If you enjoyed the last two years and want more of the same, vote for May’s deal

Trade negotiations happen after the Withdrawal Agreement (WA) is signed, so why don’t those wanting a softer Brexit just vote for the WA and argue about trade later? The Political Declaration which does talk about trade is vague and non-binding. The reason is straightforward. Parliament will get very little say on the framework for those trade talks. The only real chance most MPs will get to influence the type of trade relationship the UK has with the EU is by directing the government now, as the price of passing the WA.

However so far parliament has largely failed to do that, largely because Conservative MPs have put party unity above the future health of the country. So what will happen to politics and the economy if parliament votes to pass May’s deal, either today or in a few months time? The first and well known point to make is that nothing would immediately change as far as UK firms and citizens are concerned, because we would start a transition period where we remain inside the Customs Union (CU) and Single Market (but no longer have any say on the rules of either). There will be little economic bounce from ending No Deal uncertainty, for reasons outlined below. So the immediate action will be about the politics of negotiating what happens after the transition period ends.

If you want to know what that would be like, just look at the last year or two. Most of the arguments within the Conservative party over the last year or so have been about trade, and not the content of the WA. So signing the WA settles very little. It does mean that we have signed up to the backstop, but May still pretends that this backstop means we can still stay outside the CU. I cannot see Brexiters meekly accepting that the UK should join the CU either. We will continue to have endless discussion of unicorn ‘alternative arrangements’ for the Irish border designed only to avoid us being up to a CU. The inevitable truth of course is that the backstop implies some part of the UK has to be in the CU, but as the last two years have shown large parts of the Conservative Party refuse to accept reality when they don’t like it.

At some point during the transition period Theresa May could be replaced as Prime Minister. It seems very likely, given the views of Conservative Party members on Brexit, that a Brexiter will be elected in her place. The likely outcome of that, as far as Brexit is concerned, is either that nothing changes, or that the government attempts to persuade the EU to do the impossible.

For example Theresa May is determined that we should leave the Single Market (SM) because her primary aim is to end Freedom of Movement (FM). Any successor is likely to want to leave the SM because they do not want to be bound by EU regulations on minimum workers rights or the environment. Because of the economic damage that will cause (see below) the government will attempt to get a trade agreement with the EU that mitigates that harm. They will find out, yet again, that it is impossible to get anything close to the benefits of the SM without being in the SM. And because the UK will not want to accept that, the negotiations will go on and on.

But at least No Deal will be off the table? Unfortunately just as you think you have avoided one cliff edge, another appears. If no trade deal is done during the transition period, we crash out much like we would with No Deal now. And the Brexiters in government will be saying not to worry the EU always cave at the last minute. They will fight extending the transition period from 21 months, even though it is impossible to negotiate a trade agreement in that time, because the ERG wants to fall off a cliff.

In short, if May’s deal is approved we can look forward to a politics dominated by internal squabbles within the Conservative Party, and the absence of constructive negotiations with Brussels, for perhaps the next four or more years. Much as we have seen for the past two years. This is because the WA does nothing to resolve internal Conservative conflicts, and more fundamentally conflicts inherent with Brexit itself.

If, despite it all, the government manages to negotiate a trade agreement with the EU, what will be the economic and political consequences for the UK? Will it all be worthwhile in the end? A good guide to the economics is the study involving a collaboration between the Centre of Economic Performance and The UK in a Changing Europe, which is both authoritative and representative of similar work. They believe that from 2030 onwards UK GDP per capita will be lower by between 1.9% and 5.5% as a consequence of leaving the Single Market. The midpoint of that range represents lost resources for each household of about £3,000 each year. There will of course be a large hit to the public finances, implying higher taxes or less public spending, even after allowing for an end to contributions to the EU.

Why such a large range? The 1.9% mostly comes from the direct effects of lower and more costly trade, using standard trade modelling techniques together with reasonable estimates of the barriers created by leaving the SM. The government using a similar model get similar numbers. The higher figure in the study’s range is based on empirical evidence for the impact of trade on productivity, which captures other effects such as lower foreign direct investment or reduced competition. Because the empirical evidence captures many more effects than the model, we would expect it to be larger. Those who dispute numbers of this scale in this range have to explain not only why the models, including those used by the government, are wrong but also why the simple correlations between trade and prosperity more than back the models up.

Our best guess is that we have already lost over 2% of GDP as a result of stagnant investment and sterling’s depreciation. As a result, most people will probably not notice the economic impact of ending the transition period, because most of the firms that were going to leave will have already left as a result of cliff edge uncertainty. Instead Brexit will be a gradual decline in the UK relative to the remaining EU.

