While the global market eagerly awaits outgoing UK PM David Cameron's address to Parliament on Monday after a weekend of political turmoil that left Britain looking rudderless following the shock vote to leave the European Union, this morning Chancellor George Osborne made his first statement since the EU referendum in a bid to calm the turmoil in financial markets that has followed the UK’s vote to leave the EU last Thursday.
As Open Europe summarized, Osborne stressed that the UK government is “ready to deal with the consequences” and that the UK economy is strong. However, he also warned that there will need to be “a period of adjustment” and that “there is going to be an impact on public finances”, although he said any new budget would be a job for the new government. He insisted he doesn’t “resile” from any of the forecasts made during the campaign. He added that he agreed with the decision to delay triggering Article 50 of the EU Treaties – which sets out the process for leaving the EU.
It is unclear if the decision to delay the trigger, a process the EU wants implemented immediately, is to spook the UK population further in hopes of a second Brexit vote, one which would result in a "Remain" outcome.
Still, despite Osborne's "attempt to calm the markets", the pound resumed its historic slide in the wake of the UK’s decision to leave the EU, touching a fresh 31-year low despite as turmoil in financial markets persisted, with numerous UK bank and other stocks halted due to excess volatility.
Breaking his silence since the referendum, the UK chancellor told a news conference that the result of the referendum was “not the outcome that I wanted” but that authorities were “ready to deal with the consequences”. As noted earlier, The pound has continued to fall this morning and is down more than 3% against the US Dollar, hitting new 31 year lows below 1.32, while the FTSE 100 was down well over 1%.
More details from the FT:
Accepting he did not have a mandate to change tax and public expenditure policy immediately, Mr Osborne shelved plans for an emergency Brexit budget of higher taxes and spending cuts. He indicated instead that similar action to shore up the public finances would still be needed later in the year when new forecasts from the Office for Budget Responsibility are published.
Mr Osborne could not give a reassurance to the British people that the UK would avoid a recession, lost jobs and a hit to the public finances. He said he “did not resile” from any of the forecasts of recession he had made before the vote and Britain needed to undertake “a period of adjustment”. There was already evidence that some companies had put investment plans on hold and “there is going to be an impact on the public finances”.
Mr Osborne said the outlook for the UK economy and the public finances had deteriorated since Thursday. “I made a series of predictions . . . about the impact on the economy if we voted to leave the EU and there were a range of impacts depending on the kind of new relationships we arrived at with the EU. All of them required an adjustment in the economy.”
He said: “I don’t resile from that and of course will work very hard to make sure we mitigate the impact and remind people of the fundamental strengths of the British economy.” Mr Osborne said the UK should not trigger Article 50 of the EU treaty, which sets a two-year deadline for leaving the EU, until it has a “clear view” on the future.
“The prime minister has given us time as a country to decide what that relationship should be by delaying the decision to trigger the Article 50 procedure until there is a new prime minister in place for the autumn,” he said.
“Only the UK can trigger Article 50, and in my judgment we should only do that when there is a clear view about what new arrangement we are seeking with our European neighbours.”
Financial market volatility is likely to continue, Mr Osborne said, but over the past 72 hours he has been coordinating with fellow finance ministers in Europe, the International Monetary Fund, central banks and the US Treasury secretary to ensure markets can handle the shock. “It will not be plain sailing in the days ahead but let me clear you should not underestimate our resolve. We were prepared for the unexpected and we are equipped for whatever happens,” he said.
Osborne refused to give indications on his political future. According to the FT, his closest friends say he will not quit for now as chancellor, and he sees it as his duty to stay at the Treasury at a time of severe market turmoil and growing doubts about Britain as an investment destination. Although Mr Osborne’s allies insist he is thinking only about the UK’s economic stability, his network of supporters at Westminster are busy trying to work out his political future. “George’s team have been ringing around taking soundings on the level of support for him,” said one member of the “Friends of George” Tory cadre, a powerful group that includes many ministers.
Osborne’s team, communicating via a pro-Remain WhatsApp group, are considering whether the chancellor’s machine should be deployed in favour of an “anyone but Boris” candidate for the Tory leadership to prevent a win for Mr Johnson, the former London mayor. Stephen Crabb, the work and pensions secretary, is one option, while Mr Osborne might decide to endorse the more obvious candidature of Theresa May, home secretary, with whom he has scratchy relations.
Osborne would expect to be rewarded for such a move. His friends say a move to the Foreign Office would be the only other job that would appeal to a politician obsessed with history and global affairs, including the rise of China. Such a move would keep Mr Osborne, aged just 45, at the top table of politics and potentially in the game for a future run at the leadership, with his reputation as a sound steward of the economy still on his CV.
His full statement is below.
And now the market will focus its attention on today's key event, David Cameron's address to Parliament.