Divided We Wait

Britain and the EU: The Full English Brexit or a Cherry Pick?

“Just think for a moment what a prospect that is. A single market without barriers—visible or invisible—giving you direct and unhindered access to the purchasing power of over 300 million of the world's wealthiest and most prosperous people. Bigger than Japan. Bigger than the United States. On your doorstep. And with the Channel Tunnel to give you direct access to it”. 

How times have changed since the Brexiteers’ goddess, Margaret Thatcher, spoke those memorable words at Lancaster House, London, in April 1988. Nearly three decades later, Conservative Prime Minister Theresa May declared: “A little over six months ago, the British people voted for change. They voted to shape a brighter future for our country. They voted to leave the European Union and embrace the world”. By the “British people,” she meant the 52% who voted to leave, not the 48% who wished to remain. (she also didn’t point out that since 27% of reg’d electors didn’t vote, only 37% - just over a third of the “British people,” voted to leave).

Negotiations will begin at the end of March under Article 50 of the Lisbon Treaty for Britain’s withdrawal from the European Union (EU). While Trump was daily tweeting his opinions in the run-up to his presidency of the USA, British Prime Minister, Theresa May, was until recently sphinx-like and taciturn, feeding the media with very few scraps of Brexit ‘news bite’. Speculation, anxiety and uncertainty filled the void. Was the UK government going for a ‘hard Brexit’ – a clean break from the EU? Or a ‘soft Brexit’ – retaining membership of the free market in exchange for free movement of goods, services, labour and capital? In short, was she Mrs May, or was she Mrs May not? 

Showing a politician’s gift for the meaningless phrase, she ventured little more than ‘Brexit means Brexit’ and later, with a patriotic veneer, ‘a red, white and blue Brexit’. 

As pressure grew on her to give the world some details of Britain’s journey towards Brexit isolation, May at last delivered a major speech on 17th January setting out her objectives. She confirmed that the government would put the final deal to a vote in both Houses of Parliament before it comes into force. MPs welcomed this but there was no indication of parliamentary approval being sought before Article 50 is invoked. However, the Supreme Court ruled on the 24thJanuary that Parliament must vote on whether the government can start the Brexit process. The judgment means Theresa May cannot begin talks with the EU until MPs and peers give their backing – which she hopes to happen in time for the government's 31st March deadline. Meanwhile a short draft bill will be put before Parliament for debate. It is expected the bill will go through on schedule. MPs will wish to scrutinise and debate the bill but most - even some of those MPs opposed to Brexit- have said they will not frustrate the Article 50 process. 

In her January speech Mrs May remarked that if no deal was reached with the EU, it would be better than a bad deal. "I do not believe that the EU’s leaders will seriously tell German exporters, French farmers, Spanish fishermen, the young unemployed of the Eurozone, and millions of others, that they want to make them poorer, just to punish Britain and make a political point." This could be wishful thinking. If Britain is confident of making new trading relationships outside the EU, as May declares, why shouldn’t Germany, France and Spain find new trade partners too? Mrs May said that if (as is highly likely), negotiations for withdrawal from the EU were not complete within the two year deadline required by Article 50, she would aim for a "phased process of implementation" i.e. a transition deal, that works in both Britain's and EU nations' interests.

The single market and customs union
Theresa May made it clear that Britain would go for the hard Brexit. She said she wanted a “bold and ambitious” trade agreement with the EU and added: “I want to be clear - what I am proposing cannot mean membership of the single market." Being a member would mean complying with the EU’s freedom of movement principles and complying with the judgments of the European Court of Justice. “It would, to all intents and purposes, mean not leaving the EU at all." Nevertheless she made it clear that she wanted the best of both worlds for Britain - to have access to the single market while not being a member. Striking a somewhat jarring note, she threatened that without a deal Britain would change the basis of its economic model: "We would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain.” In other words, Britain would become a tax haven – one industry where Britain does lead the world. 