What about Global Britain? Most trade agreements involve tariff reduction, so being in the CU largely limits the scope for Mr. Fox to do new trade deals. In addition, who would want to harmonise their regulations with the UK, when the gains from doing the same for the EU are much greater. A more likely outcome is that we harmonise our regulations with the US.

The government will be desperate to sign a trade deal with the US to show that ‘global Britain’ is more than a slogan, and that means the US will largely get their way in terms of regulations (including food standards) and participation in the NHS. Thus the longer term political consequence of parliament agreeing to May’s deal is the gradual transition of the UK into a US style economy.

In an age where the regulations governing trade in goods and services are increasingly decided by large regional blocks, the only rationalisation of Brexit that makes any kind of sense is that we move from the EU block to the US block. That is what a lot of the Brexiters want, which is why they resist the backstop so much, because that ties our tariffs to the EU. But the political consequences of tariffs are less important in shaping an economy than regulations on things like working conditions and the environment. That is why, even with the backstop, Brexit will mean we will become more like the US economy. Whatever the merits or otherwise of that, a big difference is that we had a say in how the EU is run but we will have none in what the US does. A 51st state without representation if you like. Taking back control it is not.

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.

What ignoring Ireland tells you about our governing elite

The hapless progress of the Brexit negotiations continues. I do not mean the almost childish nonsense of May’s new wheeze. Instead I’m talking about the Irish border. It seems, if you read most of the UK press, that out of the blue this new obstacle has been sprung on the UK at the last minute. Some of the press talk about surprise, while the Guardian talks about it ‘emerging’. Some have even decided to cover up their ignorance by inventing conspiracy theories. With political commentary in the UK largely reflecting the beliefs of the UK side, then this also means that this surprise extends to our negotiating team.

In reality there is nothing to be surprised about. The Irish border was one of the three issues to be dealt with in the first stage. As the UK government has consistently said they are leaving the Customs Union and Single Market (CU/SM), and have failed to convince even themselves that they can invent a new magically invisible border that can police countries that have different customs and regulatory regimes, it was only natural that an EU paper would suggest that Northern Ireland stay in the CU/SM to avoid a hard land border.

So why did the UK, and its media, seem to forget about this third issue, when even I had flagged it up as the critical issue a couple of months ago. What I think happened is that the Brexit side convinced itself that, because a hard border would only arise as a result of different trade regimes, then the border was really a trade issue and so should be in stage 2. In other words the EU had simply made a mistake in putting it in Stage 1, and would therefore quietly forget about it.

That reasoning was part wishful thinking and part delusion. Wishful thinking because, as I wrote back in September, it is a problem with no obvious solution that Brexiteers would accept. And delusion because the UK side continues to imagine that the EU is governed by Franco/German interests, and why would these countries be concerned about what happens in Ireland. What it completely failed to understand, and what the EU had understood, was the importance of the border issue to the people on both sides of it. It was an important reason why Northern Ireland voted to Remain.

But I wonder if there is something deeper behind the UK attitude. For too many people in England, the ‘troubles’ in Ireland were a quarrel in a strange country between people of whom we know little, to paraphrase Neville Chamberlain. As a result, there is little comprehension of why a hard border should be such a big deal. You would think memories of bombs going off in England’s cities would change that, but I’m not sure it did, anymore than more recent terrorism has led to a better understanding among English people of tensions within Islam. In contrast, most people in Northern Ireland would move heaven and earth not to go back to those times.

Even while all this might be true, it is no excuse for the same attitudes to be held by our political leaders. John Major knew better than this, as did Tony Blair. Only the arrogant disdain for different realities displayed by Brexiteers can explain a mistake of the magnitude of ignoring the border issue. I suspect any politician that lied the way the Brexiteers lie, or lived in the alternative reality they appear to live in, would not have survived long in UK politics two decades ago, whereas now it has become a criteria for holding high office.

At the end of the day there is little difference between Brexiteers who tell people that new trade deals with countries outside the EU can make up for trade lost with the EU, and Republicans who say scrapping Obamacare will extend coverage and their tax bill reduces taxes for most people. In both countries when the ability to gain office is determined by how well you can fire up or charm a base, because a large part of the media will then assure you have a good chance of winning elections, is it any wonder the political system fails to select for competence, understanding or respect for wisdom and knowledge.

There is a simple solution to the problem of the border. It is for the UK side to commit to only negotiate new trade arrangements that would be consistent with a soft border. [1] That would mean staying in the Customs Union and parts of the Single Market, but it could leave open the possibility of negotiating over the remaining parts of the Single market and perhaps free movement. Anyone who tells you that this concession by the UK side does not respect the referendum result is once again lying: Leave won precisely because they ruled no arrangement out. Any red lines erected after the referendum carry as much weight as the Prime Minister currently has authority.

