Mervyn King attacks Theresa May: Brexit plan ‘betrays’ Britain
Preparations for Brexit based on trade under WTO terms should have started in 2016, immediately after the referendum, as I said at the time. Britain needed a fall-back position — it is foolish to negotiate without one — and that was the form it should have taken. An immigration policy for the post-Brexit world could and should have been published in 2016. But there was no such planning. Instead, the government pretended that everything could be postponed until an imaginary long-term deal could be negotiated. This was naïve at best, and in the event has proven disastrous. And so Project Fear turned into Project Impossible. It is incompetence on a monumental scale.
Before the referendum, official economic projections intended to scare the country into voting Remain didn't succeed. Based on flimsy and arbitrary assumptions, they were subsequently proved wrong. The same strategy has resurfaced.
It saddens me to see the Bank of England unnecessarily drawn into this project. The Bank's latest worst-case scenario shows the cost of leaving without a deal exceeding 10% of GDP. Two factors are responsible for the size of this effect: first, the assertion that productivity will fall because of lower trade; second, the assumption that disruption at borders — queues of lorries and interminable customs checks — will continue year after year. Neither is plausible. On this I concur with Paul Krugman. He's no friend of Brexit and believes that Britain would be better off inside the EU — but on the claim of lower productivity, he describes the Bank's estimates as "black box numbers" that are "dubious" and "questionable." And on the claim of semi-permanent dislocation, he just says, "Really?" I agree: The British civil service may not be perfect, but it surely isn't as bad as that.
The UK is a European country, and always will be. Trade and contacts among the nations of Europe can and should continue much as before. And I have no doubt they will do so. But the political nature of the EU has changed since monetary union. The EU failed to recognise that the euro would demand fiscal and political integration if it was to succeed, and that countries outside the euro area would require a different kind of EU membership. It was inevitable, therefore, that, sooner or later, Britain would decide to withdraw from a political project in which it had little interest apart from the shared desire for free trade.
Leaving the EU is not the end of the world, any more than it will deliver the promised land. Nonetheless the country is entitled to expect something better than a muddled commitment to perpetual subordination from which the UK cannot withdraw without the agreement of the EU.
Many MPs will argue that "we are where we are," that it's too late to change course, and that May's deal is the only deal available. But remember, this is a political not an economic crisis. If Blair and Johnson, from opposing political viewpoints, can see the fatal weaknesses of this proposed deal, politicians of all hues should try to do the same. This deal will not end the divisiveness of the debate about Britain's relationship with the EU. The Remain camp will continue to argue, correctly, that to align the country indefinitely with laws over which it has no influence is madness, and a second referendum is vital to escape from this continuing nightmare. And the Leave camp will argue, also correctly, that it is intolerable for the fifth largest economy in the world to continue indefinitely as a fiefdom.
If this deal is not abandoned, I believe that the UK will end up abrogating it unilaterally — regardless of the grave damage that would do to Britain's reputation and standing. Vassal states do not go gently into that good night. They rage. If this parliament bequeaths to its successors the choice between a humiliating submission and the abrogation of a binding international treaty, it will not be forgiven — and will not deserve to be.
- Mervyn King, a professor at the New York University Stern School of Business, was governor of the Bank of England for a decade, beginning in 2003.