Brexiters are stopping Brexit because they need to believe in the fantasy of Global Britain

It now looks like May will not get a chance to put her deal to parliament for a third time today, thanks to a ruling from Speaker Bercow. Yet while some compare Theresa May’s relentless and humiliating quest to get her deal passed by parliament to the Black Knight from Monty Python’s the Holy Grail, and Bercow believes the deal has to change for it to be voted on again, there would have been a critical difference this time.

Previously rejection has meant nothing except that we get closer to leaving without a deal. No deal is what economists might call the ‘bliss point’ of many Brexiters. The outcome most Brexiters want is what they call a ‘clean break’ with the EU. Before parliament agreed to delay rather than crash out, it was obvious the Brexiters would vote against May’s Withdrawal Agreement.

If the Withdrawal Agreement had been voted on today (and May could well have pulled it herself anyway because she believed she would lose again), rejecting it would have almost certainly meant a long delay to Brexit rather than crashing out. That may be a crucial difference for many Brexiters, including the DUP. A few have already said that they would have supported May’s deal this time, and others appear to be looking for ways to change their minds. So the vote would have been closer than last time it it had been held.

Given this, I have never understood why May kept No Deal on the table for so long. It was obvious that most Brexiters preferred No Deal and would therefore inflict embarrassing defeats on the Prime Minister. In contrast the threat of No Deal does not seem to have kept the few MPs on the opposite wing on board. All I can assume is that she really believed the David Davis mantra that the EU would cave at the last minute for fear of the impact of no deal. If so that was a huge misjudgement, to be added to the already long list of huge misjudgements she has made over Brexit.

Now she has finally said a long delay is the alternative to her deal passing, the Brexiters would have a real dilemma if the deal was voted on again. A long Brexit delay does not take No Deal completely off the table, but it makes it much less likely than before. It also increases the possibility of a second referendum. To understand the dilemma the Brexiters would have if May were allowed to and had put her deal to parliament for a third time, we have to enter the make-believe world of ‘Global Britain’. Of course Global Britain appeals to the English nostalgia for empire that runs deep within Brexit, but to most Brexiters it is much more than that.

Conventional economic analysis tells us that leaving the EU’s Customs Union and Single Market will reduce the amount of trade the UK does with the rest of the world. The reasons are obvious, and I think are privately accepted by most Brexiters. Their main line of defence during the referendum was that the EU would give us all the benefits without the costs, which we now know conclusively is not true. While some Lexiters might be attracted by the idea of a less global UK (because they blame globalisation for deindustrialisation), Brexiters do not want less trade. Their idea of Global Britain was to do more trade with non-EU countries to offset, in the longer term at least, the loss of trade with the EU.

The Irish backstop in the Withdrawal Agreement (WA) effectively rules out Global Britain. Most trade deals involve tariff reductions, and if the UK is in the EU’s Customs Union it cannot unilaterally reduce its tariffs to make new trade deals. Theresa May and Liam Fox may pretend otherwise, but most Brexiters know this to be the case. The more May moves to appease the DUP by promising that EU rules in Northern Ireland will also be adopted by the rest of the UK, she restricts yet further the scope of independent (from the EU) UK trade deals. Without tariff reducing trade deals with emerging countries and the US, Brexiters believe there will be a decline in the amount of trade the UK does with the rest of the world, and that will be harmful to the UK economy.

That is why some Brexiters insist that May’s deal is worse than staying in the EU. But others will point out that the WA does allow the UK to move away from many of the rules of the Single Market, which in their eyes is an important part of Brexit. A few may pretend to themselves that the backstop can still somehow be subverted once we have left, or even that No Deal can still be achieved after approving the Withdrawal Agreement by rejecting enabling legislation. They may say that it would be extremely ironic and embarrassing if Brexiters by their own actions stopped Brexit happening. Those still opposed to May’s deal will respond that those who vote for it own it, and if trade and the economy subsequently decline voters will blame those who voted for May’s deal.

Behind all this is the influence of Conservative members. The departure of Nick Boles, who left his Conservative Association before he was pushed, reflects a new mood of militancy among the Tory grass roots. Boles had voted for May’s deal, and his crime in the eyes of party members was that he also campaigned against no deal. With some of the Brexiters hoping to succeed May, their decision is all about pandering to this electorate.