Already we have many people in the UK saying why should we adapt our policies to keep the people of Ireland happy. This is the Chamberlain type attitude that I talked about earlier. The Irish border is at least as much our creation and our concern as it is of anyone else. Maintaining peace within the UK should be any government’s top priority. The fact that it has failed to make it onto Brexiteers to do list tells you as much about their outlook and competence as you need to know.

[1] Whether the UK will be forced to take this position I do not know. I stand by what I wrote recently that there will almost certainly be a deal, one element of which will be a transition where we stay in the EU/SM. Indeed I understated my case there. First, there can be no such thing as no deal. As Davis has explained, there are things that have to be sorted to keep planes flying and the like. He has described this as “some sort of basic deal without the bits we really want”. What that remark shows is that the ‘no deal is better than a bad deal’ line is simply a bluff and he knows it. The bad deal is no deal. And finally there is parliament. I know it has been pathetic until now, but that does not mean it would sign off on the worst possible kind of Brexit. But what the border issue will most likely show is that it is unlikely we will get to a deal involving transition without cabinet resignations.

Why Owen Jones is wrong about Brexit

Owen has written a very clear account of why he supports the referendum result, even though he campaigned against it. He is, to use one terminology, a ‘re-leaver’, and as he points out there are many like him. He is quite right that those advocating overturning the referendum result have devoted insufficient attention to this group. However I think in key respects his argument is wrong.

I think it is helpful, as I have done before, to set this debate in the context of future decisions that may realistically face MPs. I can see four:

1. Having left in 2019, we are likely to remain in the Single Market and customs union while we negotiate some kind of trade agreement to allow us to leave one or both. The first decision, which could face an incoming Labour government, is should those negotiations continue or be abandoned.
   

Owen does not explicitly address the Single Market, which is surprising. In my view leaving the EU but staying in the Single Market (the ‘Norway option’) is what Labour should choose to do if it gains power. That is fully consistent with respecting the referendum result. Those who say that the referendum was about immigration and therefore we have to end freedom of movement commit a simple logical error. A majority (those who voted Leave because of immigration) of a majority (52%) is not necessarily a majority. There is no mandate of any kind for leaving the Single Market.

2. During the vote on whether to leave in 2019, there is a vote to hold a second referendum where the choice is to accept the deal or remain in the EU.

Again he does not directly address a second referendum, but some of his arguments are relevant to it.  You could argue that holding a second referendum would disrespect the first. If the Brexit decision was changed as a result, then Owen’s arguments about a large section of the population losing faith in democracy would perhaps still apply. However it seems to me the rationale for holding a second referendum is overwhelming. In the first referendum, what leaving would entail was very unclear. In particular, we did not know what the divorce bill would be, and what the economic implications would be. Information is crucial in voting decisions. We now know much more, and therefore it seems only right that people should be allowed to change their minds. We are familiar with the idea of requiring new information to reopen issues in other contexts, so why not for a referendum.

To argue that the 1975 referendum over joining was a once in a generation event is irrelevant, because by then the nature of the deal was clear. Why should the fact that Cameron or anyone else said this would be a once in a generation vote bind parliament? The bottom line has to be that if Leave cannot win two votes just a few years apart then we should not be leaving. Remember the first referendum had an electorate chosen to keep the Brexiteers happy, and likewise it had no super majority. To argue that we have to respect the first referendum to uphold faith in democracy and at the same time argue that to hold a second referendum would be undemocratic seems a bizarre, and very worrying, notion of democracy.

3. During the vote on whether to leave in 2019, there is a vote to remain in the EU without a second referendum

Here the referendum would have been overruled by parliament. Owen has two, related arguments why this would be wrong. First, both government and opposition said that they would be bound by the referendum result. Second, the people will have been overruled by parliament. On the first, I agree that any MP that said their vote would be bound by the referendum and then went against that has some explaining to do. But an explanation along the lines of ‘I had no idea how bad Brexit was going to be’ sounds reasonable to me. MPs, like people, are allowed to change their minds.

I also cannot see why pledges by the government and opposition have to bind MPs who did not so pledge. This gets back to the nature of our representative democracy. Although Owen does not think much of people, like me, who keep noting that the referendum is advisory, this does express the fact that parliament is sovereign. We live in a representative democracy. People may be upset to learn that, but it is true. Ed Miliband was right to rule out holding a referendum. Just because Cameron chose to hold one to appease his right wing should not bind the actions of MPs.

