Brexit Britain: Divided, Deadlocked and Disconnected

Since our last report on Brexit in the July edition of newnations, the political summer break has allowed time to reflect on the political disaster inflicted on Britain and its place in the world by the Conservative government. First, in June 2016 it called and lost a referendum which it expected to reaffirm Britain’s membership of the EU and to heal the divisions within the party. Secondly, the Conservative Prime Minister Theresa May in May 2017 called an unnecessary general election, three years before it was legally required, in order to secure a democratic mandate for her version of Brexit. After a poor and incoherent campaign, the result gave her party no outright majority. In a rather squalid deal, the government now depends on the Democratic Unionist Party (DUP) of Northern Ireland to secure majority votes in the House of Commons. In return for that support, the government is releasing from its ‘magic money tree’ £1 billion in funding for Northern Ireland. The election outcome has inflicted immeasurable damage on May herself, her party and on Britain. Indeed, her decision to call an early election, the policies she put forward and the kind of campaign she conducted showed the ‘strong and stable leadership’ she claimed to offer was noticeable for its absence.

It was never clear from the start what Theresa May’s Brexit policy was. In a major speech in January, she remarked that if no deal was reached with the EU, it would be better than a bad deal. She said that if negotiations for withdrawal from the EU were not complete by March 2019, she would aim for a transition deal. She said she wanted a ‘bold and ambitious’ trade agreement with the EU but not 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 and she didn’t want that, ‘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. She also announced that she wanted to leave the customs union. None of this was good news for business - particularly for exporters and importers - but music to the ears of the Brexit zealots in her own party and to the anti-EU tabloid press.

Small wonder the EU’s chief Brexit negotiator, Michel Barnier was exasperated and accused Britain of wanting to have its cake and eat it. From the EU perspective, Britain seemed unaware of the full consequences of leaving the EU. In Barnier’s words, Britain ‘wants to take back control, it wants to adopt its own standards and regulations, but it also wants to have these standards recognised automatically in the EU – that is what UK papers ask for. This is simply impossible. You cannot be outside the single market and shape its legal order … The single market, the EU capacity to regulate, to supervise, to enforce our laws, must not and will not be undermined by Brexit.’ Barnier is not alone in his bewilderment. A French government minister said that Britain needs to show ‘“more clarity and less ambiguity”’ in Brexit negotiations. Benjamin Griveaux, a junior economy minister, asserted that it is not good for business on either side of the Channel and that it is difficult to negotiate ‘when the other side’s positions are changing’. The Observer newspaper in the UK put it more bluntly: ‘The debate is no longer mainly about the EU – it is about the Tories. It is about how gaping Tory divisions, ideological, personal, instinctive and prejudicial, are propelling Britain ever more rapidly towards a national humiliation surpassing the 1956 Suez crisis’. It is also about Britain’s exaggerated belief in its own bargaining power.

May’s loss of credibility since the election has emboldened opponents in her Cabinet to stake their leadership claims, once her fragile hold on power is broken. 'Collective responsibility' is no longer. For example, Philip Hammond, the pro-EU Chancellor of the Exchequer, has openly advocated a softer Brexit deal and a transitional arrangement to preserve continuity and minimize disruption when Britain leaves the EU. Other ministers, imbued with the Brexit gospel and impervious to practicality, preach a quick and radical departure from the EU. For example, Boris Johnson, Britain’s unlikely foreign secretary and leading fake news peddler during the Brexit campaign, has also intervened in the debate. In the Daily Telegraph on September 16th, he set out an upbeat vision for a ‘glorious’ post-Brexit future for Britain as a low-tax, low regulation economy freed from the shackles of Brussels. He insisted that Britain can be ‘the greatest country on earth’ post-Brexit. Those who do not share this vision of the ‘promised land’, were roundly condemned as ‘remoaners’ and ‘woefully underestimating this country’. Many commentators saw Johnson’s intervention, in advance of Theresa May’s anticipated speech in Florence on 22nd September, as a marker for a second leadership bid after May’s final defenestration.

The different approaches to Brexit by government ministers reflect similar divisions in the Conservative parliamentary party. As Andrew Blick of Kings College London University, puts it: ‘The existence of a substantial group firmly committed to departure and suspicious of compromises in negotiations with the EU will persist as before. It is plausible that this wing could at some point be a source of demands that the UK opt for ‘no deal’, on the grounds that the exit terms on which the EU is insisting are unacceptable. Such a campaign is likely to find supporters within Cabinet itself’. But the impossibilists may not have it all their own way. Other Conservative MPs who are less hostile towards the EU might also see an opportunity. ‘They could seek to take advantage of a weakened leadership and might regard the election result as calling into question the EU policy advocated by May.’

