Winner of the New Statesman SPERI Prize in Political Economy 2016

Wednesday, 19 September 2018

Why Brexiters look defeated





One reason Brexiters split in stage one of the Brexit endgame is that there is no good way forward for them. When Boris Johnson calls the EU’s Irish border backstop “a monstrosity” he is talking about its impact on the plans of the Brexiters rather than its impact on the UK. It destroys their hope of a Canada type Free Trade Deal with the EU, because the EU will not agree to anything like that without the backstop, but the Conservative and Unionist party cannot agree to a backstop that ends the UK single market.

Those that split over Chequers (the quitters) have one hope left, which is we crash out with No Deal. Those that did not, like Gove and Javid (the schemers), hope that one of their number can at some stage grab the party leadership and then change any agreement to their liking. But neither strategy is likely to work because of that ‘monstrous backstop’ and parliament’s ability to stop No Deal.

One way No Deal could happen is that May fails to compromise enough to get a Withdrawal Agreement (WA). If nothing else then happens, we get a catastrophic No Deal. But if she cannot make a deal with the EU she has to report to parliament on 21st January (ht Steve Lawrence). Parliament can then vote down this ‘neutral’ motion, and perhaps amend it if the speaker allows. But I suspect this is a bit academic, because what parliament is likely to request is what May herself would want, which is an extension of Article 50 (A50).

The EU does not want No Deal anymore than May does. So they are likely to agree to that request, but probably at some political price. The whole point of A50 is that all the power lies with the EU. What that price will be I do not know, but in any iteration between the EU and parliament I cannot see a No Deal outcome unless either party seriously miscalculates. This is not a sequence of events that looks good for May, which is one of the reasons why May is likely to conclude a deal.

In that eventually (there is a WA) the quitters will hope that they can defeat the deal in parliament. How many of the quitters will stay firm in that resolve is unclear, because the outcome of the deal being defeated is unlikely to be No Deal. Quitters apart, MPs want No Deal even less than they want whatever WA May puts to them. In the political chaos that results something like a referendum or a general election may emerge as a way forward (and the EU will extend A50 to allow time for this). Brexiters do not want a referendum, because for all their talk of the will of the people they only want that will if it agrees with their own wishes.

Given all this, the schemers may seem to be on firmer ground. Let the WA pass, and then change anything that is agreed subsequently once one of their number becomes Prime Minister. Note in passing that the Brexiters and May have a common interest in what I have called a perpetual Brexit: the Brexiters because it keeps the issue in members minds when they come to vote for May’s replacement, and for May because for that very reason the majority of Conservative MPs who are not Brexiters will want her to stay.

The problem for the schemers is that after the WA they face exactly the same problem Brexiters face now but more so. The Irish backstop will now be enshrined in a treaty. Any attempt to reduce the degree of alignment of regulations between the UK and EU, for example, would end the UK’s single market. Enough Conservative MPs will object to that and so prevent it happening.

The big flaw in the Brexiters’ plans to free ourselves of pesky EU regulations on employment, the environment etc is the Good Friday Agreement, the laudable wish of the Irish government to keep the spirit of that agreement intact, and the admirable wish of the EU to stand by one of its members. If that had not been the case, they might have got away with a FTA with the EU, but instead they are stuck with the ‘monstrous’ backstop. In the end the Brexiters have failed because they are just not very good at what they see as details. The critical detail in this case is the large island to the west of Great Britain.

The Brexiters may have failed in their primary aim, but they have caused considerable damage nevertheless. Estimates of the GDP loss so far are around 2%, and real wages have fallen by a lot more than that because of the depreciation. Unless MPs can, directly or indirectly, stop Brexit, we will end up at best with less sovereignty than we had as members of the EU. The damage to the UK's reputation, both as a safe place to export from and more generally as a pragmatic tolerant nation, will take a very long time to repair, and that time will not start until the Brexiters themselves lose their political influence.



