Economy

The Leave campaign have had their best week of the campaign this week. After months of being battered by the Whitehall machine, they’ve taken advantage of purdah silencing government departments to get themselves onto the front foot. As I write in The Sun this morning, even IN supporting Cabinet Ministers admit that Leave have had a good week. But they argue that they won’t be able to ride the immigration issue to victory on June 23rd. One argues that you can’t focus on immigration week after week, or ‘By week four, you end up sounding like Nigel Farage’. But Vote Leave think their trump card is the link between immigration and people’s pay packets. That is the economic argument they are confident they will win.

The IN campaign’s plan for victory in this EU referendum is relatively simple.  ‘Do you want the status quo or the riskt alternative?’, is how one Cameron ally sums it up. To date, Remain—aided by the various government dossiers—have been pretty effective at pushing this message. That is why they are ahead in the polls. So, Vote Leave know that they need to push the risks of staying in, up the agenda. I write in The Sun this morning that their message in the coming weeks will be that ‘wages will be lower and taxes will be higher if stay in the EU’. Their argument will be that the continuing troubles in the Eurozone will hit the UK in two ways.

It’s now exactly one month until the EU referendum and the Treasury has marked the moment with another economic warning about the consequences of Brexit. The analysis out today claims that walking away from the European Union would kick-start a year-long recession. Brexit would also lower the country’s economic growth down by 3.6 per cent, according to the analysis. Although George Osborne must be nearing the point of running out of words to describe the economic ramifications of Brexit, in an article in the Daily Telegraph, Osborne and Cameron had this to say: ‘It is clear that there would be an immediate and profound shock to our economy. The analysis produced by the Treasury today shows that a vote to leave will push our economy into a recession that would knock 3.

Amid all the fun and games of the EU referendum campaign, the polls suggest that economic anxiety is growing, along with concern about the government’s economic management. Voters are worried, but they don’t think Labour would do any better. Economic optimism has fallen to its lowest level since March 2013, and only 18 per cent believe the economy will improve over the next year. Many more are pessimistic. It’s worth noting that this isn’t necessarily a sign of a slump because for most of this century – long before the Crash of 2008, the public were pessimistic about the economy – even though it grew after year after year.

Has the shadow of Brexit already cost us a slice of GDP — and if so, is it a blip or an omen? The Office for National Statistics says UK growth was 0.4 per cent in the first quarter of this year, down from 0.6 per cent in last year’s final quarter. And we can’t blame the neighbours, because the eurozone upped its game from 0.3 per cent to a positively breathless 0.6 per cent — with even France trotting in ahead of us at 0.5 per cent. We still look stronger on the jobs front, mind you, with our unemployment rate, at 5.1 per cent, well down on a year ago and at half the rate for the eurozone. And our service sector continues to perform quite well.

Downing Street is more confident than it has ever been that the EU referendum will be won. It is not just Barack Obama’s full-throated warning against Brexit that is responsible for this, but—as I say in my Sun column this morning—the sense that they have got the argument back onto their home turf of the economy. Indeed, it was striking how much Obama talked yesterday about the economic benefits to Britain of EU membership and the single market. The fact that this was his main message, rather than Western unity against Putin and Islamic State, shows which argument Number 10 thinks is working.

With the Budget due next week, George Osborne appeared on the Andrew Marr show to warn of the need for further spending cuts. Keen to put forward an alternative vision for the UK economy, Labour's Treasury team have also taken to the airwaves this morning. John McDonnell told Marr of the need for more long-term investment, arguing that at least 3 per cent of GDP should be used for investment compared to Osborne's 1.4 per cent. Alas it seems that Labour's shadow Chief Secretary to the Treasury had failed to catch this. When Seema Malhotra appeared on the Sunday Politics to help explain McDonnell's vision she appeared to lack knowledge of any of the specifics.

Don’t expect ‘fireworks’ from the Budget one of Osborne’s closest political allies told me this week. Ahead of the Budget on Wednesday the Chancellor finds himself hemmed in by the EU referendum, fraying Tory discipline and the worsening global economic situation, I say in my Sun column this week. A Budget four years out from a general election is normally when a government takes some risks. But I doubt Osborne will be doing much of that on Wednesday. First, he doesn’t want to do anything to make the EU referendum more difficult for the government to win—the intensity with which David Cameron is campaigning reveals how worried he is about losing it. Second, Cameron and Osborne know that they can’t rely on Tory MPs at the moment.

Sajid Javid will campaign for Britain to stay in the EU. The Business Secretary’s decision is a blow to the Leave camp which had been hopefully of recruiting him; Javid had spoken in the past of how he was ‘not afraid’ of Britain leaving the EU as it ‘would open up opportunities’. Senior figures on the Leave side had hoped that Javid would help them persuade voters that quitting the EU would not be bad for business. Those familiar with the Business Secretary’s thinking say that what has swung Javid to IN is his sense that it is just too risky for Britain to leave right now given the parlous state of the global economy.

Upbeat or downbeat? I asked last month whether the mood where you live is energised by enterprise or demoralised by public-sector retreat — or both. Replies poured in while the news mostly got worse. Governor Carney warned that ‘the UK cannot help but be affected by an unforgiving global environment and sustained financial market turbulence’ as shares took another dive. BP and Shell announced profit falls and job cuts. The Brexit debate took off, but the migrant benefits row overwhelmed any sensible discussion of economic pros and cons, on which voters must so far be utterly confused. Then again, it wasn’t all bad: like-for-like retail sales surged by 2.