Mervyn King, the former Bank of England governor, has delivered his most stinging criticism of George Osborne and the Treasury over the Brexit campaign, saying they will need to row back from exaggerated claims that left him “baffled”.
He said the nadir of “the most dispiriting campaign in my lifetime” was a claim that ministers would need to raise taxes and cut spending in an emergency budget to tackle a recession that was likely to follow a vote to leave the European Union.
Lord King said it made no sense to set up a budget to cope with economic trends five, 10 or 15 years ahead. He said the chancellor would need to adopt the opposite policies – higher spending and cuts to taxes – to lift the economy and offset the worst effects of a looming recession.
He said: “I think the government said things it is not easy to sustain or support. If the Treasury forecasts are right and we face a recession, then it would not be right to raise taxes and cut spending. So I was baffled by the idea that an emergency budget would be either sensible in the short term or that we knew anything like enough about the longer term to make that judgment today.
“The Treasury is in a difficult position now because it did make forecasts that were exaggerated in terms of at least the certainty and now will have to row back.”
King was governor during the 2008 banking crisis before stepping down in 2013 to take up a position as a crossbench peer. He warned earlier in the campaign that both sides risked making claims that stretched the truth and warned the debate could not be “reduced to a cost/benefit analysis”.
He said: “I was travelling round the UK a lot at that time and I was struck by how many people said to me they didn’t like the scaremongering tactics, they didn’t like to be told that if they were to vote to leave they would be idiots.
“If you say to someone: ‘You are an idiot if you don’t agree with me’, you are not likely to bring them in your direction. It would have been enough to say there would be a great deal of uncertainty, but they went way beyond that, using precise numbers to say how much our living standards might fall.”
This article was written by Phillip Inman Economics correspondent, for theguardian.com on Monday 27th June 2016 15.07 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010