The opening rounds of negotiations have not gone well. Unlike the factions within the British body politic, the 27 member states of the EU have an agreed negotiating position. The key exit issues, agreed between the parties, concern ‘people, money and Ireland’. The EU has insisted, despite Britain’s objection, that these three issues be solved before future relations are discussed. The ‘people’ agenda concerns the rights of EU citizens living in Britain and of Britons living in EU countries after Brexit. The ‘money’ relates to Britain’s outstanding financial obligations which must be paid before exiting the EU. Central to the ‘Ireland’ issue is the existence or otherwise of border and customs control between the Irish Republic and Northern Ireland when Brexit occurs.

The ‘people’ issue continues to cause distress and uncertainty for those concerned but has still not been resolved, despite reassuring noises from both sides of the channel. There is growing evidence that EU nationals in the UK are being prevented from buying or renting property, getting jobs or booking holidays. They live in fear of being deported to their country of origin and a series of scandalous blunders by the Home Office has added to their anxiety. Progress on Britain’s divorce settlement has been slow because Britain refuses to say how much it is willing to pay. It wants to link the issue with future trade relations, a point recently reiterated by Boris Johnson, the UK foreign secretary, whose frequent buffoonish utterances have previously caused bewilderment around the EU.

Michel Barnier said on 7th September that he was disappointed with the UK position he had heard at the latest round of negotiations. ‘It seems to be backtracking on the original commitment of the UK to honour its international commitments,’ he said. ‘There is a problem of confidence here.’ As to Ireland, Britain has yet to make a convincing case for maintaining a ‘frictionless’ border between the Irish Republic after Britain leaves the EU. This has prompted more 'cake' imagery. Mairead McGuinness, the Irish vice-president of the European parliament, said Britain’s ideas on customs, trade and the Irish border ‘are more than the UK wanting to have its cake and eat it, it’s an attempt to have its cake and eat ours’. Failure to resolve the three issues means that talks on future trade relationships scheduled for October will be delayed. The next round of talks was postponed on 12th September to allow time to break the stalemate.

Exasperation with Britain’s negotiating tactics is not confined to the government’s political opponents and the EU. The former governor of the Bank of England, Mervyn King said: ‘If you are going to have any successful negotiation, you have got to have a fallback position, which the other side understands and believes is credible’, King said in a BBC radio interview on 5th August. ‘It’s not the first preference of anybody, I’m sure. But it’s got to be a credible fallback position, otherwise those negotiating on the other side will not take any notice of what we would like to achieve in the negotiations – why should they, if we had absolutely no alternative but to give in to what they demand?’ King’s successor at the Bank of England, Mark Carney, said in August that the uncertainty around Brexit has already hit people’s incomes and is weighing down the economy. He said the Bank is helpless to prevent the ‘weaker real incomes’ accompanying Britain’s withdrawal from the EU. Households had cut back on spending and businesses on investment, slowing the economy’s growth. As confidence in Britain’s economic future has declined since the referendum result, the pound has lost 16% of its value as measured against Britain’s main trading partners. The new £10 note will buy £8.40 worth of goods in the eurozone, according to the campaign group, Best for Britain.

A monthly survey by Lloyds Bank shows that overall business confidence among 200 companies with a turnover of at least £1m, fell by 13 percentage points in August to its lowest level since August 2016. The share of firms reporting higher business confidence decreased by 7 points to 38%, while those reporting lower confidence increased by 6 points to 21%. Optimism about the economy declined by 12 points from 17% to 5%, the lowest level since June 2016 and the second lowest level since 2012. The survey indicates that the share of firms citing greater economic optimism fell by 5 points to 33%, while the proportion reporting lower economic optimism rose by 7 points to 28%.

