A vote to leave the EU would cause economic Armageddon. We know because David Cameron and George Osborne have told us so, claiming that there is a wide consensus among economists on the matter. But what if – as now seems increasingly likely – we vote to remain but then have a recession anyway?
The Prime Minister and the Chancellor are very quick to quote economists when making the case for us to stay in the EU, saying we should listen to the experts. They would do well to listen to what the experts are saying about the chances of a recession. A Wall Street Journal survey in May put the chances of a recession in the next 12 months at 20 per cent. Over the past fortnight the probability has jerked upwards, with Barclays putting the risk at 30 per cent and J P Morgan at 36 per cent. All these predictions are for the US, but, with the exception of a brief and shallow US recession in 2001, all US recessions in recent times have been accompanied by recessions in Britain.
A recession following a vote to Remain would be a doomsday scenario for the Prime Minister and his Chancellor. It wouldn’t matter how much they protested that Britain had been caught up in a global downturn, and that things would have been far worse had we voted to leave the EU, blame for the recession would land firmly on their shoulders. Eurosceptics would point out the obvious: that voting to stay in the EU failed to save us, as Cameron and Osborne had promised it would. Almost everyone would accuse them of having talked us into a recession through their negative language on the UK economy during the EU referendum campaign.
George Osborne – assuming his head has not been presented to Eurosceptics as a post-referendum peace offering — might have to enact an emergency budget anyway. Gordon Brown showed what happens to the public finances when you enter a recession with a £40 billion deficit. It will be an even uglier picture if we enter a recession with a £55 billion deficit (The Treasury’s prediction for 2016/17). It is not hard to foresee the mutiny on the Conservative benches if, the country having fallen for Osborne’s plea and voted Remain, they are asked to vote for spending cuts and tax increases similar to the ones he threatened after a vote for Brexit.
This might well turn out to be a good referendum to lose. If we do suffer a recession, then whatever the result, there will be many left wondering if things would have turned out better had we voted the other way.
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