Sean Rickard - Independent Economic Analysis

I have come across a few people who were under the impression that leaving the EU would improve the representation of the population as well as the quality of governance.   If the shenanigans regarding Parliament’s involvement in overseeing the process of Brexit hasn’t sowed doubts as to the government’s commitment to democracy, the Budget farce must surely have raised concerns regarding its competence.   In less than a week our hapless Chancellor has been forced to abandon a key pillar of his Budget; namely, raising NICs for the self-employed.   As I previously pointed out, I do not share the adulation of our Prime Minister by the Brexit wing of the English press.   The Budget debacle reveals both a lack of leadership and blatant dis-loyalty to her Chancellor, neither of which auger well for the imminent Brexit negotiations.  


Reputational damage aside, the fact that not only May and Hammond but also their advisers and the Cabinet were blindsided as to the political implications of increasing NICs, has served to generate doubt as to the government’s ability to negotiate a politically acceptable Brexit.   Fatuous talk about ‘carrying out the will of the people’ will be no protection when many of those who voted to leave the EU realise the economic implications of a hard Brexit for their living standards.   And further evidence as to Mrs May’s weakness when operating at heads of government level is her churlish attitude, if not disdain towards dealings with Scotland’s First Minister.   Nicola Sturgeon’s demand for a new independence referendum is a direct outcome of Mrs May’s favouring of the zealots within her party at the expense of Scotland’s interests in the Brexit negotiations.   Ironically her failure to establish an inclusive approach to the negotiations involving the devolved administrations has handed Nicola considerable leverage.   The harder Brexit, the larger the provocation to the Scottish people and the greater the likelihood of Scottish independence.  


Talking of zealots, I cannot be alone in viewing David Davis’ admission to the Commons ‘Brexit’ committee that the government has not made an assessment of the economic impact of a hard Brexit with alarm.   A hard Brexit is interpreted as being forced to apply WTO tariffs to trade with the EU.   It is worth pointing out that our arrogant government seems blithely to assume the UK can just walk straight in to the WTO if all else fails.   In fact the process of joining – the UK has never been an individual member – could take several months.   Following an application the UK would enter the WTO’s six stages, accession process.   Some of these stages are merely administrative but the UK may not be able to avoid the setting up of a working party to determine its suitability.   Any member of the WTO can be a member of the working party – including the EU – which means that not only might the working party be large but also it may include countries with a concern eg, the level of farming support.   In reality, the speed, smoothness and timing of the UK’s accession would depend on the political goodwill of WTO members.   Given the enormous workload involved in negotiating the UK-EU ‘divorce,’ not to mention the signal it would send about our intent, it is very unlikely that the government would seek to put the UK in a position where it accedes to the WTO on the day it leaves the EU by negotiating on two fronts simultaneously.  


Returning to Mr Davis.   On balance, I suspect that his admission reflects insincerity rather than incompetence.   The Secretary of State accepted that UK businesses would face tariffs and non-tariff barriers in the event of a hard Brexit but went on to repeat Mrs May’s silly assertion that ‘no deal is better than a bad deal.’   Neither he nor the Prime Minister can rationally make such a statement if they have no idea of the likely economic cost of a hard Brexit.   To take some examples of a hard Brexit: carmakers would face 10 per cent tariffs, farmers would be hit with tariffs of more than 40 per cent, financial services would lose their EU ‘passports,’ passengers would no longer benefit from the EU/US open skies aviation deal, and customs checks would be restored to the Northern Ireland border.   Mr Davis justified his extraordinary admission that much would depend on the mitigating measures the UK would take to offset a hard Brexit.   This is rubbish: it serves only to confirm the government’s determination to avoid any serious consideration of the costs of Brexit.  


The starting point for assessing the purpose and cost of any mitigating policies is an understanding of the likely economic impact.   When pressed on the lack of a detailed impact assessment of a hard Brexit, Mr Davis said that in his former business career he ‘knew what would be a good deal even if you didn’t have a number.’   Really.   Mr Davis is being disingenuous.   He is a zealot who thinks an economic cost is worth paying for leaving the EU.   He is of course entitled to that view but he is not entitled to deny the British people the opportunity to form their own views based on reasonable estimates of the likely cost.   The absence of a government assessment will make it easier for a duplicitous Mr Davis and his fellow Brexiters to rubbish adverse estimates by private organisations.   Good, transparent governance demands that the government undertakes and publishes its own estimate rather than relying on inane claims à la ‘we will get a good deal from the EU.’   Attempting to keep the population in the dark as to the impact of a hard Brexit on jobs, investment and living standards is not only a rather odd interpretation of ‘taking back control’ but how can people be expected to judge whether a deal is good or bad unless they have an alternative outcome against which to compare it?

I N C O M P E T E N T  O R  I N S I N C E R E ?

28th March 2017


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