Tuesday, 28 March 2017

Triggering Article 50: A bleak and bitter day for our country

The handing of the letter to Donald Tusk triggering Article 50 marks the end of the beginning of the self-inflicted national disaster that began with the referendum vote. Prior to the vote it had been understood that David Cameron would invoke Article 50 immediately, and it was on that basis that many of the economic forecasts were made. In fact, he resigned without doing so. This had the potential to buy some time for politicians – the majority of whom wanted to stay in the EU – to find some way of avoiding or at least mitigating the stark economic, political and strategic dangers of Brexit.

In fact, that has not happened. The speed with which Theresa May emerged from a chaotic leadership election process may have contributed to this, as she immediately made appointments that seemed to tie the UK into a hard Brexit. Even so, for many months the government’s position was ambiguous and there did seem to be a real possibility that Britain would at least remain in the single market, if not also the customs union. That possibility was rejected in the May’s Lancaster House speech in January and we are now entering a process about which little is known and with an outcome that is completely unknowable.

So this breathing space, which could have been used to build some kind of national consensus in which the divisions of the referendum were somewhat healed, has been irresponsibly squandered. There could have been a soft Brexit which gave most people some of what they wanted and some people all that they wanted. Instead, the most divisive form of Brexit possible is being pursued, one which differs from what leave voters were told would occur as well as being one which remain voters cannot tolerate. May calls for national unity whilst insisting on a policy that makes this impossible. Debate is deemed disloyalty, dissent is deemed treachery. Leading business people and senior statesmen are dismissed as ‘remoaners’, judges traduced as ‘enemies of the people’. The future of Scotland and Northern Ireland is up in the air and the dismemberment of the United Kingdom is a real possibility. Meanwhile, hostility to immigrants has increased and the many European citizens embedded in communities in the UK have been left traumatised and in limbo, as have UK citizens in the EU. So there is already a huge cultural cost, and it will grow.

During this period, too, the economic effects of Brexit have begun to emerge. This is most evident in the collapse of the pound – which at any other time would have been seen as a major crisis – and the beginnings of the effects of that in terms of inflation, with little or no dividend in increased exports from the devaluation of sterling. There are daily reports that whole swathes of the economy – farming, finance, science, care homes, healthcare, construction, car making and in fact just about every other sector – are in turmoil, with no idea of what their future will be. To take just one example – relatively small but strategically significant for the UK’s economic future – every financial technology (‘Fintech’) firm of any size is reported to be actively looking to leave the country. Longer-established and more familiar, Lloyds of London, the world’s largest insurance market, is reportedly set to announce the creation of a new base in Europe. As many of the links just given show, jobs are beginning to leach abroad whilst, at home, vacancies cannot be filled because of the deterrent effect on EU immigration, the NHS being one important example.

Investment plans have been deferred or abandoned and where they have gone ahead it has been despite but not because of the vote. I am not aware of a single case where a company has announced a new investment because of Brexit. The public finances have taken an additional hit, with the ‘punishment budget’ occurring in all but name: £59 billion, or half of the extra borrowing over the next five years, is already attributable to Brexit. Economic growth has continued, but only supported by even more consumer borrowing and that is now waning. Most of what was dismissed as ‘project fear’ is becoming true, if not in exactly the order or timescale of some of the predictions. There has already been a huge economic cost, but the full cost has hardly yet begun to be paid or even quantified.

Meanwhile, the shape of international relations has dramatically changed with the election of Donald Trump. This has huge implications for how the UK positions itself both with respect to the US but also China and Russia (£link). At the same time much goodwill with the rest of the EU has been eroded by the way the British government has conducted itself. Every major ally we have counselled against Brexit. Now we have to navigate a geo-politics in which the entire post-war order is getting re-negotiated from a position which is isolated and to much of the outside world simply incomprehensible. There has already been a strategic price to pay, and it will get bigger.

