BREXIT WATCH: IMF Adds To Stark Leave Warnings By Bank Of England
London (May 13) The Bank of England moved itself to the centre of the European Union referendum battle after it trimmed growth guidance for the UK economy on Thursday and delivered its starkest warning thus far on the impact that leaving the EU could have on Britain , followed by similarly gloomy predictions from the International Monetary Fund .
Mark Carney , the governor of the Bank of England , warned the risks of leaving the EU "could possibly lead to a technical recession". In the minutes from the latest meeting of the Bank's rate-setting Monetary Policy Committee , the bank said a leave vote could cause economic growth and the pound to fall and unemployment to rise.
Prime Minister David Cameron said the warning amounted to a "very clear message" on the dangers of Brexit, while Chancellor of the Exchequer George Osborne said the UK had a "clear and unequivocal warning" from the MPC and the governor about the risks involved in leaving.
"The Bank is saying that it would face a trade-off between stabilising inflation on one hand and stabilising output and employment on the other," Osborne said.
"So either families would face lower incomes because inflation would be higher, or the economy would be weaker with a hit to jobs and livelihoods. This is a lose-lose situation for Britain . Either way, we'd be poorer," he added.
The warning was decidedly less welcome for the Leave side of the debate. Jacob Rees-Mogg , a Tory MP, called on Carney to resign, claiming the central bank has become unacceptably partisan. He claimed the bank's comments were equivalent to it announcing during an election campaign what the economic impact of either a Tory or Labour victory would be.
Norman Lamont , the former chancellor, said Carney would need to be careful "he doesn't cause a crisis". He added: "If his unwise words become self-fulfilling, the responsibility will be the governor's and the governor's alone."
UK Independence Party leader Nigel Farage also weighed in during a debate on LBC Radio. " Mark Carney is on the public payroll and is doing the government's bidding," Farage claimed, adding "the whole apparatus of government is being mobilised to tell us what to think."
A spokesman for Carney rejected criticism of the Bank of England's statements, saying the bank "had a duty" to make its judgements on any economic factors known.
The Remain campaign was given further support for its warnings on Brexit dangers on Friday by the International Monetary Fund , which said leaving the EU would result in a "protracted period of heightened uncertainty" for the UK , with a likely hit to output and "sizeable" long-term losses in income.
Global market reaction to a Leave vote in the June 23 referendum is likely to be "negative and could be severe", warned the global finance body in a regular report on the UK's economic prospects.
The IMF said the negotiation of new trade pacts could take years, weighing on investment and economic sentiment, while London's position as a global financial centre would be "eroded".
Osborne welcomed the IMF report, saying it made clear a vote to leave the EU would cost the UK money.
"The IMF are very clear today - the hit to growth we could expect from a vote to leave would cost our public finances more than the amount we would gain from no longer contributing to the EU budget," Osborne said. "Put simply, the IMF says a vote to leave costs us money."
Beyond the debate over the Bank of England's forecasts, a further warning was issued by Transport Secretary Patrick McLoughlin , who said the farming and car industries in the UK could disappear, akin to the coal industry in the 1980s, in the event of a Brexit.
McLoughlin disputed comments made by Iain Duncan Smith , the former work and pensions secretary and Leave campaign leader, who claimed the EU was a "force for social injustice", suggesting Britain's membership increases the cost of living, lowers wages and restricts jobs.
McLoughlin argued the opposite, that the consequences of a leave vote "will not be shared out evenly" across society and that those at the lower end of the income spectrum will be hit hardest. "It’s the poorest in our society who will feel the chilling effect of uncertainty first."
Source: Reuters