11 comments:

  1. "For Want of a Nail ..."
    Very good insight, as expected. Hopefully, the lack of grasp of detail will prevent the Brexiters having their dream come true. I am enjoying (with some pain) the Jason J Hunter "Three blokes in a pub" discussions of Brexit details. Someone on Twitter summed it up well, "You voted to take back control of the things we never lost, to lose control of the things we currently have."

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  2. I notice that your academic work is entirely macro in the old-fashioned sense - ie, monetary and fiscal policy. I am concerned that you think this narrow focus gives you an adequate theoretical base from which to address the issues arising post-Brexit. Surely the key point of Brexit is precisely to open up a wider range of policy options, mainly on micro-economic issues, than the political imagination currently manages. The belief that the EU, or EU countries, have a monopoly on successful and wise policy-settings is surely belied by the results achieved. Have we really nothing to learn from, say, Singapore in terms of provision of public goods (including education)? Have we nothing to learn from, say, Japan, on social cohesion? Have we nothing to learn from S Korea, or Taiwan, or even China, on the fostering of industrial clusters?

    And do you seriously suggest that improvements in micro-economic policies would make no difference to longer-term economic outcomes? Yet if you acknowledge this, you surely can't sustain the credibility of your purely macro-forecasts?

    I would be interested in your response to what I believe is a reasonable academic challenge.

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    Replies
    1. It is easier to Macro-bullshit than Micro-bullshit.

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  3. Great piece. But please add the nuances that, for example, when you suggest that the UK is less tolerant, that does not include Scotland and when one talks of a 'UK single market', it is not the same as the EU's single market (voting rights alone making a key distinction).

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  4. I can't see May getting her Chequers plan through the HOC; any changes are likely to be in favour of the EU and are even less acceptable than the current proposals. A no deal is a distinct possibility.

    Brexit will go through despite what you suggest; there would be widespread political and social chaos if this did not happen; trust in politicians, already low, would evaporate.

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  5. One thing to bear in mind is that when May is challenged for the leadership after the Withdrawal Agreement is (probably, narrowly) passed by Parliament is that the next incumbent of Number 10 might be someone with a positive antipathy towards the Good Friday Agreement, such as Gove (it's a longish shot, but he may have a better chance of making the shortlist than Johnson).

    Despite their protestations to the contrary, some Tories, and certainly the DUP, are quite sanguine about the prospect of a hard border in Ireland if they can blame it on the EU generally and the Republic specifically. Any collateral social damage will naturally be blamed on "the men of violence" and their "enablers" in Sinn Fein and "supporters" in the Labour Party. The cost of Brexit may be much more than a hit to GDP.

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  6. Has any other country been more foolish in its collective decision or led by such a bunch of fools than the UK over this debacle? You are quite correct the damage done so far to the UKs reputation will take decades to restore if in fact it ever can be.

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  7. You haven't said that the Sun and Mail editorials have both approved Chequers.

    TINA!

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  8. I just wanted to send a really quick note to say thank you, and let you how much your blog is appreciated.

    I’ve been following your blog since the days of the coalition and austerity. It’s always a really useful place to understand the implications of political policies on the economy and also gain a much better sense of when politicians are being deceitful!

    Keep it up!

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  9. Capital flows are more important than trade.

    GDP is a ridiculously crass measure of a country's well-being.

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  10. The opportunity to vote regarding the EU was a accidental act of democracy, some one forgot that NO ONE voted to be IN the EU.

    It should be no supersize when given the chance, any one who remembered the UK used to be a nation, voted to leave the EU a none democratic dictatorship yes I voted with NO thought to the COST benefit or loss.
    The join vote years ago was to enter the "common market" not the EU.

    I voted out so that our law makers would get on with making the laws of our land and not just sit on bench for 75K a year while an offshore cabal did the work for them.

    Stop think about nothing but cost, a large part of the UK will not notice a 2% drop in GDP.

    No big screen with a stock ticker at the bottom on the wall of the local FOOD BANK.

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