Matthew Lynn

Everyone thinks they know the script of how Italy's saga will play out. As the populists take power in Rome, they will rail against Brussels, try to fight austerity, come up with some bold plans for reforming the euro, and hold a referendum or two. And then they will meekly cave in as Angela Merkel and the European Central Bank, the euro-zone’s equivalent of Gordon Brown’s ‘big clunking fist’ from a decade ago, bring them to heel. After all, that's what happened in Greece when Syriza took power. A lot of fighting talk was followed by a dismal surrender, and five years of budget cuts, tax rises, and unending recession. But there is a chance that Italy will be different. Why? Because it is a far bigger economy? Because it has a trade surplus?

Everyone thinks they know the script of how Italy's saga will play out. As the populists take power in Rome, they will rail against Brussels, try to fight austerity, come up with some bold plans for reforming the euro, and hold a referendum or two. And then they will meekly cave in as Angela Merkel and the European Central Bank, the euro-zone’s equivalent of Gordon Brown’s ‘big clunking fist’ from a decade ago, bring them to heel. After all, that's what happened in Greece when Syriza took power. A lot of fighting talk was followed by a dismal surrender, and five years of budget cuts, tax rises, and unending recession. But there is a chance that Italy will be different. Why? Because it is a far bigger economy? Because it has a trade surplus?

Bond yields are soaring. Stock markets are tanking. The banks are looking wobbly, and money is starting to drain out of Italy. To listen to the mainstream commentary on the Italian crisis part 782, you’d imagine that a wild and irresponsible ‘populist’ government had just been tamed by the financial markets. And that once some sensible suits backed by the IMF and the EU take back control in Rome order would be restored and everything will be back to normal. The trouble is, that is not quite the whole story. In fact, the markets have already worked out that Italy is leaving the euro, at least in its present form. The debate is about when and how, and whether its departure is orderly or chaotic. And right now the ‘populists’ are winning.

There are plenty of questions to be asked about the decision by Rupert Murdoch to sell 21st-Century Fox, including Sky in this country, to Disney.  On what, for example, will Momentum blame the loss of the 2022 election if not the malign influence of the Australian tycoon? Is the old rattlesnake finally bowing out of the game, or is he already plotting a comeback? And how will the dynastic power struggle within the Murdoch family play out? But the most interesting one is this. Has the master media deal-maker pulled off another coup, or will he come to regret selling what has long seemed the jewel in his corporate crown? On the surface, the decision to sell his 39 percent of Sky looks an odd one. Murdoch has been battling for years to get full control of the company.

We could have given them free Spotify subscriptions. Or Just Eat vouchers. Instead, the government’s pitch to Jezza-loving twenty-somethings was a cut in stamp duty for first-time buyers. The levy on buying a home will be abolished completely up to £300,000, and, for the trainee bankers and tech moguls buying in the better parts of London, the first three hundred grand when you are spending half a million will be let off the tax. On the surface, that might seem like a good wheeze. If young people are angry that they can’t get a first foot on the housing ladder, then it will now be a little easier for them. It comes with a cost, however. It takes a housing policy that was already a mess, and achieves the almost unimaginable feat of making it even worse. Take stamp duty.

Maybe we should blame John Grisham. In his breakthrough best-seller The Firm, the young lawyer Mitch, played by Tom Cruise in the movie, has to make regular trips to the Cayman Islands where the corrupt law firm he works for creates hundreds of shell companies for the assorted cast of money launderers, tax dodgers and gangsters who are its core client base. Ever since then, the murky ‘offshore centre’ has become a staple of the post-Cold War thriller: a place where, amid the palm trees and skyscrapers, sharply dressed financiers salt away billions, safely out of view of any government.

The wine bars will be spookily empty. The lap-dancing clubs will be abandoned, and Savills will have to start working out how to sell mansions within an hour’s commute of Frankfurt and Paris instead of London. Just about every day brings another dire prediction about the impact of leaving the EU on the City’s mighty financial services industry. Only this week the Bank of England, which has turned itself into a semi-official  chorus of doom on the issue, joined the fun, with reports that it was predicting 75,000 job losses. No one denies that would be serious. The City is one of the most dynamic parts of the British economy, creating wealth that ripples out through London and the rest of the South-East, and contributing billions in tax revenues every year.

We have a couple of hundred years of economic history to tell us that some things are just a really, really bad idea. Printing loads of money, for example. State control of industries. Punitive taxes. Subsidies. But of all the really terrible polices a government can put in place, the very worst of all is price controls. The trouble is, that also seems to be the most popular idea in British politics right now. Last week, Labour announced what amounts to price controls on credit cards, with a cap on the interest rate that can be charged. It is already in favour of controls on rents. Today, Theresa May stepped in with her own contribution, unveiling a plan for controlling the price of energy. And it is still only Wednesday, so who knows where we will end up by the end of the week.

There are some commercial decisions that are intrinsically difficult to defend. The plot of the last Captain America film, for example. Ryanair’s charges for bags that are slightly too big. The price of the new iPhone, and just about anything done by the lovable folks over at Foxtons. Credit cards changes come very close to that category. Almost but not quite. In fact, if the Labour party gets its way, and imposes controls on them, we may find that out to our cost. In what will probably be the first of a whole week of populist measures, the shadow chancellor John McDonnell today announced that, if in office, he would impose limits on what could be charged on cards. No one would have to pay back more than they originally borrowed.