The fact that the referendum result was achieved as the result of a completely inadequate campaign matters. The Remain side (and the media) failed to adequately put across their case, because the positive case for immigration was not made. The Leave side lied their socks off. To equate the dishonesty on the Remain side with that of the Leave campaign, as Owen does, is quite wrong. Two central planks of the Leave case, that the NHS would have more money and that Turkey was about to join the EU, were complete lies. The main plank of the Remain campaign that Brexit would reduce the real income of UK citizens has been shown to be true. Information matters.

If such a vote was almost certain to fail because it lacked the backing of enough Conservative MPs, then there might be a tactical reason for not supporting it for reasons I outlined here. But this is not the case that Owen makes. Barry Gardiner has also departed radically from this script. As I said in that post I did not know if Labour's Brexit position was strategic or just confused and conflicted, and Owen's piece together with these recent developments reinforce such doubts.  

4. The government fails to negotiate a deal but wants us to leave despite this. There is a vote in parliament to revoke Article 50 and not leave the EU.

If you remain unconvinced by the above, consider this outcome. No deal would be a disaster, and bring immediate chaos. But all of Owen’s arguments for respecting the referendum would still apply! Would Owen really argue that Labour should not support such a vote for the sake of Leave voters’ faith in democracy? If it did that it would be complicit in the chaos that followed. 

Owen keeps coming back to the impact of any decision on how those who voted Brexit would feel. In this sense he is in the same spirit as John Harris’s article that I discussed here. It is an utterly defeatist argument: we must let people harm themselves because only then might they learn that they were mistaken in what they wanted. A much more progressive policy is to persuade people they are wrong.

If Labour did form the next government, as I very much hope it would, the consequences of leaving the Single Market would be on its watch. Would those who voted Leave forgive slow growth in their living standards as their own fault for wanting Brexit? Would they accept the implications of low immigration for the public finances as a price worth paying to control immigration. Of course not. Much of the media would argue that these problems were all down to the Labour government, not Brexit. A Labour government that presides over leaving the Single Market could be a one term government.

In an earlier post I talked about the logic of a triangulation strategy for Labour, but I said at the outset that I did not know if this what they were doing. As a result, there is currently a serious danger that Labour would squash any attempt from the Tory backbenches to hold a second referendum, or if they won the next election that they would leave the Single Market. Although everyone focuses on Corbyn, this is as much a problem with many Labour MPs in Leave voting areas. It is an area where we need the membership to influence Labour policy, as both Jeremy Corbyn and Owen Jones have always suggested they should.

A completely pointless amendment

There was a lot of indignation yesterday from committed Remainers about Corbyn sacking those who supported the Chuka Umunna amendment on the Single Market. I’m a committed Remainer, but I couldn’t see what the point of the amendment was. That is because we are almost certain to leave the EU still in the Single Market.

In March I wrote that the outline of the Brexit deal was fairly clear. Crucially, there would be a longish (many years) transitional arrangement to enable a bespoke trade deal to be negotiated. During this period we would preserve our position in the customs union and Single Market (and pay money to the EU to do so). The UK side may dress this up as something a little different, if they have the wit and energy to do so and if the EU lets them, but to all intents and purposes that means nothing changes on the trade side for some time. That conclusion didn’t require any great powers of foresight at the time, but simply followed from the length of time it takes to negotiate bespoke trade deals (see, for example, Alasdair Smith here).

My only uncertainty back in March was whether May would choose (or be forced to choose) No Deal. With the election giving more power to soft Brexit elements among the Conservatives (e.g. Hammond), I think No Deal is now very unlikely because parliament will vote it down. As a result, towards the end of 2018 we will know how much we have to pay in order to formally leave the EU, but things will otherwise stay pretty much as they are now.

What about a change in Prime Minister and an election? Unless something turns up (a big if), I suspect we will see neither before the end of 2018. The least important reason for this is May would rather be known as the PM who took us out of the EU than the PM who threw away certain victory in GE2017. One reason she is unlikely to be challenged over the next year and a half is that delaying the negotiations once again (this time for a leadership contest) just looks awful. Both ex Tory Remainers and Brexiteers are nervous of how a leadership election might evolve. If May is prepared to sacrifice her two lieutenants, she will also sacrifice the foolish red lines she created for the EU negotiations.

No Conservative contest of course means no election. Once again, unless something turns up, the Conservatives will want to leave an election for as long as possible in the hope that their popularity improves. Labour will be hoping that it wins that election, so it will be in charge of the trade negotiations designed to create a bespoke trade deal, but whoever is in charge it is difficult to see any enthusiasm for replacing the Single Market.

