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28 September 2022

No, Daniel Hannan, sterling isn’t crashing because the markets are scared of Keir Starmer

That market panic spiked at the exact moment of a Tory Budget has not made Hannan rethink his claim that it’s all Labour’s fault.

By Jonn Elledge

Anyone can believe in something that has yet to be proven. The mark of true faith is the ability to keep believing when something is shown to be wrong.

For a few months, more than half a decade ago now, I wrote a regular column concerning the thoughts of Daniel Hannan, the MEP who had long been one of the noisiest and most steadfast advocates of Brexit. The reason this column focused on a man who wasn’t even an MP, let alone a minister, was that there was something that many on this side of politics found uniquely irritating about Hannan: it wasn’t merely that he could say the sky is green, but that he could do so in a manner that made it seem like it was actually us blue-sky thinkers who were the mad ones.

That column has been dead roughly as long as all hope, but still my phone explodes every time Lord Hannan of Kingsclere, as he is now, so much as blows his nose, and word of his latest brainfart somehow managed to reach me here, halfway up a mountain in Wales, so here we go again. “No, the pound isn’t crashing over a trifling batch of tax cuts,” runs the headline on Conservative Home. “It’s because the markets are terrified of Starmer.”

The column is, it must be admitted, a classic of the genre. It contains references to the previously unknown ideology of “Osbrownomics”, which Hannan defines as a “high-spending-low-interest-rates combo”. This is, in a narrow sense, accurate, but it does conflate the decade Gordon Brown spent building up the state with the six years in which George Osborne’s animating mission was to tear it down again. (Neither man, let’s be honest, will be happy with this elision.)

Then there’s the comment that “few voters get the counterintuitive logic of the Laffer Curve”, the bit of economics that means you can actually cut taxes while also raising revenues. Personally, I do get that logic – above a certain point, high tax rates deter taxable activity. It’s just that I’ve also bothered to spend the five seconds on Google required to discover that, while there’s no consensus among economists as to where the turning point is, it’s probably around a 70 per cent tax rate and certainly a lot higher than the 40 per cent that is our top rare now.

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My favourite bit of the column is the reference to “those who mortgaged themselves to the eyeballs in the belief that near-zero interest rates would carry on forever”. This seems seriously to suggest that the thing which has pushed people into taking out enormous mortgages is a fundamental moral failing – and not, say, the fact that renting is far too insecure and house prices far too high.

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All this, though, is a sideshow to the central claim that the collapse in sterling since the government’s mini-Budget last week results from fear of a Labour government. Hannan’s argument is that Liz Truss and Kwasi Kwarteng’s tax cuts are actually trifles compared to [insert thing he doesn’t approve of here]. The fact that this fear seems to have spiked at the exact moment of a Tory Budget statement has not made Hannan rethink this claim; neither has the fact that a Budget which makes everyone decide your opponents are going to win might be generally considered a bit of an own goal.

And the barrage of numbers he lists to make his point would be more compelling if the mini-Budget hadn’t been followed by three things: mortgage lenders fleeing the market in a panic, a rebuke from the IMF, and an emergency statement from the Bank of England that, don’t worry, they’ll buy government debt if they have to. None of these things can plausibly be blamed on a potential Labour government. Oddly, in Hannan’s column, you won’t find any of them mentioned.

But of course such facts won’t shift his views. They can’t. At a certain point ideology leaves the realm of politics and enters the realm of faith. Heaven can never be disproven, only deferred. Never mind that these beliefs have dragged us all to hell.

[See also: What the UK’s financial crisis means for your pension]