The domestic political arena has also been damaged. A heroic legal action in the face of disgusting abuse opened the possibility of parliament restraining an executive that wanted to act without scrutiny or accountability. The House of Lords at least attempted to make use of that opportunity, but the House of Commons shamefully refused to do so. The Labour opposition simply abdicated its responsibility and its principles under a leader who is manifestly incompetent. The LibDems have been staunch, and may well make significant electoral gains as a result, but for now have too few MPs to make a difference whilst the SNP are understandably primarily concerned with Scotland and Scottish independence. Tory MPs who backed remain – the majority - are too cowed by government whips and the Brexit press to make more than squeaks of concern. The consequence is that the government is free to pursue a policy which, to repeat, most elected politicians know to be highly damaging for the country. How ironic, after a campaign centrally concerned with parliamentary sovereignty. And how ironic to see a Tory government shredding its traditional commitments to business interests and to maintaining the union in the one-eyed pursuit of Brexit at any cost.

For there is no sign at all that the government understands the realities of what it is now embarking on, and there have been numerous warnings that the civil service lacks the administrative bandwidth to cope with it. May’s apparent political selling point of mature pragmatism has morphed into a cavalier disdain for anything remotely practical. Even as the negotiations begin, the government is talking blithely about the possibility of exiting without any deal in place. Having chosen a hard Brexit of a trade deal over the soft Brexit of the single market, hard Brexit is becoming the ‘moderate’ position with a no-deal ‘ultra-Brexit’ now being touted as a real option, possibly even the preferable option. That would be crazy in terms of trade, which is how it is mostly discussed, but no less so in terms of the myriad of other parts of the UK-EU relationship from policing to air travel to nuclear safety.

The shift towards ultra-Brexit is partly a consequence of the unappeasable nature of the Tory Eurosceptic hardcore, as I wrote in my previous post. But it also reflects the fact that each time the claims of the Brexiters meet reality they are exposed as nonsense. Right from the beginning of the campaign people like Peter Hargreaves, the largest individual donor to Leave who funded a mailshot to every UK household, were repeatedly saying that a quick and easy new trade arrangement would be ensured by German car manufacturers. Typical was David Davis, now the Brexit secretary, who wrote in February 2016 that:

“Within minutes of a vote for Brexit the CEOs of Mercedes, BMW, VW and Audi will be knocking down Chancellor Merkel’s door demanding that there be no barriers to German access to the British market.”

Within minutes! Well, we are not minutes but months since the vote and nothing remotely like that has happened. Nor will it, because it is not how trade policy works and it is not how the EU works and, in any case, it is not what German car makers think. But when confronted with realities that make a mockery of their predictions Brexiters refuse to backtrack and so have no alternative but to move to a harder and harder position ending, ultimately, in advocating a ‘no deal’ Brexit. Thus, for example, Lord Lawson, the French-domiciled former Chancellor, told people before the referendum that there would be no difficulty in having a post-Brexit trade deal with the EU. Now he says that leaving without a deal is by “far and away the most likely outcome”. That wouldn’t resemble anything that was put to the electorate by the Leave campaign.

It is important never to forget that campaign, since its outcome is, and will be, used to justify all that will now happen. It made three main promises to voters. The first was that Brexit would mean that there would be an extra £350 million a week for the NHS. That was an outright lie and was disowned by the leave campaign within hours of the result. The second was that Britain would regain sovereignty by leaving the EU. But the Brexit government’s White Paper (para 2.1) has since confirmed that sovereignty was never lost. The third was about reducing immigration, but since the referendum Brexit campaigners and indeed the Brexit secretary have admitted that it won’t necessarily be reduced.