According to the Financial Times, ‘Exporters of goods have tended to raise the sterling price of their products, in a move that boosts margins rather than market share. Meanwhile the volume of Britain’s services exports has risen little in response to sterling’s fall, as they are less sensitive to price changes. And with uncertainty over Britain’s future trading relationships after Brexit, few companies have been willing to invest in new plant and equipment to swell exports’. Many companies want a transitional deal beyond March 2019 which will give businesses time to make contingency plans for Brexit. As things are, time is running out. A company that will need to build or relocate a factory or laboratory to Europe has little time left to do so. The CBI reminds us that ‘…urgency is growing because businesses are starting to get ready to produce goods and services for sale after March 2019. Many automotive production lines are 18 months long, and sellers don’t know if they need to factor in the cost of tariffs. Airlines are about to start selling seats for flights in 2019, and they don’t know what legal basis there will be to fly between the UK and Europe’.

The majority of economic forecasters have concluded that Brexit will damage the UK economy especially if no deal is reached. During the referendum campaign the UK Treasury, the OECD and the London School of Economics’ Centre for Economic Policy (CEP) all agreed, in reports published during the referendum campaign, that if there is no deal, the loss of GDP by 2030 would be severe - in the range of 7-10%. Economic forecasts are often treated with disdain by the wider population but, in the absence of a clairvoyant alternative, long-term forecasts remain influential and will inevitably effect the Brexit negotiations. If there is no deal on trade and it is forecast that it will result in economic disaster, British negotiators will be placed in a very weak position.

The ‘legal basis’ of Britain’s departure from the EU is of massive complexity and consequence. The principal bill of seven other Brexit bills, is the European Union (Withdrawal) Bill. It attempts to fill the enormous legal void left by the UK’s departure from the EU, thereby minimising disruption to citizens and businesses. The bill will repeal the European Communities Act 1972 which took Britain into the EU. A major ‘copy and paste’ job is involved. All EU legislation is incorporated into the bill which Parliament will ‘amend, repeal and improve’. Any laws which have been converted from EU law or any other EU-related law that exists on the day the UK leaves the EU will be categorised with the name ‘retained EU law’ and can be amended, changed or repealed by Parliament after Britain leaves. In the early hours of 12 September, MPs voted for the bill to go through to the second reading stage by 326 to 290, after Remain-backing Tory MPs fell in line with the government and a small number of Labour MPs rebelled against orders to oppose it. 

The reality is that Parliament faces, in the words of former Lord Chief Justice, Lord Judge, a ‘legislative tsunami’. At its core EU law consists of the treaties between the EU and member states. These established the various European institutions and are the constitutional basis of the Union. EU legislation comprises ‘regulations’ - which, once made, automatically became part of UK law - and ‘directives’ which set out a legal framework that is left to member states to implement by drafting their own legislation on the subject. It is estimated there are more than 12,000 EU regulations to be transposed into UK law. UK law consists of statutes (or Acts of Parliament) and secondary regulations (or statutory instruments) made by ministers under an Act which flesh out in more detail the workings of the Act. Most EU directives are implemented by statutory instruments but some are incorporated into statute. Directives range over a wide area – such as free movement of workers and goods, agriculture, fisheries, competition policy, environment and transport. According to the House of Commons library, 231 statutes and 4,283 statutory instruments implemented EU obligations between 1993 and 2014. The legislative task ahead for Parliament is enormous, considering that Britain leaves the EU in April 2019. The withdrawal bill has begun its various stages through Parliament and is likely to be extensively criticised and amended as it embarks on its various stages through Parliament. To add to the complexity, negotiations with the EU over a Brexit deal will continue in parallel. The huge diversion of time and resources towards implementing Brexit will inevitably draw government attention away from important domestic policy on pressing matters such as housing and social welfare.

The government has inserted into the withdrawal bill a ‘Henry VIII clause’, so-called after the monarch with a fondness for bypassing parliamentary scrutiny. The clause allows ministers to use secondary legislation to amend laws without parliamentary scrutiny. The government justifies this by arguing that the measure expedites smooth passage of the bill through Parliament in time for the withdrawal from the EU. The government claims it will use the clause only to make technical changes where there are ‘deficiencies’ in wording. An example would be deleting references to the EU or its institutions. Although some safeguards are included to limit the situations in which unscrutinised laws can be changed, the powers have been criticised for being too wide-ranging. Ministers can create or repeal any law (including itself) and could be used to bypass a Parliamentary vote in the final days of negotiations. Even without the withdrawal bill, routine parliamentary scrutiny of secondary legislation is inadequate because of its sheer volume. The Brexit process makes matters much worse and, in the opinion of libertarians of all parties, amounts to a power grab by the executive branch of government. The fact that this whole process has been initiated so as to ‘take back democratic control from Brussels’ is an irony which has not gone unnoticed. Besides, the government’s track record on allowing Parliamentary scrutiny of Brexit is already highly dubious. It needed a Supreme Court ruling earlier this year to give Parliament a say on invoking Article 50.