In the manner of the policewoman who wishes for crime to flourish for fear of losing her job, she declared “… we do not want to undermine the Single Market, and we do not want to undermine the European Union. We want the EU to be a success and we want its remaining member states to prosper. And of course we want the same for Britain.” Having already destabilised the EU by proposing to leave, these emollient words may not have been too convincing to the member states that remain. 

The Prime Minister also announced that she wants to leave the customs union. This is the common set of rules and tariffs that govern imports and exports around Europe. It means goods don't have to be re-checked by member states as they travel round the bloc. Membership of the EU binds Britain to a common external tariff and prevents Britain negotiating its own trade deals. Leaving the customs union is not good news for exporters and importers where added delays and bureaucracy will not be good for business. However, by leaving the single market and customs union, May clearly placated the Brexit zealots in her own party and ensured continuing bullying rants in the anti-EU tabloid press in her support. Such a statement of policy also served to dent the electoral appeal of UKIP, the right wing nationalist party, by appearing to assert greater control over immigration. 

There may be a heavy price to pay. Writing in the Observer newspaper Jason Langrish, a Canadian involved in negotiating the trade deal between Canada and the EU, declared that a British deal could take a decade to make. When Brexit does occur the UK will be forced to trade with the EU under World Trade Organisation (WTO ) rules, meaning it will be subject to the EU’s external tariffs. Britain is a member of the WTO only through its membership of the EU. To become a full member of the WTO, Britain will have to set out its own tariff schedules i.e. a list of the full tariffs it will apply to goods across the board entering the UK. This could take two or three years. About 44% of UK exports in goods and services went to other countries in the EU in 2015 - £220 billion out of £510 billion total exports. There will have to be many lucrative trade deals outside the EU to make up for that. Despite the hype, a trade deal with Donald Trump’s protectionist USA will hardly fill the gap.

Immigration
Control of immigration seems to be May’s overriding priority for which free trade and free movement have been sacrificed. The EU Lisbon Treaty also embodies the principles of an open society. Its aim is to “promote peace, its values and the well-being of its peoples.” These values include equality, respect for human rights, democracy, and the rule of law. Thus the member states acknowledge that they are interdependent and use the EU to cooperate to achieve a greater, collective good. Freedom of movement, the Treaty states, is an important part of this cooperation, encouraging tolerance and understanding among people of different cultures. It can also help to build solidarity between people and governments of different countries. 

Although Britain claims to embrace these ideals, its departure from the EU suggests it has repudiated them.

May said that the UK would continue to attract the brightest and the best to work or study in Britain and acknowledged the benefits of migration. But, she said “… when the numbers get too high, public support for the system falters”. High levels of net migration had “put pressure on public services, like schools, stretched our infrastructure, especially housing, and put a downward pressure on wages for working class people”. After proclaiming that Britain is an open and tolerant country she concluded: “..the message from the public before and during the referendum campaign was clear: Brexit must mean control of the number of people who come to Britain from Europe. And that is what we will deliver”.

May omitted to mention that immigrants are net contributors to UK public finances. Nor did she admit that it is the policy failures of governments – not migrants - that put pressure on housing, schools, public services and wages. Immigrants fill many skill gaps in the labour market and do menial jobs that the indigenous workforce cannot or will not do. Without immigrant labour, Britain’s economy would be in trouble. There are 54,000 EU migrants now working as doctors, or nurses or ancillaries in the NHS and nearly 80,000 working in social care. There are other skilled workers like builders and plumbers and unskilled workers who do jobs that the local British won’t take. Paradoxically, if the number of migrants from the EU were restricted, more migrants from non-EU countries would be needed to fill even bigger gaps in the labour market and to maintain Britons in the lifestyle to which they have become accustomed. According to Oxford University’s Migration Observatory, non-EU citizens already accounted for 44% of all inflows into the UK in 2015. Britain’s membership or non-membership of the EU is irrelevant to that.

Since the EU referendum campaign morphed into an argument about immigration - thanks to the ‘attack dog’ right wing press and the ‘leave’ campaigns - the Brexit result has seen a shameful rise in race hate crime. Home Office figures released in October suggest that they rose by 41% after the EU referendum result. The Independent newspaper analysed local figures drawn from police databases and found that increases in such crimes were particularly steep in many areas that voted strongly to leave the European Union. But the reality may be even worse. EU nationals living in the UK are often too scared to report hate crimes to the police, despite being encouraged to do so.