These were just the headline claims. Beneath them were a myriad of others, not just in relation to trade but, to take just one example, that a new deal with the EU would be negotiated before the leave process started. But this is exactly the opposite of what Article 50 states, hence the prospect, now, of leaving without a deal. Or, to take another example, leading Brexiteer Michael Gove claimed that there was no prospect of Brexit leading to a second Scottish independence referendum. Yet this is, indeed, now in prospect. Every single claim made by the Leave campaign, without any exception, has now been discredited or disowned. But that does not stop new ones being made. Thus faced with the obvious fact that the UK will have to settle its outstanding financial commitments to the EU, estimated as being as high as £50 billion, John Redwood, another leading Brexiter, simply asserts that there will be nothing to pay.

It is impossible to overstate the sheer stupidity and terrible danger of what has happened since last June. Political leadership and institutions have failed. A narrow vote for an undefined outcome on the back of a mendacious campaign has been fetishized as it being the ‘will of the people’ to pursue a policy favoured only by a narrow section of the political right. That policy is being pursued without any regard whatsoever for the cultural, economic, geo-political or strategic damage it is already causing and with reckless disregard for that which will follow. A combination of unexpected or accidental factors have coalesced so as to turn what was already a disaster into a catastrophe. It remains to be seen whether it will prove to be even worse than that.

It may be that even at this eleventh hour some sanity will prevail. There is a long way to go from triggering Article 50 to an actual exit – possibly longer than the two year period. If recent months have taught us anything it is that politics is more unpredictable than it has ever been. If, as I think is inevitable, the huge costs and dangers of Brexit become even more tangible it is just possible that public opinion will shift decisively. The danger is that these costs and dangers will be blamed on the EU, ‘remoaners’, the ‘liberal elite’ and so on, as indeed has already been the case. So it will be the job of those of us who can to keep reminding our fellow citizens that they arise from a decision taken by the British electorate on the basis of lies, distortions and misinformation. They can change their minds, and given how close the vote was it does not need too many people to do so for the prospects to be brighter than they seem on a bleak and bitter day for our country.

3 comments:

  1. Brilliant. Thank you. The one hope I have (and it's a thin one) is the 'transition' period proves incredibly long. In fact, there might just be the chance of a classic Whitehall/EU fudge.

    As of today (5 April 2017), May has acknowledged that a) we can't sign an FTA with the EU until we have left and b) there will need to be (in her words) an 'implementation' period during which the four freedoms would probably continue.

    This leaves open the interesting if remote possibility of the UK being able to "check out but never leave" the Hotel EU. Something many people, including British holiday makers to southern Europe, will appreciate.

    May and her team clearly have no real idea what they are doing - they are making it up as they go along. Hence their fulsome rejection of all sound advice until they have to concede the point because reality has smacked them on the arse.

    They talk about a transition but can't give any details on what we might transition to. They talk about 'implementation' but can't say with certainty what we might implement.

    However, May has categorically said she will avoid a cliff edge. The Brexit hardliners don't have the muscle to force her over it - and British manufacturing (Tory donors) have said it's a red line to them. This leave her the opportunity of agreeing an open ended transition to a future arrangement yet to be determined.

    In April 2019 we will leave the EU (give up our MEPs, commissioners and seats at the various top tables - so no veto - but we might be allowed some sideline consultations). In return we will maintain full access to the single market / customs union with all that entails, including the four freedoms. May will spin this as "helping our EU neighbours adjust to our new freedom and preserving peace and stability in our most important market" or something similar).

    To avoid the agony of paying an exit bill (which would upset the Brexalots) - May will simply declare victory by saying we will not pay the exit bill (the EU will nod politely). However, we will continue paying into the EU budget just so long (to be determined) as we benefit from it (in terms of EU projects, CAP etc).

    This transition will be set at a minimum of 5 years with automatic extension to 10 years and beyond as mutually determined. By 2030 (three elections away), we might have spent so long in the EU Hotel lobby that we are willing to contemplate taking a room again.

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    Replies
    1. Thanks, Huw. My latest post picks up some of these issues and I hope will be of interest.

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    2. Thank you Chris - will read with interest later today.

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