisation is accelerating across the Midlands and the North.

Yet presiding over this is a directionless government, fiercely protected by its press, whose sole purpose is to become the prime minister in office. Rather than addressing these weaknesses, future parliamentary time is being pursued by its vendetta against Channel 4 and the BBC. The gods would destroy, to coin a phrase, they first make mad.

Will Hutton is an Observer columnist

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