What is the future of the three million EU nationals living in Britain and the one to two million Britons in EU countries? The moral duty of government in such a situation would be to offer immediate reassurance to the three million EU nationals in the UK by allowing them to remain after Brexit. Having made their lives in the UK and contributed to its economy, they are fearful of being caught in the crossfire of the Brexit negotiations. After six months delay and uncertainty, May said in her speech that she wants a deal to guarantee the rights of EU citizens already living in Britain and the rights of British nationals in EU member states, as early as possible. Such a statement was long overdue after a Home Office official in a letter to a group of worried EU citizens wrote: “Agreeing a unilateral position in advance of these negotiations would lose negotiating capital with respect to British citizens in EU member states and place the UK at an immediate disadvantage”. Some of the ‘negotiating capital’ – otherwise known as human beings - were born in the UK and have lived there all their lives. Others are married to British citizens and have children born in Britain. But, according to Nesrine Malik of the Guardian newspaper, “the Home Office in particular, and the immigration system in general, have long made decisions not on the basis of merit or reason, but as a way of filtering out as many applicants as possible – either via exhaustion of resources or impossibly high barriers. Brexit lays bare the brutal way in which decisions about people's lives and families are taken, and how facts they thought immutable – like nationality or the holding of a passport – can be withdrawn by a sudden change in public mood and a reckless government cowering in whatever direction the winds of xenophobia are blowing.” 

Such is the raw reality behind May’s fine words about Britain’s openness and tolerance. The risk is that the ‘brightest and the best’ will find Britain a very unattractive place in which to work or study. 

Dis-united kingdom
David Marquand, academic and former Member of Parliament recently wrote in the Guardian newspaper: “The problem with “Brexit”, as shorthand for “British exit”, is that there is no such place as Britain.” Instead there is “a state called the United Kingdom of Great Britain and Northern Ireland. It is not a nation state like France or Denmark. It is a multinational state, like the former Yugoslavia or the Austro-Hungarian Empire. It contains four nations, one far richer, more populous and more powerful than the other three. England contains almost 84% of the UK population, Scotland has just fewer than 8.5%, Wales just under 5%, and Northern Ireland just under 3%”. 

Thus England dominates with five sixths of the electorate. 53.2 % of them voted to leave the EU and 46.8% voted to stay. There was a similar vote in Wales – 51.7% for leave and 48.3% to remain. However, Scotland voted by a large majority to remain within the EU: 62% to 38%, as did Northern Ireland by 55.7% to 44.3%. Should these divergences be ignored in favour of the majority national vote? Many Brexiteers think so for their own obvious reasons, but the devolved governments of Scotland and Northern Ireland do not wish to be ignored. 

The majority of Scots voted to remain in the EU. The Scottish Brexit Minister warned the UK government not to "treat Scotland with contempt". He reminded them that: "The people of Scotland overwhelmingly rejected a hard Brexit and it is absolutely crucial that this is respected, to avoid an economic catastrophe”. Scotland’s First Minister, Nicola Sturgeon, has said she is determined to save Scotland from Brexit. "It's not just the case that the Tories are running towards Brexit, they want to drag Scotland kicking and screaming over that Brexit cliff-edge and I'm determined they are not going to get away with this." Chris Hazzard, the Infrastructure Minister in Northern Ireland called for it to have "special designated status" within the EU. He also said the devolved administrations have been treated with contempt and disdain over their involvement in the plans for the impending withdrawal from the EU.