In truth this debate is upside down compared to the real world. I describe Global Britain as make-believe because all reputable studies suggest new trade deals cannot come close to offsetting lost EU trade. A key reason is what economists call gravity. Gravity is the observation that countries trade more with their neighbours than those far away, a robust finding that appears to hold despite falling transportation costs. That means that even if the UK after Brexit could get lots of tariff reduction deals with countries outside the EU (a big if), this would not come close to making up for the lost trade with the EU. The government’s own analysis comes to the same conclusion. By keeping us in the Customs Union, May’s deal actually helps the economy, although as I outlined last week leaving the Single Market is still very costly.

Brexiters always refer to how much faster countries outside the EU are growing. But this is like giving up your solid 40 hour a week day job to work just one hour a week for a rapidly expanding firm for the same hourly pay. Because the firm is rapidly expanding you could be working 2 hours a week within 10 years! This is something few in their right minds would do in real life, so why should we do the equivalent as a country?

Brexiters prefer to ignore the analysis of the overwhelming majority of economists, and instead look to the tiny group of Economist for Free Trade (EFFT). But as Chris Giles has recently shown, if you look at how the GDP forecasts of various groups just after the referendum have been doing recently, those of EFFT have been wildly optimistic compared to others. As the chart shows, EFFT (then Economists for Brexit) did well in the first few quarters after the referendum because many consumers dipped into their savings, but by the end of 2018 EFFT were doing much worse than the OBR, Bank of England and the consensus of private sector forecasters. Giles sums this up by saying “The lesson is simple: listen to economists, but not to those peddling a political line.”

So the only economists who really believe in Global Britain have already been shown to be far too optimistic about the impact of Brexit. No doubt they would say that is because May’s deal prevents Global Britain, but it is clear from movements in sterling that the foreign exchange markets fear No Deal most of all because of the impact this would have on trade. The Brexiters have a wonderful way of avoiding these facts. As the consensus among economists is that trade will suffer if we leave the EU, economists overwhelmingly favour staying in the EU. The Brexiters then conclude that if they favour Remain they therefore must be biased. Ergo only the predictions of economists who believe in Global Britain can be trusted!

There would be a certain horrible symmetry if May’s Brexit deal had passed this week. It would have been a narrow victory, just as the EU referendum result was narrow. It would be a victory tainted with public money used to bribe Labour MPs and the DUP, while the referendum vote was won by the Leave side spending much more private money than the rules allowed. Both victories would have been won against a weak and divided opposition: Cameron unable to talk about the virtues of immigration and Corbyn unable to campaign against Brexit. Both May’s deal and the referendum victory are based on lies designed only to get them across the line. Both are blind, with no clear idea of the kind of Brexit that will follow. Both therefore fail basic notions of legitimacy.

If Bercow prevents May putting her deal before parliament again in the near future, or if she decides herself she would not win anyway, then her failure to pass her deal on 12^th March involves a delicious irony. Brexit failed to happen because of the actions of Brexiters themselves, because they actually believed one of their own lies: the make-believe of Global Britain.

Are the Labour leadership attitudes to Brexit just the austerity story all over again?

with a short coda on yesterday's events

Labour party voters overwhelmingly want Labour to come out in support of remaining in the EU, because it is the right thing to do. But apparently allies of Corbyn say that private polling and focus groups conducted by the party suggest that doing so risks preventing Labour from winning the next general election. Does this debate ring any bells? It certainly does for me. The debate over austerity took exactly this form within Labour from 2010 to 2015.

Austerity, like Brexit, was clearly a bad policy in the sense of making pretty well everyone worse off. But austerity, like Brexit, was popular among many voters, because they believed what they were told about its desirability. Just as the EU was about to open the floodgates of Turkish immigration to the UK, so austerity was required to prevent the bond vigilantes causing financial havok.

Labour began 2009 by ignoring the deficit and embracing an expansionary fiscal policy to end the recession. But later, while still in government, they began to talk about the need to support the recovery and reduce the deficit. In opposition this became a message of moderation: Osborne’s cuts were too far too fast. Before the 2015 election they were pledging to be “tough on the deficit”, even though their actual policy involved substantially less austerity than Osborne’s plans. After that election defeat some senior Labour figures suggested Osborne’s fiscal policy had merits.

This gradual change in message had very little to do with a changing view about the economics. [1] Instead it seems pretty clear it was about one thing only: austerity was popular. In good part this was because the media overwhelmingly adopted the austerity narrative, and so Labour found it almost impossible to argue for an alternative (standard macroeconomic) narrative. In the end some Labour politicians decided that if you couldn’t beat them you had to join them. This helped lead to Corbyn’s victory.

