The mighty economic salvo unleashed by the Bank of England yesterday has heaped pressure onto the government to pull its weight in supporting the UK economy in the wake of the Brexit vote.
Mark Carney, George Osborne, the Labour Party and a host of analysts and businesses called on the chancellor Philip Hammond to step up to the plate with his own stimulus package, with many demanding action over the summer, rather than waiting until the traditional autumn statement.
The governor said that while the Bank of England could “ease the adjustment” into a new post-referendum economic order, it was “not the gift of monetary policymakers” to determine how that should look and feel.
“Monetary policy is more nimble, and it is appropriate to be the first responder to a shock,” Carney said. “[But] the biggest elements of the change are structural. Monetary policy can take those into account, but it can’t really do anything about those structural factors.”
Controversially, the former occupier of Number 11, George Osborne, did not hold back yesterday as he outlined the steps he would be taking if he still held the keys.
The Bank of England's Brexit response
Osborne said on Twitter the Bank was “right to use the triple whammy of lower official rates, quantitative easing and funding scheme to support demand.
“But [this] is only a temporary answer … [it] must be matched by permanent supply side reform: lower business taxes, free trade with EU and unambiguous message we’re open to overseas investment.”
Former rate-setter Andrew Sentance of PwC agreed, saying the current situation "requires a political response from the government", while KPMG's Yael Selfin urged the "government to pick up the baton and provide the more substantive support the UK economy needs”.
The Centre for Economic and Business Research (CEBR) said waiting until the official autumn statement for new policies “could make recession inevitable” and business groups including the CBI, the British Chambers of Commerce (BCC), the Institute of Directors (IoD) and the manufacturers’ organisation the EEF, have all called for a robust government response to the economic shock.
Shadow chancellor John McDonnell wants the government to spend at least £500bn on a infrastructure projects.
How late can it wait?
The term 'autumn' statement has been used a little loosely in recent years.
Despite his pledge to take “any necessary steps”, Hammond appears reluctant to shake up the parliamentary calendar. He said yesterday: “As we approach the autumn statement of course we will consider whether there is any need for a fiscal response.”
This worries some since the statement has fallen as late as December in recent years. The date for this year's has yet to be set.
To call or not to call?
Tim Bale, professor of politics at Queen Mary University said he could see why Hammond might not want to make such a dramatic move as calling an early autumn statement.
"The government is in the position of playing for time," he told City A.M. "They don't really know what they are dealing with, but you have to assume behind the scenes they are burning the midnight oil.
"They don't want to give any indication of what's going to go in the autumn statement," until they have a clearer picture of the wider economic response, Bale added.
Claudia Wood, chief executive of think tank Demos, however, suggested it may have been unwise for MPs to trot off on their usual extended summer holidays while the machinations of Brexit were being played out behind the scenes.
She said: "An appearance of business as usual is important, but probably what should have happened is government stays on a bit longer and MPs come back a bit earlier because there is so much to be decided.
"I'm not sure sticking to the current parliamentary calendar is going to give us enough time to shake out those concerns."