What is it that really bothers me about Theresa May’s approach to Brexit? The dither? Yes, of course. The deceit? That too, naturally. The lack of a genuine bottom line that would lead her to walk away on WTO terms? Totally.
But it hit me the other day that none of these deficiencies quite gets to the kernel of infuriation that observing the Prime Minister’s politically dishonest bungling of our EU departure engenders.
The biggest thing, the aspect that gets to the heart of the matter is as follows: that it is the agenda of those who were on the losing side in the referendum that is dictating the policy of Mrs May’s administration.
You hear it from her all the time – apparently we must have “frictionless” trade with the EU in order to secure the supply chains of multinationals and do the right thing by the economy.
Now, frictionless trade should clearly be ranked as a “nice to have” in our negotiating priorities. I am as concerned about the 12 per cent of UK economic output that is sold into EU markets as the next man.
But during the referendum, the Remain campaign spent almost its whole time arguing that leaving the EU would be an economic disaster because barriers to trade would be so damaging. Knowing that there was no widespread feeling of affection towards the project of European political integration, it spoke of little else besides the supposed crippling economic downsides of leaving. It even earned itself the moniker “Project Fear” in the process. And it was rejected by the British public in the great democratic event of 23rd June 2016.
Leavers, on the other hand, were quite clear that while frictionless trade was the preferred option, the UK could do just fine economically by trading with the EU on WTO terms – especially given the compensations of the right to do our own trade deals; the right to free the 88% of UK output not being sold into the Single Market from excessive regulation; the right to cut VAT rates; the potential tariff revenue that would be generated given our £70bn trade deficit with the EU; the right to have a more active regional policy; somewhat better insulation from the impact of a blow-up in one or more members of the eurozone; and much else besides.
The main ‘must have’ items set out by the victorious Leave campaign were as follows: control over our laws, borders – including maritime borders – trading regime and money.
But Mrs May has inverted the referendum. She is behaving as if the losing side won, while the winning side is only due the few baubles that can be squeezed out of the EU while keeping within the parameters set for her by the CBI and other big business lobby groups. So the ECJ is to have continuing legal sway in the UK, the EU will determine business regulations after we have left, we are to carry on paying large sums into the EU budget, the EU is to dictate the nature of the Irish border, EU trawlers will continue to be able to access UK fishing waters and there is likely to be a special immigration status for EU nationals.
All of this is offered in pursuit of a trading regime of zero tariffs, minimal checks and continued compliance with Single Market regulations.
Apparently, and this is an argument increasingly being taken up by her friends at the Daily Mail as they turn their backs on the sound instincts of Paul Dacre, we need to have post-EU arrangements with which the 16.1 million people who voted Remain will be content, as well as the 17.4 million people who voted Leave. This is not how binary choices are meant to work.
The British people are not daft. Had they treated the referendum as purely an economic matter, they would probably have voted to Remain. But they worked out that economic forecasting is – to say the least – a very inexact science, correctly figured that the economic downsides of leaving were being hugely exaggerated, factored in that there would also be economic upsides (set out above) and decided that it was perfectly doable.
This allowed them to go ahead and vote on what mattered most to them: a restoration of national democratic sovereignty, especially including control over which and how many people come into their country.
When Mrs May was installed as Prime Minister by Tory MPs, many people wondered how a Remainer could possibly negotiate Brexit. The answer, we have now learned, is that she couldn’t – or at least couldn’t with any degree of credibility such as would force the other side to take a reasonable and realistic attitude to the departure of its second biggest economy.
Despite the sabre-rattling of a few dozen Tory MPs who swear they have continuing affinity to a proper Brexit, I fear it is too late now for the Prime Minister to secure any deal that will abide by the spirit of the referendum result. The one substantial remaining hope is that we leave on “no deal” terms and then swiftly negotiate what Michael Gove correctly suggested during the referendum campaign itself would be an economic “bump in the road”.
But Conservatives as senior as Amber Rudd are suggesting that the Remain majority in the Commons will magically find a way to block leaving at all if the WTO option becomes the route out. And she might be right. So the road less travelled – the road that the country opted to go down – has in effect been barricaded.
What this will mean for British democracy and the British political process is yet to be seen. But I have two predictions: it will be big but it won’t be pretty.
The post Having the referendum losers dictate the Government’s Brexit policy spells trouble appeared first on BrexitCentral.
I won my seat in Mansfield at the last General Election by 1,057 votes. I am so grateful to local people for their support and I never take their votes for granted. I work hard to represent them, to promote our town and to improve the lives of all my constituents.
I’m confident that I understand the concerns and aspirations of people in what is a key marginal seat. They were heartened when the Prime Minister said at the Conservative Conference that their hard work was paying off and austerity was over. They are sick of feeling like they are worse off.
Speaking at the sidelines of the recent IMF summit, Philip Hammond then confirmed a £15 billion buffer to “plot the path out of austerity” that he would be able to release with the conclusion of a Brexit agreement. This, he said, “could be released to support the spending envelope or to deliver tax cuts or to pay down the debt more quickly”.
Now it looks like this – and more – could instead be handed over to the EU for an extra implementation period that nobody wants and our country does not need. The cost of extending the negotiating period is estimated to be as high as £15 billion. This extra cost comes on top of the £5 billion EU rebate that the UK would lose if it stays in the EU.
