Winner of the New Statesman SPERI Prize in Political Economy 2016

Wednesday 16 May 2018

Delusions of National Power

As soon as the EU decided, quite rightly, to support Ireland in rejecting any deal that resulted in placing infrastructure at the Irish border, the idea of a Free Trade Agreement between the EU and the UK was dead. It became inevitable that the UK would stay in the Customs Union (CU) and the Single Market (SM). The two possible alternatives, which is that the UK would go ahead and impose a hard border and forsake any deal with the EU, or that a border would be created in the Irish Sea, would not be approved by a majority in parliament. If the UK had a strong bargaining position, it could perhaps persuade the EU to compromise over how much of the Single Market it needed to be part of (the Jersey option), but according to Sam Lowe who gave that option its name the “EU will not contemplate the backstop applying to the whole UK”. The UK gave up any bargaining strength it had when it triggered Article 50.

Yet neither leader of our two main political parties allow themselves to see this inevitable implication of the Irish border. Delusion is at its most extreme in the case of Theresa May, who still thinks it is possible to conclude a deal with the EU that would keep the Brexiters in her party on board by appeasing them at every step. So we have the ludicrous situation where the UK cabinet is at loggerheads over which of two impossible plans they will put forward so they can be rejected by the EU. This isn't rearranging deck chairs on the titantic. It is having a full blown row over how the deck chairs should be arranged as the ship sinks. 

This charade could be put out of its misery by parliament telling May that the UK has to stay in the CU and the EEA. The former might happen, but the Labour leadership, along perhaps with some of its MPs (and not just the few Brexiters), still think that they can negotiate a bespoke version of the Single Market that either avoids rules on state aid or avoids free movement. There is no reason why the EU need contemplate this, given that they know MPs will not approve No Deal. The left or Lexiters can talk all they want about uniting to guarantee that the EU cannot obstruct a future socialist government, but the lesson of Greece is that if the EU has power it will use it.

It is easy to imagine where these delusions of power come from. After all, despite what Brexiters say, the UK did have considerable influence in the EU when it was a member. Ironically both the Single Market and EU expansion owed a lot to UK pressure. The more interesting question I think is why these delusions continue when the reality of the UK’s powerlessness becomes obvious. Political leaders have had a painful year to learn that in these negotiations the EU calls the shots.

I can think of two answers. The first is ideological blindness. This is obvious in the case of the Brexiters, but I think you can also see it elsewhere in various ways. But I also think there are specific dynamics created by the referendum. Leave votes were in part predicated on an illusion of power: the UK would not be worse off because the EU would be desperate to accede to our demands. Once a politician agrees to go with the 'will of the people', they find it very hard to go back to the 52% and say your beliefs were delusions. And no politician wants to say in public that the UK has to do what the EU says. It is very hard for an elected politician to confront English nationalism, a nationalism largely exploited and distorted in my view by a deeply corrupt press.

The UK is therefore in a trap of its own making. It is obvious what has to happen in the end: the UK stays in the CU and SM either inside or outside the EU. But the leadership and perhaps a majority of MPs in the two main parties either cannot see that yet, or can see it but dare not take the steps to get us there. If Brexit is to survive despite always being a fantasy project it has to end with a whimper, but it could take many wasted years and much economic harm to get to that point. There is one way out that will spare politicians’ blushes and revitalise the economy, and that is to hold a referendum on the final deal where the economic costs of the deal are clearly spelt out.


  1. The problem is that there was a democratic decision to leave the EU, and remaining in the single market (e.g. in the EEA) and a customs union would not accomplish this. So do T. May and J. Corbyn say to the electorate, “we know you voted for Brexit, but it is just impossible, you can’t have it”. I don’t think that is credible because clearly many countries are not in the EU. Or is it that, despite having open borders with Ireland before joining the EEC, the Good Friday agreement compels us to remain with the EU. I seem to recall that no government agreement can bind subsequent governments. So are we really saying that the democratic wishes of the UK as a whole can be vetoed by the 1.8 million, less than 3% of the UK population? That doesn’t seem plausible either.