On the Conservative side the idea that we should leave the customs union because it will enable us to negotiate lots of trade deals of our own will be increasingly recognised as the nonsense that it is. It will also be obvious that any bespoke trade deal will require the same pooling of sovereignty as the Single Market. Brexiteers never had any real interest in ending freedom of movement: that was a ploy to get a Brexit vote. If Labour were in charge they would quickly find out that the Single Market did not prevent them doing most of what they want to do, and that there were easier ways of managing free movement. The priority would be repairing the public services, a task not helped by reducing immigration and weakening our trade position, so the bespoke trade deal will get kicked into the long grass.

Of course that means ending up with a situation where nothing has changed except that the UK will have paid the EU to no longer have any influence on the rules of the Single Market it is still part of. All that time and effort for a truly epic fail. The best hope for Remainers is that this realisation will dawn on enough Conservative MPs to embolden them to demand a second referendum. (This has always been the best strategy for Remainers: to work the Condorcet paradox that was at the heart of the referendum result.) In these circumstances it would be an extraordinary act of self harm if Labour did not join them in voting for a referendum. They would instantly be on the wrong side of the triangulation which served them so well in GE2017, which would put their popularity at serious risk.

Given all this, what was the point in the amendment to the Queen’s speech saying we should stay in the Single Market, given that the occasion meant that no Tory MPs could vote for it, and we will probably be staying in the Single Market anyway? (Jonn Elledge comes to similar conclusions by a different route.) When you are a leader of the opposition who has surprised himself by completely wrong footing the pundits through a combination of a manifesto that increases the size of the state and triangulation on Brexit, wouldn’t you be annoyed by such pointless and potentially harmful distractions? 

Why voting for Article 50 may ruin an MP's career

The last time I did something like this was to urge Labour party members to vote for Smith rather than Corbyn, knowing full well that Corbyn was almost certain to win. Being proved right on that occasion is no consolation, because I would rather have been wrong. This is even more futile, but now as then I feel a decision is about to be made that is both disastrous and irreversible.[1] I also want to say something about the longer term interests of MPs that I have not seen said elsewhere.

There are so many principled reasons for MPs to vote against triggering Article 50. Let me summarise what I see as the main ones here, but this is far from comprehensive.

1. The vote was close, and is advisory. Unlike the Scottish referendum, it excluded 16 and 17 year olds, who by the time we actually leave will be able to vote. Demographic trends suggest that at some time in the near future the referendum would go the other way. Migrants from the UK were excluded, even though they are directly affected by the vote and legislation is on the table to give them votes for life in a UK election.
   
   
2. The vote was also won on the basis of clear lies of a kind that have never been used in a UK election before. There is strong evidence that these lies helped swing votes. I would add that the broadcast media facilitated the propaganda coming from most of the tabloid press, in particular by treating knowledge as opinion.
   
   
3. The referendum was only about leaving the EU, and not about how we leave the EU. In particular, it was not about leaving the Single Market. We have no way of knowing which way a referendum on the Single Market would go. May’s logic that the referendum was ‘really’ about immigration and that therefore we have to leave the Single Market is conjecture. Polls on immigration that do not also note the costs of reducing immigration are worthless, like polls that ask about cutting taxes.
   
   
4. A proper response to the referendum would be to note that many ways exist to leave the EU, including staying in the Single Market, and allow parliament to decide what the UK’s negotiating position should be. The statesman like response to such a narrow vote would be to seak the softest of Brexits. The fact that May does not wish that to happen is an affront to parliamentary democracy. That alone is reason enough to vote against.
   
   
5. [Added 30/1/17] What triggering Article 50 actually means is still unclear. Is it reversible? Do we have to wait until we leave before we can negotiate new trade agreements with the EU? As Rick says, you would not exchange contracts on a house with these kind of fundamental uncertainties unresolved. Why has everything to be so rushed?   

But alas, being realistic, this is not the basis on which many MPs will vote. Instead they will think about their political careers, and the backlash they will encounter if they vote No to Article 50. But conventional wisdom on this is at best incomplete and quite probably wrong for many MPs.

The assumption in much of the media, encouraged of course by the tabloids, is that MPs in constituencies that voted Leave will face a backlash from angry Leave voters if they personally vote No to triggering Article 50. However it is far from clear that the number of Leave voters who would change their vote on this basis is greater than the number of Remain voters who will do the opposite. My reason for thinking this is partly the local and national election results since the Brexit votes, where we have seen huge swings to the LibDems in both Remain and Leave constituencies. It is also because, unlike Leave voters, many remain voters are personally affected by the referendum result. They may have family living in the EU, or have close colleagues who are from the EU. They may work in firms that could well decide or be forced to downsize if we leave the Single Market.

