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14 September 2018

Mark Carney likened a no-deal to the 2008 crash. But is that enough to make Tories back May?

The Bank of England’s govenor warned of a fall in the pound and house prices, and a rise in unemployment, inflation and interest rates.

By Patrick Maguire

Leaks from Theresa May’s cabinet are seldom helpful to the Prime Minister. But could the fact that the grisliest details from yesterday’s marathon meeting on preparation for a no-deal Brexit are all over the papers strengthen her hand?

Dominic Raab will certainly hope so – and with good reason. In warnings described as “spicy” by one attendee, The Times reveals that Mark Carney, the governor of the Bank of England, teamed up with Philip Hammond to warn the cabinet that house prices would fall by as much as a third in the event of no deal, sparked by a plummet in the value of the pound and rising unemployment, inflation, and interest rates. The Guardian reveals he warned that, in his worst case scenario, the economic impact of crashing out would be as severe as the 2008 financial crisis. And, helpfully for Downing Street, the FT says he added that a deal like May’s Chequers plan would see the economy outperform expectations.

His gloomy predictions were followed by the release of a tranche of new papers warning that no deal would mean mountains of new customs paperwork for businesses; driving licences and passports rendered useless within the EU; and transport links with Europe disrupted if not severed entirely. Not quite as apocalyptic, but still burdensome and exactly the sort of thing that the government and mainstream Tories do not want to carry the can for. Strikingly, all of these dire warnings have been accepted without a peep of dissent from ministers.

It’s true, of course, that the most vocal and obstinate Leavers – namely Boris Johnson and David Davis – have long left cabinet. There is nobody left to blow the whole thing up with a Heseltine-style walkout. By any measure, the hard core of Tory Brexiteers will say two things: that Carney is a discredited shill for Project Fear and is scaremongering, and that the equally discredited Chequers isn’t the answer in any case. But politically, the audience that matters is neither the cabinet nor Jacob Rees-Mogg’s European Research Group, but the quieter Brexiteers that Downing Street hopes it can bounce into pragmatism.

The top line of the ERG’s message – Chuck Chequers – has a lot of purchase on the Tory benches. But as far as winning the battle to force May to change course or defeating her plan in the Commons goes, a top line is all they have. What they don’t have, as became clear this week, is a workable alternative, or, indeed, an alternative at all beyond the stuff John Redwood has been saying for three decades and “get a prime minister who would put their back into it”.

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Lots of Tory MPs don’t like Chequers, but if the choice is between Chequers and Carney’s chaos, then Downing Street is betting its survival on enough backing Chequers with gritted teeth for it to win the day. It’s relying on the sort of MP who thinks any Brexit is better than no Brexit and Corbyn. They might well be vindicated.

But, as ever, May’s problem is that she has no parliamentary majority. In that context, she will have to win over almost all of the existing refuseniks. The rump of unpersuadables, for whom Brexit is bigger than everything, could well be big enough to defeat her deal even in that best case scenario. We might see Carney’s economic dystopia yet.