    1. This makes as much sense as saying that you divorcing your wife shouldn't mean hard decisions about splitting property and/or alimony, because after all you made a democratic decision to divorce, and you didn't pay alimony, child support or maintenance before you were married. It is a silly riposte, and one grounded on a strong sense of cognitive dissonance. Reality is shining through though, as it must. Will of the people be damned; the law of the letter is stronger than any will.

  2. Dear Simon, Your analysis is wonderful and precise (I love the deckchair analogy, mine would be spending time discussing the optimal speed and route for Titanic after hitting the iceberg). I think your prediction is flawed however. Faced with CETA or SM/CU option, May will push CETA (hard Brexit, Irish border etc), the 60 hard Brexiteers will bring her down at any significant hint of a SM/CU deal. I lived in Scotland, for the true believers, wrapping up in the 'flag' being patriotic enough like the confidence fairy will suffice. There Is already a strong push to blame Ireland.

  3. Dear Sir. You are wrong. Mrs. May may use her executive powers and set up border walls in Northern Ireland without any consent of corrupt Parliament. They may vote as they like, but last work belongs to the Nation, and nation stated their opinions in referendum. In other words, we have EU "by the balls"

  4. The late Tessa Jowell believed that schools should equip pupils with the skills to listen to / view / read the media critically and not just accept news stories at their face value. See this link:

    The idea never really took off, apparently. Maybe UK newspapers are just so good at telling the whole truth that it wasn't needed....

  5. "It is very hard for an elected politician to confront English nationalism, a nationalism largely created in my view by a deeply corrupt press."

    The rising circulation of the "The Sun" in the 1965 -75 period is matched by the falling circulations of the "Daily Mirror" and the "Daily Express"


  6. May is the political equivalent of being famous for the sake of being famous.

  7. Did you read this, Simon?
    EU law is no barrier to Labour’s economic programme
    The gist is that the whole debate about the rules on state aid may be irrelevant

  8. A daring, but probably also "impossible" solution is to unite Ireland and let it stay in the EU, while the UK brexits. NI can vote on this, and just maybe the idiocy of brexit will push them to make this decision, rather than sticking within the UK for cultural reasons.

  9. "Ironically both the Single Market and EU expansion owed a lot to UK pressure."

    It is a great irony, and who would have throught that it would be the UK that would be forced out once large scale migration from the east commenced.

    Interestingly Delors and the French were very concerned about the possible implications of rapid eastward EU expansion. After Maastricht, they believed that monetary union must be quickly followed by fiscal, which would imply greater political, union. The UK was opposed. It was worried about the implications for NATO, and it was mainly interested in expanding the single market. It was concerned about European social liberalism. The US was also not keen on the idea of a united European defence and foreign policy. There were also cold war dinosaurs who sadly at the time of Glasnost were undermining Gorbachev and Russian moderates by rushing the entry of the Warsaw Pact states into the EU and NATO.

    The UK to make its case needed evidence that there would not be large scale inward immigration with eastward expansion.

    Enter economists and their models. The lead modeller (who has been promoted to a distinguished position in the British Academy and credits recent German success to the deregulation of the German labour market) said there would be no rapid and large movement of labour into the UK with eastward expansion.

    Well there was. And immigration became a political issue - which admittedly bordered on hysteria, but that was political fallout was very predictable.

  10. Thank you. I think one needs to be very careful about the use of this "52%" figure. It lends credence to the PM's oft repeated "Will of the People" mantra. Better to use the percentage of Leave voters based upon the total electorate (c. 37%) or upon the UK population (c. 27%).

  11. "MPs will not approve No Deal". But they may reject whatever deal is signed. In which case, No Deal occurs automatically.

    There has to be a Commons majority in favour of staying in the CU+EEA. There may not be.

  12. I don't think you know what May "thinks" as opposed to says, considering the concessions she has already made so far such as the exit bill after saying she wouldn't.