If May is defeated on Article 50, she will almost certainly call an immediate election. How will the fortunes of a MP that voted for Yes to triggering Article 50 compare to any that vote No? Labour MPs that vote No will lose some Leave voters, but these are likely to split between Conservatives and UKIP. They may do this even if they vote Yes because they will have read in their papers that Labour is stalling Brexit. Conservative voters that vote No are unlikely to lose many votes to UKIP. Those from either the Conservatives or Labour that vote Yes are likely to lose many Remain voters to the LibDems. How these opposing forces pan out is very difficult to judge, and is likely to vary a great deal across constituencies, and without additional information it is far from obvious why MPs should only worry about Leave voters.

Labour MPs may feel that they are bound to lose badly in a quick election because Corbyn is so unpopular. I think that is right, but for every reason why that might get better by 2020 I can think of reasons why it will get worse.

But all this is thinking short term. MPs that are not ideologically opposed to the EU must surely know that Brexit is very likely to be a disaster. The impact of leaving the Single Market is going to be pretty bad, but as the OBR has made clear the impact of reduced immigration from the EU on the public finances is also going to be large. To tell yourself that this is all uncertain is to deliberately ignore the judgement of the best economists both at home and overseas and the major economic institutions. The outlook for the NHS and other public services is therefore dire.

The government’s position is full of contradictions. They are desperate to make trade deals with anyone, but are prepared to see a sharp fall in trade with the huge market that is our closest neighbour. They say that leaving the EU is to regain sovereignty, but every expert knows that the major gains from trade, particularly for the service orientated UK economy, come from reducing non-tariff barriers which inevitably compromise sovereignty (look at UK trade to the EU before and after we helped create the Single Market). Do we really want to take back control from Europe only to give it to Donald Trump?

The political implications of May’s strategy are more speculative, but initial signs are not good. May now finds herself unable to condemn the immigration policy of President Trump that overtly discriminates against Muslims including UK MPs, and which is the biggest gift to terrorists since Bush talked about a crusade. (At least when that happened Blair was quick to tell him to stop.) May has threatened to turn the UK into a tax haven if the EU do not meet our demands, once again without parliament having any say. All this makes her desire to help the left behind and the just managing into empty words that will become a sick joke. She sees reducing immigration as an absolute priority, which will further hurt business and feed growing UK xenophobia.

All this means that Conservative MPs who will vote with the government because they have ambitions for a ministerial career will find if they succeed that they will spend most of their time administering cuts. If it passes, the Article 50 vote will soon be regarded by Labour members as they now regard the vote over the Iraq war, meaning that those that vote Yes will find it very difficult to achieve a senior position in the Party. Another comparison with similar implications is Suez, another failed attempt to regain a lost imperial past.

All this should make MPs very reluctant to base their decision on perceived self interest, when that cuts so many ways. They should instead heed the words of a well known ex-MP.

“The first duty of a member of Parliament is to do what he thinks in his faithful and disinterested judgement is right and necessary for the honour and safety of Great Britain. His second duty is to his constituents, of whom he is the representative but not the delegate. Burke's famous declaration on this subject is well known. It is only in the third place that his duty to party organization or programme takes rank. All these three loyalties should be observed, but there in no doubt of the order in which they stand under any healthy manifestation of democracy.” Sir Winston Churchill on the Duties of a Member of Parliament. (Source)

MPs should ask where stands the honour of Great Britain when its leader feels that Brexit
prevents her joining leaders in Europe and Canada in condemning Trump's Muslim ban.

[1] At present there is no mechanism for parliament to stop the process of leaving the EU once they trigger A50, whatever Corbyn may imply. Once we leave, rejoining will almost certainly mean we would have to join the Euro, which is not a good idea..  

The Single Market was Mrs Thatcher’s great achievement for the UK

Parliament should be able to vote on whether leaving the EU means destroying this legacy.

The story of how Mrs Thatcher helped in the creation of the Single Market is told by Helene Von Bismarck here. She believed it would be of great benefit to the UK, and she was right. Here is a nice chart from this CBR report I discussed in my last post.

It shows the share of UK exports as a percentage of the GDP of the area exported to, for both the EU and the rest of the world. The rapid increase in the UK export share, doubling between 1990 and the beginning of the financial crisis, has to be largely down to the Single Market. [1]

But didn’t the CBR report say that the benefits of the Single Market had been exaggerated by the Treasury? Yes it did. Here is some of its reasoning. That growth in UK export share after the Single Market is not as impressive as it looks, because there is an underlying 6% 3.5% ** positive trend in the share relative to non-EU penetration, which you can detect before we joined the EU. That looks pretty on a picture, until you realise it is nonsense. A 6% 3.5% trend rise in an export share will imply that at some point not too far away UK exports to the EU will be as high as total EU GDP. UK exporters are just not that much better than exporters in other countries. There is no underlying trend rise in the UK’s export share.

