Even by Brexiters’ Standards, This Hollow Claim is a New Low

As one economist, Frances Coppola, asked on Twitter, what had David Davis been smoking? In a keynote interview with the BBC’s Andrew Mar on Sunday, the Secretary of State for Exiting the EU said that Britain would simply not pay the £40 billion it had agreed just two days earlier that it owed as a departing member if it did not get a trade deal with the EU.

While some might see this as a tough negotiating position, it is such patent nonsense it is hard to imagine why he said it. It immediately raised the idea that a member of the Group of Seven industrialised nations would simply turn its back on its financial obligations.

One wonders what the financial institutions that hold Britain’s £1.6 trillion debt and whom the Treasury’s Debt Management Office asks to buy more bonds to help fund the deficit £52 billion over the coming fiscal year thought as they watched this government effectively default on its debts.

The one group of people who have something to say would be the credit rating agencies, who hand out the grades to governments that investors follow closely when deciding whether to buy their sovereign bonds.

this was bravado for the benefit of pro-Leave voters

The UK has already lost its cherished triple-A rating — the highest available grade — after their reckless austerity programme in the wake of the global financial crisis led to a pronounced slowdown in growth. Rating agencies’ grade are a measure of the chance of default, so the chances of dropping to an A+ grade (the same as Chile and Slovenia) are quite high.

One can only assume that this was bravado for the benefit of pro-Leave voters watching Andrew Marr to check that the government was loyally following their agenda. However, just as Davis and Theresa May have turned their once unlovable negotiating red lines pink over the negotiating timetable, alignment with the single market and many other, so this refusal to pay its debts will be conveniently forgotten.

The plain reason for his statement is the need to cover up the harsh reality: the government is spending a large amount of time, money and political energy to secure a deal that will be much worse than what the UK enjoys as a member of the EU. The truth may be painful but at least it’s the truth.

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

Enjoyed this article?

Help us to fund independent journalism instead of buying:

Also in Disclaimer

Trump's Freak Show Might Get Top Billing in Davos But Power Lies With China

Donald Trump will become the first sitting US President to attend the World Economic Forum in Davos since Bill Clinton in 2000. While many are intrigued as to what the US president will say, it actuasloly does not matter. A year into his presidency, the world is going about its business without referenceto Washington and is, increasingly, looking east.

How Brexit puts the UK at risk of more collapses like Carillion

The construction industry has always been characterised by uncertainty. Managing large construction projects involves enormous challenges, coming from the political, economic, social and technological environments involved. Carillion’s demise shows the risks that are encountered in an industry. We should be mindful of how Brexit compounds this.

“In my Beginning is My End.” How Project Corbyn Will Fall Apart

The seeds of political downfall are sown early. Both David Cameron and Theresa May set in motion their own ends early in their leaderships. Jeremy Corbyn will be no different. The sin that will catch up with him is arrogance.

Carillion is This Week’s Watershed: But When Will Anything Change?

The collapse of Carillion is a catastrophe. 20,000 jobs are now under threat, while even more are at risk at the small firms that are owed money. But this is not the only disaster of recent times. The common theme from Grenfell Tower to GS4 at the 2012 Olympics is private sector outsourcing.

After a Lost Decade, Time for our Leaders to “Raise Their Game”

Nick Boles was right to warn that Theresa May needs to raise her game. She is offering second-rate leadership and has no domestic agenda. Even worse, her opponent Jeremy Corbyn is not offering an thought-through alternative. Britain is still ducking the challenges a decade after the banking crisis.