It has become an article of faith amongst Brexiteers that Britain will be free to negotiate better trade deals than it ever got through its membership of the EU. As Britain’s chief negotiator put it: ‘First of all, leaving the EU gives us back control of our trade policy, and gives us the opportunity to maximise returns from free trade’. The Common Commercial Policy (CCP), as it is called, gives the EU the exclusive right to conclude trade deals. UK governments of all stripes – and Eurosceptic politicians – have hitherto endorsed the obvious truth that the collective weight of the EU in concluding trade agreements exceeded that of any one member state. The abrupt change in attitude by the Brexiteers may be part of its narrative that Brussels is bureaucratic and inefficient (unlike the British government of course!) and that Britain can recover its glory days as an independent free trading nation.

A British government White Paper – an official policy document – proudly proclaimed in February 2017 that ‘we will forge ambitious free trade relationships across the world’. Thanks to the divisions within the Conservative party, it is not clear what the relationships will be and whether they will begin to replace the barrier free-trade Britain enjoys with the world’s largest trading block of 300 million people on its doorstep. What is clear is that such relationships, even if achievable, will not be created instantly but will take years of detailed and complex negotiations to achieve. In a blog published by the London School of Economics, three international economists from Groningen University, Steven Brakman, Harry Garettsen and Tristan Kohl take a gloomy view: ‘If the UK government aims to compensate for the large negative trade shock of Brexit, the options seem limited. Based on existing empirical evidence on trade agreements, our conclusion is simple. If the UK wants to limit the negative trade effects of Brexit, the UK has no trade-enhancing alternative to an agreement with the EU that essentially mimics the situation in which the UK is a member of the EU’.

In contrast, European Commission President, Jean-Claude Juncker, was upbeat about the EU’s prospects without Britain, in his annual State of the Union message on 13th September. It was not only because he could say little else, but because the European economy is bouncing back ten years after the financial crisis. While regretting the British decision to leave the EU, he referred to the EU’s new found unity after Britain’s vote and declared that ‘the wind is back in Europe’s sails’. Growth in the 19-country eurozone has exceeded that of the US for the last two years – 2.3% compared with the 2.2% growth in the American economy. Eurozone unemployment has fallen to the lowest level since 2009, and industrial production is up 3.2% compared with last year. Juncker’s message was that Europe will move on, Brexit is not the end and the EU should use the opportunity to restate its mission.

Such has been the dismal and disordered chain of events since Article 50 was invoked. As Britain exits, chaotically and damagingly from the EU, the situation cries out for leadership. But all we have is Theresa May. In a major speech in Florence on 22nd September, the haughty and arrogant tone of her January Lancaster House speech, was replaced by something more conciliatory. After all, she is now politically weaker and the Brexit negotiation needs unblocking. The speech also had the near impossible task of placating the warring factions in her own party, as well as trying to give certainty to business on the UK government’s future direction.

The speech provided clarification on some issues and continuing vagueness on others. On UK financial obligations the prime minister offered to continue making payments into the EU budget until 2020 when the current budget round ends, thus sparing other member states from paying more or receiving less. This is thought to be about 20 billion euros (18 billion pounds). She was silent on other debts such as the cost of EU officials’ pensions and promised contributions to various EU funds. These could cost at least 50 billion euros and would provoke fury among Brexiteers. She was vague about future costs, saying only that the UK wanted to ‘continue working together to promote long-term economic development’ and would contribute ‘our fair share of the costs’ in ‘specific policies and programmes’ including science, education, culture and mutual security.

Another priority item in the negotiations is the border between Northern Ireland and the Irish Republic after Brexit. Apart from declaring support for a ‘frictionless’ border (whatever that means), there has only been ‘magical thinking’ as the EU describes it. May had little to say about this in her speech. ‘We have both stated explicitly we will not accept physical infrastructure at the border’, she said. So it can safely be assumed that the government remains clueless as to a solution.

