Claims by a former Bank of England governor that Brexit has exacerbated Britain’s cost of living crisis have been dismissed as “obviously nonsense” by arch Brexiter Sir Jacob Rees-Mogg.
The former Business Secretary lashed out at Mark Carney’s blaming of stubbornly high inflation on Brexit – and instead accused the Bank of stoking the cost of living misery. Carney, who led the Bank for seven years until 2020, said he had warned the public that leaving the European Union would damage the economy and that he had been vindicated after predicting Brexit would lead to higher prices, a weaker pound and slower growth.
But Sir Jacob hit back by saying: “He uses dodgy figures, he is responsible for many of the failures of the Bank of England, he was a bad governor who politicised the Bank and presided over failures in forecasting and failures to begin the process of reversing quantitative easing when the economy was strong.”
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Carney, who was branded the “architect of Project Fear”, repeatedly claimed that the economic consequences of Brexit were all negative, warning that unemployment would rise under anything except a “close” relationship with the EU.
In an interview with The Telegraph Carney said: “There’s no joy in saying, ‘Well, we told you so’ because people are having to live with that reality.”
In 2018, Carney published a report containing doom-laden predictions that a no-deal scenario would trigger up to a 30% drop in house prices and a recession more damaging than the financial crisis.
He told The Telegraph that a series of “negative supply shocks” had disrupted the economy and led to an unexpected increase in costs.
He said the single biggest energy shock since the 1970s, combined with a shrinking workforce and the impact of Brexit had triggered a “unique” adjustment in the UK that he suggested could take years to unwind.
“We laid out in advance of Brexit that this will be a negative supply shock for a period of time and the consequence of that will be a weaker pound, higher inflation and weaker growth,” he said.
“Now that’s exactly what’s happened. It’s happened in coincidence with other factors, but it is a unique aspect of the economic adjustment that’s going on here.”
Food prices are rising at their fastest rate in 45 years, wage growth remains strong and stubborn inflation has triggered chaos in the mortgage market as investors bet that interest rates will rise from 4.5% to 5.75% to bring down inflation.
Carney, now the UN envoy for climate action and finance, described Brexiteers as “a group of people who portrayed it as being something that was going to be seamless and positive and driving growth”, and said these views contrasted with those of the Bank and other ‘technocrats’ who “based on analysis were sceptical of that”.
He said the negative outcomes had “proven to be the case”.
Sir Jacob has previously accused Carney of leading ‘Project Hysteria’, while Dame Andrea Leadsom, added: “I do not agree that inflation is caused by Brexit. Inflation is a massive problem around the world.
“The spikes in energy prices are a massive problem caused by Vladimir Putin’s invasion of Ukraine – it is not unique to the UK.
“You can certainly argue supply chains were broken by the Covid pandemic, and that made it harder following Brexit to recover. But to say this is all the fault of Brexit is just nonsense.”
Carney predicted this week that the UK and other advanced economies faced years of higher interest rates because of “tectonic shifts” in the global economy that had forced a rethink of globalisation.
Inflation remains far higher than the Bank’s 2% target, and policymakers have admitted that inflation is unlikely to be brought under control until 2025.
Andrew Bailey, the current governor, announced this week the Bank would carry out a review of its inflation forecasting. He admitted that it was going to “take a lot longer” to bring inflation down.