Labour’s policy on austerity during the 2015 election was a classic example of triangulation. Talk the talk on austerity but through detailed policy signal to your base that there would be much less austerity under Labour. Under the leadership of Corbyn, Labour’s policy on Brexit has followed a similar triangulation path. Indeed the parallels are even closer. If we equate the referendum with the 2010 election, before both we had some compromise towards austerity/Brexit (with Brexit Corbyn campaigning separately and did not endorse Remain’s economic case), and after both Labour triangulated, conceded the austerity/Brexit case but promising to reduce the economic cost.

The lesson from austerity is that Labour made two clear mistakes. The first, before 2010, was to muddle the message by arguing to both encourage the recovery and reduce the deficit at the same time. Will history view the leaderships acceptance of the 2016 result, and its consequent failure to point out the contradictions within Brexit, in the same light, or will they see it as essential to avoiding a 2017 general election that was all about Brexit? [2] The second mistake was to triangulate for too long, and miss the point where voters began to turn against austerity. With the gap in favour of Remain in the polls widening, have we already passed that point [3]?

Brexit, like austerity, is based on a huge lie. It reduces any politician who is persuaded that to keep votes, they too have to peddle the lie. It is pathetic watching senior Labour figures pretend that they, rather than the other side, can produce a Brexit unicorn: leaving the EU and increasing sovereignty without any economic cost. If you argue that these politicians have to demean themselves in this way to avoid losing votes, then you have also to accept that Labour before 2015 were right to accept some degree of austerity.

But whatever the rights and wrongs of this argument, we have now reached a critical point with Brexit. A clear majority of the country no longer believe in the Brexit unicorn. Labour’s membership overwhelmingly do not. Until now the decisions over Brexit have been made elsewhere, so Labour could just about get away with triangulation. But very soon Labour will have to make up its mind. [4] Is the Labour party of Corbyn and McDonnell strong enough to survive betraying its supporters over by far the biggest issue of the day? The parallel with austerity suggests not.

Update

I wrote this before May decided to delay (cancel?) what is now laughably called the meaningful vote, but also before the confirmation that the UK could revoke A50 unilaterally. One of the many unfortunate consequences of her actions is that Labour will continue to delay the day they finally accept they have to campaign to end Brexit. Waiting for the right moment to table a no confidence motion may be like waiting for Godot (just before May finally allows a vote in late March, anyone?). This in turn will make that eventual move to supporting a peoples vote look even more opportunistic.

But Labour’s dithering over Brexit is the least of our current problems. On the 26th November 2016 I wrote a post called “A Little English coup”. I argued that Brexit represented a coup against our pluralistic parliamentary democracy. I was attacked for using emotive language, and I wondered whether I had let emotion get the better of me. But consider what just happened. Parliament was on the point of overwhelmingly rejecting May’s deal, which could have led to a process whereby parliament debated over the best way forward. That is what should happen in a parliamentary democracy. Instead, May intends to waste time so she can present the same choice when there is no time for such a debate, all the while saying with a straight face that a second referendum would damage UK democracy. It is uncertain whether she needs to come back to the house on 21st January. Maybe not quite a coup, but a serious attack on parliamentary democracy nonetheless.

[1] A caveat might be that in office the Treasury had been able to persuade Darling about the need to quickly cut back on the deficit more than they might have been able to persuade Brown or Balls.

[2] While the 2017 election argument is compelling, a counter argument is that with a Labour leadership firmly committed to arguing the case for staying in the EU, Labour’s popularity would have been higher and there would therefore have been no 2017 election.

[3] A comparison many people make is with the Iraq war: popular at the time but when it all went wrong everyone decided they had been against it from the start. There is another structural similarity: with both cases we have had large popular movements against a policy that is backed by both major parties. Will the Labour party leadership be on the wrong side of both these popular movements?

[4] Labour’s policy of aiming to get a general election and if they won to then negotiate their own version of Brexit would be disastrous in practice. They would in all probability agree something pretty close to BINO. That would be a disaster for Labour. Any thoughts that at least the minority of Labour Leaver voters who are left would be grateful will be short lived. The Tories would become united in their opposition to the deal. Together with the right wing press they would attack Labour for reducing UK sovereignty with no gain. Many Labour Leavers would be able to see the evident truth in that claim. Fairly soon Labour Leavers would be condemning Labour for having given away UK sovereignty. This is the curse of Brexit - it destroys anyone who tries to implement it because all forms of Brexit are worse than staying in the EU, and are certainly worse than the fantasy promises that were made in 2016. Implementing Brexit, in short, is a vote loser.