Wealthy Nations Daily Update - Conservative Party / CBI

We always knew the upcoming vote on the UK’s membership of the EU had the potential to split the Conservative party; however, it is a leading anti-EU campaigner resigning over welfare cuts that could spark it off.  Although not quite at the civil war stage as yet, Friday’s resignation of Iain Duncan Smith, the Work and Pensions Secretary, over the recent budget does have the potential to damage not only the Tories but also the argument for Britain to stay in Europe.

After the budget was announced last Wednesday, Duncan Smith resigned, saying he could no longer support the cuts  to the welfare budget, whilst taxes on higher earners and companies were being lowered. In a round of interviews he did over the weekend he said “I am resigning because I want my government to think again about this and get back to that position that I believe, which is about being a one-nation” adding “I believe they’re losing sight of the direction of travel.” It seems Iain Duncan Smith is not alone in his view that the party leaders are protecting wealthy pensioners, middle and high earners (majority of whom vote conservative) at the expense of those on a lower incomes, who don’t vote for them. He insisted his decision was not driven by his role over Brexit, but purely decisions taken in the budget.

The resignation could prove to be a “pivotal point” as one MP put it, adding “The party has got to resolve this. You cannot have a rhetoric as a party that says we’ve got to ‘all be in this together’ and then the budget kind of demonstrates it is very clearly not that.” Of course Prime Minister David Cameron and his Chancellor, Osborne, don’t see it that way. A number 10 spokesperson said “We are sorry to see Iain Duncan Smith go, but we are a one-nation government determined to continue helping everyone in our society have more security and opportunity, including the most disadvantaged.”

Also over the weekend came a warning from the Confederation of British Industry (CBI) that the  UK leaving the EU could have a lasting damaging effect. They asked leading accountancy firm PWC to look at UK growth under differing scenarios if UK voted to leave the EU in June. The conclusion was, if the UK could sign a trade agreement with the EU within 5 years of exiting, the CBI/PWC estimate the UK economy would be 3 percent smaller with GBP55bn wiped from the country's output by 2020. Without a trade agreement, up to 5 percent and GBP100bn could be wiped from GDP by the end of the decade. Carolyn Fairbairn, director general of the CBI warned that  “On the impact for business – it is hard to see circumstances under which the UK could secure a better set of deals on trade and investment outside the EU. Leaving the EU would hit some of the UK’s top sectors hardest. And current global uncertainty means that now could be one of the worst times to leave.”

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