The Guardian - 01.08.2019

Section:GDN 1N PaGe:2 Edition Date:190801 Edition:01 Zone: Sent at 31/7/2019 20:59 cYanmaGentaYellowbl

• The Guardian Thursday 1 August 2019

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News and Sport

How Johnson’s Brexit

could tear the United

Kingdom apart

Martin Kettle

Page 1

I took a booze break,

but I didn’t expect to be

transformed

Gay Alcorn

Page 4

Border lobby

US Congress threatens

trade deal if Brexit aff ects

Good Friday agreement

Page 8

Anne Perkins

Can Carrie Symonds

navigate the rocky road

of living in No 10?

Page 4

Football

Lampard’s reputation for

developing new talent will

be tested at Chelsea

Page 39

My best shot

Photographer Philip

Pocock on Miriam the

Berlin punk and her pet rat

Page 11

Weather

Page 34

Cartoon

Journal, page 5

Cryptic crossword

Back of Journal

Quick crossword

Back of G

NEWSPAPERS

SUPPORT

RECYCLING

The recycled paper content of UK newspapers

in 2017 was 64.6%^

cts

t

for

will

Richard Partington

Economics correspondent

The US Federal Reserve has cut inter-

est rates for the fi rst time in more than

a decade and signalled its readiness to

provide more support as growth slows

in the world’s largest economy.

The US central bank cut its key

benchmark interest rate by a quarter

of a percentage point, to a range of

2%-2.25%, in the fi rst reduction in bor-

rowing costs since immediately after

the fi nancial crisis a decade ago.

Jerome Powell, the Fed chairman,

said weak global growth and the US-

China trade war had been disruptive

for the world economy and had an

impact on growth in America, despite

the US labour market remaining strong

with the lowest unemployment rate

since the late 1960s.

“We see those as threats to what

is a party for the whole of the UK, so

we’ll do all we can to block a no -deal,

crash-out Brexit .”

Meg Hillier, the chair of the Com-

mons public accounts committee,

vowed to scrutinise the spending.

She told the Guardian: “Just because

Boris Johnson is making it sound like

he’s fi ghting a war, with seven-days-a-

week meetings in Whitehall, that is not

licen ce to spend taxpayers’ money like

water, throwing good money after bad.

“It is of course responsible for a

government to be prepared for an

emergency but this is an emergency

of the government’s own making. Bor-

ing though it may be, that taxpayers’

money could be spent on essential

public services .”

She also cast doubt on how 500 new

border offi cials could be recruited and

trained in the next three months. A

Treasury source said they would

include existing staff redeployed and

the recruitment of new staff.

In previous planning for no deal in

March, HMRC forecast that it needed

a bout 5,500 extra staff , with most in

“customer compliance”. Insiders said

those working on surveillance and

smuggling needed years of training.

A cabinet source said the govern-

ment was unleashing more spending

because of concerns that businesses

were not taking the threat of a no-deal

Brexit seriously enough, after it was

averted on 29 March. The CBI warned

this week that the UK and EU were not

ready for a no-deal Brexit on 31 Octo-

ber, saying “some aspects cannot be

mitigated”. The Institute for Govern-

ment said this week that there was “no

such thing as a managed no deal”.

However, Johnson has sought to

make clear he will not accept the cur-

rent withdrawal agreement from the

EU with its “undemocratic backstop”

and is gearing up to blame Brussels for

a no-deal Brexit if it refuses to move.

David Frost, his most senior EU

adviser and Brexit negotiator, is going

to Brussels to deliver his message that

the UK will leave without a deal unless

the bloc abolishes the Irish backstop.

Javid, a former remain er , said:

“With 92 days until the UK leaves the

European Union, it’s vital that we

intensify our planning to ensure we

are ready. We want to get a good deal

that abolishes the anti-democratic

backstop. But if we can’t get a good

deal, we’ll have to leave without one.

This additional £2.1bn will ensure we

are ready to leave on 31 October – deal

or no deal.”