As I say in The Independent, the rationale for going down the route of leaving the Single Market is completely wrongheaded. First, the Brexit vote was close - hardly a ringing endorsement for undoing Thatcher’s legacy. Second, all the evidence we have is that large numbers of Leave voters are not prepared to accept a reduction in their living standards as a price for reducing immigration, a reduction which is in the process of happening right now as a result of the collapse in Sterling. If you say we have no real evidence for this, show me your evidence that the referendum vote was a vote to leave the Single Market. If May really believes it when she says that the recent strength of the economy has convinced her that the costs of Brexit will not be that great, she is a fool. Third, the logic of saying that we cannot accept Single Market rules because we would have no say in what they are makes no sense because we will be worse off not accepting them. Once again, a majority of the country does not want to ‘take back control’ if it costs them money.

I say in The Independent that this is happening because May wants to finally show that she can bring down immigration, after 6 years trying and failing. It is also because she thinks she has to do this to keep her party together. But what Brexit means should not be up to the Prime Minister, particularly one who cannot be objective about immigration and who is a hostage to the Eurosceptic half of her party. The Single Market decision should be up to parliament. Leaving the Single Market was not on the referendum ballot paper, so it is not the ‘will of the people’. It does not follow automatically from the Leave decision, as many Leave campaigners correctly assured us before the vote.

Parliament should decide on whether we leave the Single Market as part of leaving the EU, not Theresa May. That is what living in a parliamentary democracy is all about. If the government denies MPs the chance to vote for leaving the EU but against leaving the Single Market, then that is effectively a coup against our democracy. MPs should block approval of invoking Article 50 until they get the opportunity to vote, in a way that is binding on the Prime Minister, to stay in the Single Market.

** I made a mistake in the original version of this post: corrected figures and clarifying text are in italics. For more details see this post

[1] The chart also casts doubt on the argument that being in the EU has held back UK exports to the rest of the world. This share was falling before we entered the EU, but has stabilised while we were a member.  

Freedom of Movement, Austerity, Labour and MPs votes on Brexit

In three important ways Labour’s current attitude to Freedom of Movement reminds me of their pre-Corbyn attitude to austerity. First, Labour while in government encouraged immigration from the EU, and the UK economy was probably a lot better off for it. But they now tend to say that was a mistake. To his credit Miliband never conceded that Labour while in government borrowed too much, but he deliberately chose not to strongly contest Conservative and media claims that they had.

Second, their policy for the future is now to call on some controls on Freedom of Movement as part of the Brexit negotiations. That is rather different from May’s view that ending Freedom of Movement is a red line, but I doubt many voters will notice the difference. The fiscal policy Labour campaigned on in 2015 was significantly more sensible than Osborne’s policy, but they chose not to campaign very much on the difference, insisting that they too ‘were tough on the deficit’. Immediately after 2015 a number of MPs argued that Labour should accept the need for austerity.

Third, in both cases - austerity and restricting Freedom of Movement - the policies as enacted or proposed by the Conservatives did and will damage the economy. Austerity cost every household at least £4,000 (it could easily be £10,000), and reducing immigration from the EU is likely to have a large negative impact on the public finances, both directly and because we will have to leave the single market. Yet because Labour in effect conceded the issue (on austerity) and concedes the issue (on FoM) they find it difficult to say this in public. That in turn means that the public hardly hear these economic arguments.

In both cases Labour is not assessing what policies best enable them to achieve their principles, but instead what they need to do to avoid losing votes. [0] With austerity Labour became convinced that voters could not see beyond simple ‘government like a household’ analogies. After Brexit (and in some cases before that) Labour is convinced that they will lose votes heavily in their traditional heartlands if they fail to argue for controls on European migration.

You might think this is just normal politics. If voters want something strongly enough, it is self-defeating to fight that. Better to move your policies towards what voters want. But that ignores my third point of similarity between austerity and Freedom of Movement. In the case of austerity, and for a significant number with Freedom of Movement, voters’ views are based on misunderstandings involving economics. As I argued in this post, many voters think restricting immigration will improve their own access to public services, whereas in reality it will do exactly the opposite.

If you think it just seems wrong for politicians to support (or not actively oppose) policies that would make people worse off just because people erroneously believe the opposite, I would agree. [1] But it is important to understand one important reason why they do this. It reflects an environment which gives virtually no time to economic expertise, by which I mean treating it as knowledge rather than just one opinion to be balanced against another. The BBC refuses to treat economics, unlike climate change, as knowledge whenever it is politically contested, and it is deliberately excluded from most of the tabloid press.

