As the second anniversary of the UK’s ill-judged departure from representative democracy hoves into view, only the mess the government is making of Brexit is becoming clear. Our robotic PM continues to insist that we are leaving the customs union and single market despite the fact that she unable to articulate how this might be done without causing enormous cost and chaos. Meanwhile, the cabinet has agreed a ‘fall-back’ (in reality most likely) position that will keep the UK in the EU as a non-voting member for at least five years after March next year. The Leavers’ referendum claim that we are ‘taking back control’ can now be seen for what it always was; cynical rhetoric. Any idea the EU had that the UK’s lack of a negotiating position was a cleaver ploy has long since evaporated. It is now revealed as a theatre of the absurd.
In less than a month, the European Council will take stock of the Brexit negotiations. With the October deadline for agreement looming, the UK is as far away now as it was two years ago from a settled negotiating position. While Mrs May’s introspectively negotiates with her cabinet and party, Brexit uncertainty continues to erode the economy’s current and future prospects. Economic growth is at a virtual standstill, which the ONS insists cannot be blamed on the ‘Beast from the East’. As Mark Carney observed, the economy is following the trajectory projected by the Treasury prior to the referendum. The Treasury projected that by 2030 GDP would be some 6 per cent lower than the level it might reasonably have been expected to achieve in the absence of Brexit and the government’s more recent projections suggest the outcome could be a lot worse if the UK’s negotiations fail.
According to the Bank, Brexit has already resulted in growth and household incomes being some 2 and 4 per cent below predicted levels respectively. This translates to a £900 loss of spending power per household, and paradoxically, a £15bn loss of tax revenue, equivalent to £300m a week for public services. Looking forward, the UK’s woeful trade and productivity performances are further threatened by the 90 per cent annual decline in FDI into the UK 2017. Granted, the previous year was characterised by a strong recovery from historically low levels, but the inflow in 2017 was 80 per cent lower that the average inflow for the past ten years. Uncertainty is the enemy of investment and businesses are currently a million miles short of the ‘certainty’ Mrs May recklessly promised.
With notable exceptions eg, the FT, a Eurosceptic press pours scorn on any projection, however expertly researched, that points to Brexit costs. HMRC CEO, Jon Thompson’s warning that export businesses face additional annual costs of up to £20bn – equivalent to double the UK’s net EU contributions - if Britain adopts the customs arrangements favoured by the zealots provides a typical example. The ravingly, Eurosceptic Daily Express, chose to rubbish this dire estimate by quoting a prominent Brexiter who, despite no discernible IT expertise, thought it was ‘not an insuperable problem’. Mr Thompson also pointed out that the zealots’ solution would require an additional 5,000 HMRC staff plus an unspecified number of additional Border Force officials. Meanwhile, the Department for Transport has published a plan to deal with ‘severe disruption’ at Channel ports after Brexit. The plan amounts to parking lorries on closed sections of the M20 motorway while other vehicles are forced on to local roads. Is this what David Davis had in mind when he said ‘there will be no downside to Brexit?’
Having agreed with the EU in December that the backstop position for the Irish border would be continued membership of both the customs union and the single market for Northern Ireland, Theresa May then rejected the EU’s draft legal text. Lacking anything approaching a realistic alternative and subject to DUP tyranny, she is being forced, in effect, to transfer this backstop position to the UK as a whole. Indeed, to date, the only clarity in Mrs May’s position is that she is not prepared to return to a physical Northern Ireland border. Thus, we now know that Mrs May’s mantra, Brexit means Brexit, actually means an indefinite period of haggling with Brussels as a non-voting EU member. This is the zealots’ ultimate nightmare, though the current shambles is in no small measure due to their urging of ministers to distain and disparage expert advice. Ivan Rogers warned of the difficulties before being forced to quit as Britain’s EU ambassador after Mrs May rejected his advice. More recently, he advised the government to ‘think hard, rigorously and honestly’ about its future trade relationship with the EU rather than repeating the zealots’ ‘buccaneering blather.’
Despite the efforts of a Eurosceptic press and I’m sorry to say a cowered BBC, the Brexit effect is becoming daily more apparent as the business cycle turns down. As it does so, the animal spirits of Brexit buccaneers will deflate. More generally, the day is approaching when it will become apparent to even the most fervent Leave voters that the politicians who encouraged their vote had no idea of the costs involved. It is not unreasonable to imagine many will react with fury. All of this presents Tory zealots with a problem. Forcing the Prime Minister’s resignation – something that is currently beyond their numbers – would not overcome Parliament’s unwillingness to vote for their kamikaze option of ‘no deal’. The combination of a divided cabinet and a hung Parliament means the government’s Brexit position is deadlocked. Ironically, lacking parliamentary numbers the zealots only hope now is to support another referendum in the forlorn hope that the previous majority for leaving will be reinforced. But this time the choice will be more focused. Voters will effectively have to choose between remaining a full member of the EU and an indefinite period as a non-voting member. I doubt voters will be fooled again.
28th May 2018