Theresa May declared that people and businesses could benefit from an adjustment period of around two years after March 19th ’2019, when Britain leaves the EU. She accepted that during this period Britain will have to abide by EU rules, accept the jurisdiction of the European Court of Justice (ECJ), and continue to allow free movement of people, money, goods and services. This meets the demand of the Chancellor of the Exchequer, Philip Hammond, for a gradual exit to avert a regulatory cliff-edge for UK business. Such a practicable solution may not satisfy the Brexiteers’ more ideological wing which believes that a clean break will bring the post-Brexit paradise that much nearer. However, Moody’s credit rating agency joined the ‘remainiacs’ ‘remainers’ and ‘bremoaners’ in their pessimism about Britain’s future outside the EU. It downgraded the UK to an Aa2 rating from Aa1. It said leaving the European Union was creating economic uncertainty at a time when the UK's debt reduction plans were already off course.

At long last, after all the uncertainty there was a small step forward on citizens’ rights after Brexit. May offered to write legal protections for EU citizens living in the UK into the exit treaty. This would prevent any alteration by Parliament of their rights after Brexit. She accepted a role for the ECJ in settling rights disputes: ‘I want UK courts to be able to take into account the judgments of the European Court of Justice with a view to ensuring consistent interpretation’.

She was anxious to show that Britain was not turning its back on Europe. She emphasised that UK can make an important contribution to European defence and added that she wanted ‘a bold new strategic agreement’ providing a ‘comprehensive framework for future security, law enforcement and criminal justice cooperation’. The EU will welcome continued defence and security cooperation with the UK, but it has stated that it is not willing for the issue to be used as a bargaining chip in the Brexit negotiations.

Because her government is divided, Theresa May omitted any reference to the kind of future trading relationship Britain is seeking. Will it be a Norway type of agreement with access to the free market, but subject to free movement rules? Or should it be a Canada type of agreement with greater autonomy but fewer benefits? An agreement which combines big benefits at low cost is not on the agenda because, as we have seen, the EU does not want Britain to ‘have that cake and eat it’. May ruled out both types of agreement- ‘Norway’and ‘Canada’- in favour of a bespoke deal, but what that might be remains a mystery. She conceded that ‘neither the ECJ nor UK courts can be the arbiter of disputes’, meaning a new ‘strong and appropriate dispute mechanism’ would have to be found.

May’s Florence speech has been welcomed, but unsurprisingly it has not received an ecstatic response. Michel Barnier, the EU’s chief Brexit negotiator, described it as ‘a step forward’, but stressed that Brussels would have many questions for the British side about the ‘concrete implications’ of her words when the fourth round of Brexit talks get underway. France’s president, Emmanuel Macron, welcomed May’s willingness to move forward but more progress was needed on the rights of EU citizens in Britain and the border with Ireland - as well as the financial ‘divorce settlement’. Ireland’s Taoiseach (Prime Minister) Leo Varadkar, said May’s call for a two-year transition period was a ‘step in the right direction’, although more clarity was needed. Guy Verhofstadt, the European parliament’s Brexit coordinator, said the British position was ‘becoming more realistic’, but the speech lacked detail about the future relationship. The question is whether it was enough to kick-start the next round of the stalled Brexit negotiations.

Whatever Theresa May said or did not say, it should be remembered that she spoke for a divided party and a divided country. Scotland and Northern Ireland voted in the Brexit referendum to stay in the EU while England and Wales voted to leave. English voters who are five sixths of the total UK electorate voted 53.2% to 46.8% to leave the EU. Thus English nationalism prevailed. But what does this kind of nationalism stand for? The last word must go to Irish journalist, Fintan O’Toole writing in the New York Review of Books:

“Crudely, passionate nationalism has taken two forms. There is an imperial nationalism and an anti-imperial nationalism; one sets out to dominate the world, the other to throw off such dominance. The incoherence of the new English nationalism is that it wants to be both. On the one hand, Brexit is fuelled by fantasies of “Empire 2.0,” a reconstructed global trading empire in which the old colonies will be reconnected to the mother country. On the other, it is an insurgency and therefore needs an oppressor to revolt against. Since England doesn’t actually have an oppressor, it was necessary to invent one. Decades of demonization by Rupert Murdoch’s newspapers and by the enormously influential Daily Mail made the European Union a natural fit for the job’.

That is the contradiction that faces Theresa May, as Britain stumbles out of the EU – uncertain whether she is leading an insurgency or re-asserting former glories.

Peter Crisell