Steve Hilton was back in the UK this week. Hilton is a Cameron close friend and one time Blue Sky free thinker to the Prime Minister. Steve Hilton revealed “Cameron would vote leave, were it not for his job.”
Yes that’s what close friends are for … so much for the constraints and sacrifice of high office. Beware of ex advisers wearing clogs and hippy wrist bands living in California. They just can’t keep their mouths shut.
The Eurosceptic explained the leave campaign. “It’s about taking back power from an arrogant unaccountable, hubristic elite in Brussels” and handing it over to “an arrogant, unaccountable, hubristic elite in the eurosceptic right wing of the Tory party.”
So now we know, why we are having a referendum. Many business people I talk to aren’t really sure.
Posh Boys Bun Fight …
The posh boys bun fight is turning into a post Brexit leadership campaign. Ian Duncan Smith the “quiet man” of the Conservative party attacked Cameron this week for failing to clamp down on immigration.
He then turned on the Chancellor for failing to clamp down on government borrowing. [Oh yes, the latest borrowing figures from the ONS suggest government borrowing in 2015/16 was £2 billion higher than first thought. The figure of £76 billion is some £4 billion higher than the OBR target.] Well IDS, it’s still down year on year by £16 billion and heading in the right direction. What more do you want, you kept spending money on welfare after all.
Boris Johnson’s quest to emerge as the darling of the right wing gathered pace this week as the focus of debate moved to immigration. BJ was on the case. The latest figures from the ONS showed immigration to be at a record high with a significant contribution from Bulgaria and Romania.
If only more from the east, were “bricklayers by day and computer coders by night” then no one could have any complaints. The digital society could expand in new homes built to target. Everyone a winner.
The bun fight gets political …
Right wing Tories are getting moody. The Tory Leave campaigners were promised a free referendum only to be shanghaied by the Prime Minister and his mates. It’s a big list of mates (excluding Steve Hilton) including the Treasury, The Bank of England, The OBR, NIESR, the IFS, the IMF, The White House, EU leaders and the G7 states. Now the WTO have taken the Queen’s shilling and explained of a problematic world post Brexit assuming the UK leaves the EU.
We have argued the arguments should be divided into the business case, the economics case, the political case and the social case. Of course, there is no business case to leave the EU, clearly there is no economics case either. The political argument is largely about who governs Britain. Hilton explained the options this week. You may make your choice.
The argument about immigration …
The social argument revolves around immigration. Does immigration place a burden on society, with pressures on housing, education, the health service and welfare? Or is immigration a key factor in GDP growth?
Only through growth will we achieve the expansion in government revenues to meet the requirements of the indigenous population with or without additional immigration. The list is large and demanding. Health, housing, education, welfare, defence, domestic security, roads, rail, energy, telecommunications …
Cameron made a mistake this week, suggesting immigration is a price worth paying to secure access to the EU. It is more than that. Labour and Capital, the drivers of growth. Immigration is providing jobs for the health service, the leisure industry, farming and much more. It is a demographic offset to an ageing population. A stimulus to growth. “Poles pay for pensions” the new campaign mantra perhaps.
The head boy moves in …
Andrew Tyrie is chairman of the Treasury Select Committee. The head boy moved in, on the posh boys debate this week. The TSC produced “The economics and financial costs and benefits of the UK’s EU membership”.
It’s a great read running to almost 90 pages. It is an objective cross party report. Including Tory eurosceptic Jacob Rees-Mogg. Rees-Mogg talks in the language of yore. Of pugilistic politicians riding charabancs across the UK. The report is a balanced, objective analysis of the major economic risks to leaving the EU.
The Leave campaign were heavily criticised for the ridiculous claim of the (£350 million per week) £18 billion cost of EU membership. The Chancellor was chastised for the claim that leaving the EU could cost every household the equivalent of £4,300. Yes in terms of GDP per capita, no in terms of loss of household income! A small complaint perhaps.
Back in the UK …
The ONS released the second estimate of GDP this week. The overall figure was largely unchanged with 2% growth year on year. Household consumption is driving recovery with spending up 2.6%. Investment was up by 1.1%. The trade figures continue to disappoint. No real surprise there. Most analysts expect growth of just 2% for the year (2016) as a whole. The trade deficit and the current account deficit are the major problems facing the UK. This is no time to take risks with capital flows, international confidence and foreign direct investment.
So what of rates?
Over in the USA, the growth figures for Q1 were revised up slightly. Janet Yellen has made it clear a rate rise is coming, in coming months. June is not ruled out.
In the UK, we still expect rates to be at least 0.75% by the end of the year, with two rate hikes to 1% a further possibility. Growth of over 2% plus the backdrop, assuming we vote to remain on the 23rd June. If only the G7 had resolved to share the flight costs and vow to leave Planet ZIRP together, confining the NIRP experiment to history.
So what happened to Sterling?
Sterling closed up against the Dollar at $1.464 from $1.451 and up against the Euro at €1.314 from €1.294. The Euro moved down against the Dollar to 1.114 from €1.121.
Oil Price Brent Crude closed at $49.22 from $48.47 The average price in May last year was $64.08.
Markets, moved up - The Dow closed at 17,867 from 17,527. The FTSE closed at 6,270 from 6,156.
Gilts - yields moved down. UK Ten year gilt yields closed at 1.43 from 1.47. US Treasury yields moved to 1.83 from 1.86.
Gold closed at $1,213 from $1,255.
That's all for this week. Don't miss Our What the Papers Say, morning review! Follow @jkaonline and download The Saturday Economist App! Our review of the Brexit facts and figures out now! Download Here!
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The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.