Gordon Brown - The Man Who Saved Brexit

It was always possible that the Brexit project would not last a week.  On news of the result the value of the pound started to fall.  Markets being markets, there is every possibility that the fall would have continued.  Panic can feed panic.  The UK has reserves of course, but they are not infinite.  A sharp enough drop could have wiped them out leaving the currency too weak to pay for vital imports let alone loans on foreign debt.  Everything would have to be tried to restore confidence and any promise that was needed to calm the markets would have to be made.  The national government run by Boris Johnson and Jeremy Corbyn would have had to issue a statement confirming that plans to leave the EU had been put on hold indefinitely.


I don't think that scenario is at all far fetched.  To people who say the fundamentals hadn't changed that much - well no they hadn't.  But they hadn't changed that much during the Wall Street Crash either.  As Keynes put it, markets can stay irrational a lot longer than you can stay solvent.  And a country like Britain that lives on trade cannot afford to be insolvent.

This risk was avoided because unlike the government, the independent Bank of England had a plan.  As soon as the result was known the governor appeared in the famous window and announced a whole raft of measures to keep things on an even keel.  They worked.  In fact they might have worked rather too well because the UK economy is not just keeping going, it is having a bit of a boom.

Had the Bank of England been controlled by politicians there is every chance that their instructions would have been to not plan for the eventuality of the vote going the wrong way from the government's point of view.  This is why we find ourselves in the embarrassing position of having a major project ahead of us with no plan in place.  But we wouldn't have even got this far without prompt action by the Bank.

The person who is most responsible for the independence of the Bank of England is Gordon Brown.  It is a rare politician who gives up power, and Brown certainly seems to be at least as big a control freak as the average top level cabinent minister.  But giving up control is sometimes the right thing to do and it is to his credit that he did it.  I wonder if he would have done had been able to foresee that he was enabling one of the most stupid decisions in British history?