Sean Rickard - Independent Economic Analysis

After months of internecine conflict, the government has finally produced a White Paper setting out its Brexit negotiation position.   Before it was published the Brexit Secretary resigned – will anyone notice? – to be followed a day later by the deceitful and egotistical Boris, who pompously invited the press to witness him signing his resignation letter.   Running scared to a foreign capital twice in one month to avoid facing his inconsistencies was not an option.   Just when it seemed matters couldn’t get any worse for Theresa May, the visit of Donald Trump she had striven so hard to achieve turned into a personal humiliation.   Not only did he rubbish her Chequers plan but he made it clear he rather favoured Boris – a kindred spirit on many levels – for PM.


No sooner had Trump departed for his bizarre ‘love in’ with Putin, her negotiating plan was declared ‘dead in the water’ after she caved in to wrecking amendments from the zealots.   But the Chequers compromise was never more than the starting point for negotiation.   The fact that it survives, albeit in greater confusion, should be viewed by Remainers as positive.   The direction of travel is clear: eventually the UK will choose to remain a member of the EU.   Despite the amendments, the significance of the WP remains.   While it provides Theresa May with the political cover to keep kicking the can down the road importantly, she has been forced to face up to the contradictions inherent in her Brexit promises.   Namely, ‘taking back control’ ie, complete independence, involves unacceptable damage to the economy and the Northern Ireland peace settlement.    


Theresa May, beset by economic projections and business concerns, has opted for continued close alignment with the EU, at least for goods and agricultural products.   The WP’s position is very close to the ‘Jersey option’ – see previous blogs – while clinging to the vain hope, that eventually an IT system will emerge permitting a dual tariff regime and thereby customs union membership alongside an autonomous trade policy and regulatory divergence.   Meanwhile, the government seeks regulatory divergence for service industries by taking them out of the single market despite the WP’s failure to provide any sound economic and commercial reasons for doing so.   As regards free movement of people, the WP suggests cross border ‘mobility for EU citizens after Brexit pointedly sidestepping the extent to which existing rights on free movement would be replicated.   The only explanation for the WPs treatment of services and migration is that at this stage some face saving must be salvaged from the Brexit debacle.


Behind the government’s negotiating position is the belated understanding that for goods and agricultural products, as well as the NI border, the reintroduction of tariffs and non-tariff barriers is untenable.   Indeed, with masterly understatement the zealot David Davis described no-deal as ‘likely to lead to some disruption.’   The question now is would the EU ever accept anything close to the government’s position?   Although the EU has separated goods and services in its single market for Switzerland it insisted on the free movement of people.   Moreover, it has become increasingly dissatisfied with the near state of perpetual negotiations the arrangement entails.   That said, the EU may not reject Theresa May’s White Paper before the withdrawal agreement is signed.   Serious negotiations on the details will only start after March next year and the EU will recognise that not only will this increase its leverage but also it will allow May, or her successor, more room to compromise.   The longer the transitional period, the narrower the options for the UK if the EU rejects the Chequers compromise?   By the early 2020s the fall-off investment, the slowdown in the economy and the unreliability of Donald Trump will be manifest.   The madness of withdrawing services from the single market – where we currently have a trade surplus of 28bn – will be revealed by the lack any prospects of new deals coming close to providing compensation.   And the petulance and nihilism of the leading zealots – so succinctly demonstrated by Boris’ ‘fuck business’ when asked about businesses Brexit concerns - will be more exposed.


The government will be forced to concede on its ambiguities as the negotiations proceed leading eventually to the offer of the UK remaining a non-voting member of the EU ie, remaining in both the customs union and the single market along with the free movement of people, albeit with some linkage to employment.   This Parliament, or indeed the next, would not be prepared to vote for the economically catastrophic ‘no-deal’ Brexit.   The more so as the zealots’ influence is waning with their failure to put forward any credible plan for implementing a ‘no-deal’ option.   The zealots may know what they are against, but blithe assertions about ‘bright certainties,’ à la Boris’ resignation speech, are no substitute for an evidenced based and costed policy.   Some of their number eg, Michael Gove, have signed up to May’s plan, perhaps because they can see the direction of travel and/or recognise the threat to the Tory party of its Brexit self-indulgence.


Thus, realistically the UK has only two choices: remaining effectively as a non-voting member of the EU or remaining as a full member.   At that point a second referendum or a general election will be the only way to dampen the divisions so recklessly super-charged by Cameron’s referendum.   I am confident that next time – and I hope the last time – the UK resorts to a referendum on EU membership the vote will be to remain.   Next time people will have a much clearer idea as to the consequence of their vote – surely a fundamental condition for any democratic vote.   A larger proportion of voters – particularly younger voters – will by then be more accepting of the benefits of the free movement of people.   Net migration with the EU has fallen sharply and is likely to continue to fall during the transitional period bringing into sharp focus the significant costs to businesses and public services.

B R I G H T  C E R T A I N T I E S  A R E  F A N T A S I E S

23rd July 2018


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