MPs have broken up for the sum-

mer but a number of Tories are taking

time to consider how to stop a no deal

or whether they can even stay in the

party if Johnson pursues a deliberate

no-deal path. Phillip Lee, a Tory MP,

told a new podcast, On The House, that

he was “increasingly feeling politically

homeless” and was “going to spend

the summer thinking a lot ”. Margot

James, another ex-minister, said last

week that she could not campaign for

a no-deal Brexit at an election, while

Philip Hammond, Stephen Hammond

and Dominic Grieve have signalled

they could vote to collapse a govern-

ment intent on no deal.

Johnson is facing extremely tight

arithmetic if he wants to get MPs’

approval for a no-deal Brexit. He has

a majority of two with the DUP, which

will fall to one if the party loses the

Brecon and Radnorshire byelection

today. His senior adviser, Dominic

Cummings, has told staff that No 10 is

ready to use “any means necessary”

to secure Brexit on 31 October, and

Johnson has not ruled out suspending

parliament to try to force it through.

Brexit coverage Pages 8-9 

is clearly a favourable outlook. And

we see this action as designed to sup-

port them and keep that outlook

favourable,” he said of the interest

rate cut.

Stocks fell on Wall Street straight

after the decision as investors warned

the 0.25% cut might not be enough to

deliver greater stimulus for US growth.

The Dow Jones industrial average fell

by more than 1% in early afternoon

trading in New York to 26,907 after

the rate cut was announced.

Nick Wall of the fund manager

Merian Global Investors, said the

cut was “a positive step but could

be a missed opportunity. We believe

they should have gone further and

cut 50 basis points [ half a percentage

point] today.”

Borrowing costs in the US remain

less than half the 5.25% level seen

before the 2008 crash, when the Fed

was last forced into cutting rates to

support the economy. US growth has

slowed in recent months against a

backdrop of tensions between Wash-

ington and Beijing, which has served

as a brake on international trade,

weighing on economic activity around

the world.

The Fed said it was taking action

“in light of the implications of global

developments for the economic

outlook as well as muted infl ation

pressures ”.

Donald Trump has applied signif-

icant pressure on the central bank in

recent months , demanding lower rates

to stimulate economic growth.

The president had called the Fed an

“anchor wrapped around our neck”

and blamed rate rises last year for an

unspectacular growth rate in the US.

The cut was in line with market

expectations, but was likely to dis-

appoint the president for not going

further, analysts said.

Gross domestic product , the broad-

est measure of economic health, rose

at an annual rate of 2.1% in the sec-

ond quarter, well below the 3.1% it

achieved in the fi rst three months of

the year.

Leaving the door open to poten-

tial interest rate cuts in future, the

Fed indicated it was ready to respond

with more support for the US economy

should the outlook deteriorate further.

“[The Fed] will continue to monitor

the implications of incoming inform-

ation for the economic outlook and

will act as appropriate to sustain the

expansion,” it said.

James Knightley, the chief interna-

tional economist at the Dutch bank

ING, said: “Should tensions esca-

late once again [between the US and

China], if tariff s are hiked, markets sell

off and economic weakness spreads,

then the Federal Reserve will respond

with more stimulus given the benign

infl ation backdrop.”

First US interest rate cut

in a decade disappoints

Wall Street as shares slide

PM ramps up Brexit

costs, adding £2bn

to no-deal fund

Note: Rate is the upper limit of the target range from 15 December 2008

2010 2015 2020

The Fed has cut interest rates for the first time in more than a decade

Federal funds target rate

0.

0

1.

1.

2.

2.5%

December 2015

Rates start to rise at

the end of 2015

July 2019

Rate lowered

to 2%-2.25%

October 2008

Rate cut from 2% to 1.5%

December 2008

Rate cut to 0.25% to encourge

lending during the financial crisis

 Continued from page 1

▲ Sajid Javid: an immediate £1.1bn

cash boost to fund a no-deal Brexit

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