The former governor of the Bank of England Mark Carney has blamed Britain’s high inflation on Brexit. He claimed vindication over his repeated warnings that leaving the European Union would damage the economy. But inflation is, and always has been, a feature of capitalism.
In an interview with the Daily Telegraph on 16 June, Carney said that leaving the EU created “unique” economic conditions for Britain, citing fewer people working as well as energy costs.
Carney was governor of the Bank of England from 2013 until 2020. He consistently talked down Brexit and, like the Bank, his forecasts have not proved reliable.
In 2016, he forecast recession and soaring unemployment if we voted to leave the EU. In 2018, he published a report which forecast that leaving with no deal would cause a 30 per cent drop in house prices and a recession more damaging than the financial crisis.
Yet though Carney claimed that Brexit would be inflationary, the Bank of England under his leadership continued to hold interest rates down and to print money through quantitative easing.
Britain is not the only country with high inflation – it’s a worldwide event. And the attribution to Brexit is specious. In March, the EU average was 8.3 per cent, with Germany, Austria, Italy and Sweden experiencing inflation at around the level of the UK.
There are several measures of inflation – but on any of them workers know that their standard of living, spending power, is falling. The latest figures show that in May, after a slight drop the previous month, price rises are continuing and not dropping.
Inflation is an attack on workers, and it is not going away anytime soon. Andrew Bailey, the current governor of the Bank of England, warns that it “is going to take a lot longer” than the usual two years to bring inflation down.
‘Monetary policy is a major factor behind inflation.’
The Bank of England’s monetary policy is a major factor behind inflation. In 1997 decisions in interest rates, always taken by the Treasury, were outsourced to the Bank’s Monetary Policy Committee by the then-Chancellor, Gordon Brown.
And since 2008 the Bank of England policy has been to print money through quantitative easing, storing up future inflation. That’s now come to pass – and that was due to the global financial crisis, not Brexit.
The increased price of energy is down to government policy too. Apart from insistence on sanctions against Russia, the “net zero” policy and the failure to secure British energy sources have contributed to higher costs.
The Bank of England raised the interest rate again on 22 June in response to the latest inflation figures. This could well trigger a recession, or even a full-blown financial crash as debtors default. And there is no doubt that the immediate impact will be higher prices and higher mortgage costs.
Current Chancellor Jeremy Hunt has said there is “no alternative” to raising interest rates, supposedly to hold down price rises. That seems against common sense. But what he means is that increased interest rates will slow down demand, which will in turn lead to job losses and lower wage claims.
That approach to economics may remind older workers of the Thatcher era. But the truth is that’s always been the capitalist approach. Simply, their economic mantra is whatever the cause, workers must pay the price of fixing the economy.
• Carney is now working for net zero as a UN Special Envoy for Climate Action and Finance. He helped to set up the Taskforce on Scaling Voluntary Carbon Markets. That’s an international, privately funded (ie capitalist) body dedicated to enabling the Paris Agreement on climate change.