The grim prospect that Brexit could fracture the UK prompted honeyed words from Theresa May. In her speech she expressed the wish to “strengthen the precious union between the four nations of the United Kingdom” and to involve the four devolved administrations in the withdrawal process. In its ruling on 24th January, the Supreme Court declared that, although the UK government needs Westminster Parliament approval to trigger Brexit, it does not require approval from the devolved administrations in Scotland, Wales and Northern Ireland. The Court deemed withdrawal from the EU was ‘a foreign affairs matter’ over which these legislatures had no jurisdiction. Already feeling side-lined and resentful, the devolved governments are likely to become even angrier. The Scottish First Minister Nicola Sturgeon has challenged Scottish voters to decide whether they are content to have the country’s fate decided by right wing Tories in London, or vote for independence instead.

The Irish Republic will also be deeply affected by Brexit. It is concerned about the future of its relationship with the UK, its chief export partner, and it is the only EU country that shares a land border with the UK. Irish courts are to be asked to intervene in a new appeal aimed at reaching the European Court of Justice in Luxembourg. The issue is whether, once Brexit is triggered by formal notice to Brussels under article 50, the process can be reversed? If the UK insists on controlling immigration from the EU after Brexit, border controls with the Irish Republic could affect trade and the movement of people between Northern Ireland and the Republic. The political consequences for the peace process could be incendiary. At present there is no physical border control between them. May said in her speech that she intends to maintain the Common Travel Area, as it is called, with the Republic of Ireland. She said it would be an important priority for the UK in the talks ahead - while still protecting the integrity of Britain’s immigration system. It is not clear how these two objectives could be reconciled.

Little Britain or Global Britain?
A country that resigns membership of the world’s biggest trading bloc and pulls up the drawbridge to immigration, might justifiably be seen by the rest of the world as insular and xenophobic. In her speech on 17th January, Theresa May was anxious to dispel any such perception by emphasising Britain’s continuing commitment to its other international obligations and to co-operation with countries on matters of common interest. “Global Britain”, she said without irony …”reaches out to old friends and new allies alike. A great global trading nation and one of the firmest advocates for free trade anywhere in the world.” This trading relationship would include the EU – without paying in and being a member of course - and without its rules and regulations with the European Court to adjudicate on them. Indeed, global Britain would be looking beyond the EU and would be freely striking trade agreements with India, Australia, the USA and other countries in the wider world.

Global Britain, Mrs May proclaimed, would also be a leader in science and innovation. “One of our great strengths as a nation is the breadth and depth of our academic and scientific communities, backed up by some of the world’s best universities.” When she was Home Secretary, May’s welcome to overseas students outside the EU was none too warm. She was trying to make it more difficult for them to stay in the UK after completing their studies. In fact, international students are absurdly included in the net migration statistics and this was part of a failed government plan to cut net immigration to below 100,000 per year and reduce visa fraud. International students were also hit by an NHS charge for hospital treatment. This was in addition to paying university tuition fees four times those of UK students on some courses - fees that could be increased without notice. Further restrictions have been introduced by her Home Office successor, including a multi-tiered student visa system. It is hardly surprising that numbers of non-EU overseas student are stagnating. And the same stringent rules could also apply to EU students when Brexit occurs. 

Bouquets and brickbats
Following her speech on 17th January, Theresa May received a predictably adulatory response from the anti-EU tabloid press in Britain. “Steel of the New Iron Lady” drooled the Daily Mail, in a reference to the above-mentioned Margaret Thatcher. The Sun's front page displayed a biblical tablet of stone with the headline "Brexodus". “Deal or No Deal We Will Leave EU” screamed the Daily Express headline. Combining belligerence and bravado, the Murdoch-owned Times shrieked ”May to EU: Give us a Fair Deal or You’ll be Crushed”. In contrast the Guardian described the speech as “doubly depressing” and designed in equal parts to pander to the xenophobic press, and to keep backbench Conservative Brexiteers firmly on side”. It conceded that as a political manoeuvre the speech was a huge success and will have strengthened May’s authority both in her party and in the country. Investor and philanthropist, George Soros, was not impressed: “In my opinion it is unlikely that prime minister May is actually going to remain in power. Already she has a very divided cabinet, a very small majority in parliament. And I think she will not last,” he said. His prognosis for the UK economy was that, as the currency depreciates and inflation rises, living standards will fall. If this turns out to be true, the political mood could rapidly change against Brexit.

