No-one can accuse the Chancellor of the Exchequer of failing to throw everything at rescuing the campaign to keep the UK in the EU. His latest contribution is to threaten an emergency budget within weeks of a Brexit vote, in which he says he would increase taxes and cut spending.
This is silly in a number of respects. Even if one accepts that there would be a hit to GDP if the UK opts to leave, producing a decline in government revenues, the picture will not be clear for some time. Jacking up taxes immediately to make a point, or using it as a threat now, is ludicrous. Any government would do what governments tend to do faced with such a problem: wait and see and adjust policy accordingly, in due course.
If the concern instead is serious market turmoil and stress in the banking system – rather than the headless chicken buffoonery of those in the City this week who spend millions on analysis and have only worked out this week that Brexit might happen – then the Osborne response is about as much use as a chocolate fireguard. What would be needed there if it became critical is perhaps aid with liquidity and possibly even more QE if to boost the money supply and ease credit.
Incidentally, as a sceptic of QE – because of the distortions it helps create, and the asset-price bubble that it has been blown favouring the super-wealthy – I can of course see that I was, back in 2010, wrong about the short-term dangers. But as an emergency measure it works.
Again, a hit to GDP does not automatically flow from a market emergency. It did not after the stock market crash of October 1987. What produced the recession much later was something else entirely.
Whatever the outcome, in terms of what a UK response looks like in the event of turbulence, we get quickly to a truth whispered during the Scottish referendum by Unionists in Scotland who accepted that if they lost the vote they would switch sides and try to make the new settlement work as patriots.
The same should apply in London. Post-Brexit there will be a lot of angst, but ultimately we will all – all of us who live in the UK, no matter how we voted – own what follows. In that way, the Bank of England and the Treasury have grave concerns, but if the vote is Leave they will be charged with leading the response. We are all in this together, as someone once said.
But Osborne won’t get to produce his emergency budget, because the Tory party will not let him if Leave wins. Within hours of Osborne making his warning, 57 Tory MPs had signed-up to say they would not vote for such a budget. The Labour party has declared it would not vote for it either.
This goes beyond a Leave vote, however. The Tory party is in an extraordinary situation, without parallel since the fall of Margaret Thatcher. Even if Remain wins, and they must still be favourites, it is difficult to see in practical terms how the Chancellor can carry on for long having lost the confidence of such a large part of the Conservative parliamentary party. The fury is quite something to behold. It is time, a usually level-headed Tory MP said to me this morning, “to get George.”
Osborne has always been a bit of a gambler, someone who enjoys taking risks and being vindicated. I have criticised him plenty of times down the years, while finding him to be a fascinating politician who has admirably overcome shyness and constructed a solid public persona in the face of ugly hatred from the Left. Even if his claims stretch credulity, one has to admire the way he is refusing to go down without a fight in this referendum. But short of a big win for Remain, George Osborne will be very lucky to survive more than a few months as Chancellor.