If you think that account is reasonable, now think about Brexit, and the vote which (hopefully) MPs will have on whether to trigger Article 50. The referendum was advisory (as even Nigel Farage admits), and won by only a tiny majority. They could say that on a matter of such importance that is too slim a majority on which to leave, but they will not. They could insist that given the closeness of the vote the government should try and again negotiate with the EU, but they will not. Labour MPs in particular might reason that because they opposed offering a referendum in the first place*, the argument that they have to respect the ‘will of the people’ makes no logical sense. [2]

Even if they do not vote against invoking Article 50, they could say that while a majority voted to leave the EU, that is not equivalent to leaving the single market, and therefore any negotiation that did involve leaving the single market would require a separate referendum. Probably a majority of MPs would like to vote that way, because they know the extent of the harm leaving the single market will cause. But the majority will not, because they will be branded by the tabloid press as denying the will of the people. They fear that will lose them votes, and perhaps even threaten their physical safety. Once again, as with austerity and EU migration, the media will prevent many MPs doing what they believe is right. [3]

[0] As Wolfgang Münchau correctly argues here, what centre-left parties around the world were actually chasing were short term votes, or worse still focus groups. Supporting austerity was a disaster for the centre-left in the medium term, just as alllowing Brexit will be for Labour. (One very minor but annoying point on Münchau's piece: we wrote our Brexit letter all by ourselves. No one 'got us' to do it.) 

[1] The alternative is that MPs like voters do not understand the economics. I’m not sure if this is better or worse.

[2] You do not want to hold a referendum because there are no grounds for doing so, and therefore it is not something a referendum should decide. Or because you want to stay in even if a majority said they didn’t. Actually holding a referendum does not change these views..

[3] The situation is of course much worse because of the stance taken by either leader. May’s statement that the headlines in the Mail and Sun after the court decisions were reasonable is quite extraordinary. Corbyn’s position is hopelessly compromised by his own antagonism for the single market, and it was naive if Labour party members who voted for him ever thought otherwise.

*Postscript (7/11/16) Although this was true under Miliband, in their shell shocked state after the election they actually voted in favour (thanks Sunder Katwala @sundersays for reminding me).

Minority rule: Migration, Brexit and Mandates

It is generally (not universally) agreed that the issue of migration played a large role in leading 52% of UK voters to want to leave the EU. However that does not mean there is a mandate to end Freedom of Movement (FoM) at the cost of losing access to the single market. I’m rather surprised by the number of people who think it does. There are lots of reasons why it does not, like voters being told they could end FoM and still stay in the single market, like that many people voted to end FoM because they wanted a better NHS, whereas the opposite will be true in practice. (Tony Yates discusses this general point here).

However the clearest reason why Brexit does not mean there is a mandate for ending FoM was made by Ian Dunt yesterday. Put simply, it is that a majority of a majority can be a minority. The fact that many people voted Brexit because they wanted more control over immigration does not imply that a majority of all voters did.

Suppose that everyone understood that there was an unbreakable link between freedom of movement (FoM) and membership of the single market. Suppose all the 48% who voted to Remain prefered to keep membership at the ‘cost’ of retaining FoM. Suppose 48% of those voting Leave felt the opposite. But 4% of those voting Leave wanted a Norway style arrangement, and wanted to leave for some other reason than FoM . In this case a majority want to keep FoM, and do not want further migration controls if that means being out of the single market.

Of course these numbers are made up, although polling evidence does suggest a majority of people prefer being in the single market to ending free movement. But the key point is that we do not know what the true numbers are. Yet the presumption seems to be being made in lots of quarters, from researchers to politicians, that the referendum result means that we cannot go for any arrangement involving FoM. This just does not follow.

Nor does the fact that the Leave campaign focused on immigration make any difference. Again imagine that the 4% who wanted to leave for reasons other than immigration were rock solid about voting Leave. For the undecideds, however, immigration was critical. In which case any decent campaign would focus on the undecideds. We could change the figures to make it even clearer: 30% of Leavers were rock solid because of sovereignty or financial issues, but 22% were undecided and also worried about immigration. Again a good campaign would focus on immigration, even though it was a minority concern. Election results, like prices, are determined at the margin.

There is therefore no mandate from the referendum result to sacrifice membership of the single market in order to end free movements. Which is one excellent reason why we need a second referendum on the final terms for Brexit before we leave.

Postscript (17/10/16) Here is some polling evidence supporting these arguments.