Political reaction to Theresa May’s speech came from Labour party leader, Jeremy Corbyn, who said May wanted to turn Britain into a “bargain basement tax haven”. The leader of the pro-EU Liberal Democrats, Tim Farron, said May had outlined “Nigel Farage’s vision of Britain’s relationship with Europe”. The former Liberal Democrat leader and Deputy Prime Minister, Nick Clegg, told a conference in Brussels: "Theresa May's approach to Brexit is not only contrary to Britain's national interest, it also runs the risk that the Brexit negotiations unwittingly become the means by which the forces of aggressive nationalism seek to unpick the EU itself.” 

The European press reacted with fury to May’s speech. Spain’s El Pais accused the Prime Minister of embracing a “shameful, xenophobic nationalism,” after years as a shy Europhile in David Cameron’s government. In Germany The front page of Die Welt newspaper, referring to the TV comedy, showed May over the words “Little Britain – Prime Minister Theresa May leads Great Britain into isolation.” Der Spiegel, meanwhile, titled its coverage of May’s speech as a mock tantrum: “I want, I want, I want.”

Guy Verhofstadt, former Belgian Prime Minister and now member of European Parliament, said: "I think it creates an illusion that you can go out of the single market and the customs union and you can cherry pick and still have a number of advantages. I think this will not happen. We shall never accept a situation in which it is better to be outside the single market than be a member of the European Union." Whatever the differences between the other member states of the EU may be, they are surely agreed on that. They are also fearful of the threat of the populist far right in their own countries. Upcoming elections in Holland, France and Germany could lead to the disintegration of the European project. Verhofstadt’s reaction is a salutary reminder to Brexiteers who somehow believe that Britain will be an irresistible magnet for EU trade and business. In the Brexit negotiations, it is Britain that will be the supplicant.

What kind of Brexit deal is in Britain’s best interest?
It is not obvious what is in the UK’s overall interest post-Brexit. Some business leaders are anxious about the prospect of being outside the single market and want Britain to be as close as possible to full membership. Financial firms in the city of London are worried about the loss of ‘passporting’ which gives them the right to offer financial services across Europe while being based and regulated in the UK (the tax take on this, now at risk for the UK government, is immense). Many manufacturers, such as car-makers and aerospace firms, are very concerned about withdrawal from the customs union. Their integrated European supply-chains mean that their products cross borders several times. There would also be tariffs on some goods, rules of origin and checks for compliance with EU standards. All these bureaucratic demands will lead to border delays and increased costs. 

Farmers worry about their subsidies from the EU, as well they might. Universities want to retain the research funding and the flow of students from the EU. Farmers, researchers and local authorities receiving grants under EU Cohesion Policy have been told that they will still be funded up to 2020. If the support then ends, they will be in trouble, having to look to what might well be a cash-strapped London, to replace them. The UK could seek to remain part of some EU programmes, such as science research, but it would be expected to continue to contribute to the budget, despite popular objections. Some businesses may demand government support for economic development funds to replace those from the EU. This will compel the government to come up with some sort of national framework for regional and industrial policy. Amid the uncertainty it is safe to say that, in the short term at least, Brexit will bring some winners and many losers.

Parliamentary sovereignty re-asserted?
In its ruling on January 24th the Supreme Court President Lord Neuberger said: "By a majority of eight to three, the Supreme Court today rules that the Government cannot trigger Article 50 without an Act of Parliament authorising it to do so." He said the judgement was not about the referendum result, or a comment on the merits of leaving or staying in the EU. "The referendum is of great political significance, but the Act of Parliament authorising it did not say what would happen afterwards." He said that any action taken now must be in keeping with the UK’s constitution. "So any change in the law to give effect to the referendum must be made in the only way permitted by the UK constitution, namely by an Act of Parliament.”

