Mr Carney did not blush or look embarrassed when he told us the UK could enter a recession as a result of Brexit. It was an absurd forecast, but he was careful to use the word “could” rather than the word “would” when making it.
Could the UK go into recession in the next two years? I can see no way it could do so if we leave the EU. I could see it doing so if there was a general world recession, or if there was a sudden and serious flare up in the Euro crisis with the collapse of the Euro area economy, but not if we decide to repatriate our EU contributions, our fish and the other matters that make our position worse by being in the EU.
The Bank should set out the positive impact of spending our own money on our own priorities. Spending the £10 bn of net contribution we do not currently get back here at home would be a 0.6% boost to our economy. It would mean more jobs and more incomes earned here in the UK, so more growth. Where was that obvious fact in Mr Carney’s thinking?
Then there would be the improvement in the balance of payments for the same reason – we would no longer have to send all that money abroad. Wouldn’t that have a favourable impact on the value of the pound?
Mr Carney decided to kitchen sink the bad news forecast. He told us we could have a recession. We could have output down, inflation up, and pound down all at the same time. How come? If the pound fell substantially that would boost exports and therefore boost UK output. As the Bank has already told us it would cut interest rates in such a scenario and would look through any temporary imported inflation from a lower pound, he should also be forecasting the positive output effects of the lower rates and extra money creation he has told us he has in mind.
It was an extraordinary muddled forecast. Most commentators and forecasters do not expect a world recession or a major Euro crisis or a Chinese crisis anytime soon. Without one or more of those the UK will not enter a recession. Out of the EU we will keep our trade. Out of the EU the main car makers have already told us they will carry on investing here. Out of the EU there will be a small fiscal boost to the UK’s output and balance of payments as we spend our own money on our own priorities.