    And while I assume she meant it when she said she was a Remainer, and thus wants a soft Brexit now, it's possible she really does mean getting out of the CU and SM and that her negotiationg is just for show, and she will want a hard Brexit unless the EU agrees to those terms.

  13. Fiscal policy remains in the stone age and now this blog.

    You seem to hold 2 contradictory notions in your mind at the same time. Nothing new you've made a career out of it.

    Which is why nowadays you are ignored.

  14. "the Labour leadership, along perhaps with some of its MPs (and not just the few Brexiters), still think that they can negotiate a bespoke version of the Single Market that either avoids rules on state aid or avoids free movement. There is no reason why the EU need contemplate this, given that they know MPs will not approve No Deal. The left or Lexiters can talk all they want about uniting to guarantee that the EU cannot obstruct a future socialist government, but the lesson of Greece is that if the EU has power it will use it."

    Simon, if you're going to denounce people as being delusional then you should at least be acquainted with reality. Turkey is in a Customs Union with the EU that mandates that Turkey's state aid rules should be aligned with the EU's. That was nearly a quarter of a century ago, and they still haven't implemented that. Likewise, Switzerland's arrangement with the EU involves state aid regulations. With the exception of aviation it's all interpreted by a Swiss court, which interprets it very narrowly.

    Don't get carried away by May's masochistic performance into thinking you have some insight into reality.

  15. The one thing 5-Star and League have in common is more money must be spent in Italy. A very different fiscal stance in Italy is urgently required. The Stability and Growth Pact is now toast.

    Italy is a founding signatory of the Treaty of Rome. A new front against Brussels is opening up. The soft underbelly of the Eurozone is now exposed.

    The UK no longer stands alone.

    Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

  16. i fear SWR is overstating the force of rationality over that of visceral nationalism. The Little Englander hard Brexiters seem ready to break up the Union in pursuit of their fantasy, handing the Northern Ireland Protestants over to the Republic, Scotland to independence and Gibraltar to Spain.

    It is indeed urgent to shift the debate from the customs union to the single market. No hard border within Ireland means NI must be in the SM, not just the CU. No border in the Irish Sea means Britain has to be in the SM too. CU plus SM plus no voice is obviously worse than Remaining.

  17. Petrol duties, alcohol duties, tobacco duties are different each side of the border. Clothes in many chains are priced in Euros and in pounds sterling and the prices rarely correspond exactly on both sides of the border. Yet the system has worked. Why shouldn't it continue to work once we leave the EU?

    1. Plant and animal health regulations. These are not customs duties, but are still essential to the heavily agricultural Irish economies. An example. Wilbur Ross has already said that in any trade deal with the US, the latter will press top allow chlorine-washed chicken into UK shops. This process is banned in the EU. So in the EU withdrawal agreement, you need to find a way of preventing the banned chicken from entering the Republic.

      1. Border checks. The UK has promised the EU not to introduce these.
      2. Chlorinated chicken is allowed in Britain but not in NI, with checks in the Irish Sea. May has promised the DUP not to introduce these.
      3. The UK keeps EU regulations. Multiplied across the whole spectrum of regulated trade, and there is little left for the UK to offer the USA.
      4. Magic unicorn technology. Sure. Whitehall screwed up the IT modernisation of the NHS, a well-defined problem entirely under UK control.

  18. In the mid 1960's the Daily Mirror was selling around 4.8 million copies per day giving it a readership of around 13 million. Nearly one-third of the electorate were reading a Labour newspaper.
    The Conservatives must have been mightily relieved when its circulation began to fall as readers moved across to The Sun, although it took till the mid 1970's for rising circulation of The Sun to overtake the falling circulation of the Daily Mirror. It must have cost a lot of money to sustain The Sun during those years as it struggled to establish itself. Was it all Murdoch money or were eager Conservative donors giving him money to keep The Sun going and break the power of the Daily Mirror?

    1. I wonder how much the difference in price between the Sun and the Mirror today is the result of Murdoch using Sky profits to subsidize the Sun?


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