The judgment reasserts parliamentary sovereignty over the government’s attempt to use its executive powers (the royal prerogative) to bypass Parliament. The government is introducing a short bill which it hopes will complete its passage through Parliament in time for Article 50 to be invoked, at the end of March. However some MPs - especially those who wanted Britain to remain within the EU - are unwilling to submit to the Brexit juggernaut without registering their concerns. A number of Conservatives joined Labour in asking for a formal policy document, known as a White Paper, on negotiating objectives, so as to allow for a fuller debate. The government has conceded to the request, presumably because it doesn’t want a fight at this early stage having just a small majority in the House of Commons.

Future uncertain
There is much conjecture and argument about how the UK economy will fare when formal negotiations begin under Article 50 at the end of March. For those who believe that the only thing predictable about economic forecasts is that they are wrong, the run-up to last June’s EU referendum provided confirmation. The Bank of England, the Treasury, the International Monetary Fund, the OECD and a raft of academic economists in a spectacular display of groupthink, predicted an immediate plunge into recession if the UK voted to leave the EU. The relief that Armageddon didn’t arrive on the 24th June may since have made the UK economy look better than it really is. In fact Britain’s economic news since the referendum vote has been mixed. The economy grew by 0.6% in the three months after the Brexit vote. It declined to a three-year low against the euro after Theresa May announced that the UK would begin formal Brexit negotiations by the end of March 2017. The pound then fell from its pre-referendum rate of over 1.30 euros to a low of 1.09 euros in October. It regained some ground by early January to 1.15 euros. The pound was worth 1.22 euros compared with 1.47 euros before the referendum.

The fall in the currency has brought with it the usual mixed fortunes. It has helped to make exports cheaper but imports more expensive. Although the economy has performed better than expected, business is beset by uncertainty as it looks ahead to the protracted Brexit negotiations between Britain and the EU. A majority of managers in the UK believe uncertainty will retard economic growth in 2017 and almost half think that Britain leaving the UK will be a drag in the long term, according to a recent survey by the Chartered Management Institute (CMI). However, managers appear optimistic about their own organisations’ ability to thrive, despite worries surrounding Brexit and the global climate as Donald Trump takes over the US presidency.

There is anxiety that inward investment will be lost as Britain ceases to be a platform for the EU market. However, Nissan has confirmed that it will manufacture two new car models at its Sunderland plant thanks to government "support and assurances". What these were remains unclear. The Japanese company's commitment to Britain had been in doubt after the EU referendum. Elsewhere, Japan's Softbank said it was buying the UK microchip-maker ARM Holdings for £24bn, and would double the number of staff in five years, pharmaceuticals firm GlaxoSmithKline is investing £275m in the UK, while McDonald's is creating 5,000 new jobs. The important financial sector is more jumpy about the future. Lloyds, one of the biggest banks, has accelerated its job cuts, axing a further 3,000 jobs, although it said it had made this decision before the referendum. The UK's financial sector would face heightened risk and an exodus of 232,000 jobs, without certainty over Britain's Brexit deal. Speaking to a parliamentary committee, Xavier Rolet, chief executive of the London Stock Exchange Group, said two thirds of the job losses would be felt outside Greater London, with the blow coming as soon as the euro clearing operation leaves Britain's shores.

The CMI survey shows that many businesses are becoming more nervous about hiring and investing as the Brexit negotiations approach. Companies and individuals are also becoming increasingly concerned about costs, because of the pound’s sharp fall against other currencies since the referendum.

To secure a new free trade agreement, May plans to negotiate access to the single market sector by sector by the end of the two years laid down by Article 50. As such agreements generally take five years or more, this seems impossibly ambitious. The ‘implementation phase’ would start when the Article 50 process has concluded.

Ever since Britain joined the EEC more than forty years ago, its governments have been ambivalent and semi-detached about the European project. Instead of leading attempts to reform the EU and negotiate compromises over its concerns, Britain is now fully detaching itself in order to face a difficult and uncertain future. To many in the EU, in Britain and beyond, this has caused bafflement and bewilderment which continues. It should not be forgotten that this bizarre event was triggered by a referendum called in response to the internal politics of the Conservative party, aided and abetted by the relentless drumbeat of jingoistic nationalism from its media backers. 

Peter Crisell