We know that the Chancellor says he cannot find extra funding for Universal Credit, so where are we now finding all the extra funding to send to the EU?
As Conservatives, we should exist to help people keep more of their hard-earned money – and siphoning off huge amounts to the EU risks diverting cash from people’s pockets and from public services.
If this plan goes through to divert funding away from domestic needs and instead subsidise the EU – in the vague hope of reaching a future agreement with them on our future relationship – then I and colleagues will need to seriously question why budgetary restrictions are being proposed on a domestic level in the forthcoming Budget.
We should not allow ourselves to be bullied by the EU and we should not treat Brexit as some sort of damage limitation exercise. People voted to Leave because they wanted a change, not because they wanted to replicate the status quo as closely as possible. This ought to be the time to stand up for the national interest, to believe in our country and plot a better course for people like my constituents.
Why on earth would we want to extend the transition phase when we don’t know where or what we are even transitioning to? If we know that deals will be done on the final day, at the eleventh hour, then we should be bringing that day forward rather than delaying it. We need certainty, not further confusion.
We know that this extension would cost billions, it won’t tackle any of the supposed issues around the Irish border, it would tie the UK to the Single Market and Customs Union and offer no leverage to secure a better deal with the EU.
We’ve got to work out whose side we are on. I’m on the side of the people of Mansfield, where 71% voted to Leave. It’s their lives and future I will take into account when voting on the Budget and future financial plans. Let’s back them and the British people who overwhelmingly voted to Leave the EU and take back control of money, borders, laws and trade.
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The referendum was not fought around a choice to ‘Leave’ or ‘Remain’, but rather a choice between the ‘economy’ or ‘democracy’ – at least that’s how the choice has been framed by the ongoing Remain campaign.
The Remain campaign, especially since the result, has focused on economic risk. Project Fear saw every major public institution, including the US Presidency, pile in to coerce a Remain vote with economic predictions of doom. Remain was presented as a continuity of economic stability.
Leave voters, however, were motivated primarily by democratic concerns: the simple wish to have laws both made and adjudicated locally, by representatives who could be voted in or out.
The odd thing is that economic stability and democratic legitimacy have been presented as mutually exclusive.
Brexiteers are presented as economically reckless, pushing a puritanical, ideological commitment to self-representation and democratic consent, in a world where democracy is too high a price to pay for economic and technocratic stability engineered by a superstate.
Remainers present themselves as the continuity of liberal democracies that are first and foremost technocratic, economic projects, where democratic concerns can be overplayed and lead to dangerous things like right-wing populism.
Presenting Remain as economic continuity played well into the hands of eurosceptic Remain voters with little appetite for economic uncertainty.
But, of course, it is a false choice.
Vibrant democracy and vital economy go hand in hand. Democracy underpinned the entire course of the rise of free market economic success stories in the North Atlantic and distinguishes the UK and our sovereign democratic allies from the communist bloc, southern hemisphere dictatorships and China.
At UK 2020, the think-tank I ran with Owen Paterson, much of our research demonstrated the economic vitality possible outside of the EU by: influencing global trade bodies as a full participant, not just as a 3% of one; freedom to enter bilateral trade agreements able to respond with greater agility to fluxes in the global market; and the ability to exert diplomatic reach and influence across emerging markets.
But the choice between democracy or economy is necessary for the continuity Remain campaign because the EU is undemocratic. Remainers know this.
Have you ever wondered why support for the European Union was so mute until 2016? Did you ever hear a pro-EU conversation down the pub? Why did even pro-EU Prime Ministers like David Cameron and John Major drape their speeches in eurosceptic language?
The answer is: because there has never been popular support for membership of the European Union; any support shown was usually sceptical; and most importantly because the architects and enthusiasts for the UK’s membership were isolated elites who achieved ever closer union by stealth.
To date, no-one needed to make a europhile case. Rather, 2016 was the first time the population was able to express its long held euroscepticism.
Defenceless against the EU’s democratic deficit, the Remain campaign argument could only claim the economic high ground and denigrate democratic credentials within our political culture: concern that a perceived hate crime was being carried out en masse by Leave voters. They say the vote was undemocratic because too many old people voted and not enough young; too many thick people were voting who had received mandatory state education through to the age of, wait for it, 16; the question wasn’t clear; the process not democratic enough; the plebiscite should be considered in constituent parts, such as Scotland or London…
But the absurdity of this divorce of economic competence from democratic vitality was expressed most baldly in a recent tweet from Broxtowe MP Anna Soubry:
The uncomfortable truth is that #Brexit cannot be delivered. It’s time we all faced the reality and were honest with the British people. We owe them a huge apology for a referendum with an option that was undefined & undeliverable. https://t.co/ejimmtPLNV
— Anna Soubry MP (@Anna_Soubry) October 14, 2018
While guised as compassion for a misled electorate, the gravity of her comments eluded her. She believes that the Government cannot extract itself from the EU.
Worse, it belies that democratic participation is impossible, or can only be managed if the parameters are strictly limited. Reading the tweet it was hard to imagine Anna Soubry could believe that there is even a role for Parliament, except as a bully pulpit to tell the masses how dumb they are. For if Government cannot act, why does it need to be held accountable? If Government does not need to consult the people, because it cannot do what they want, why bother with representation at all?
Which is why the call for a “People’s Vote” is so entirely grim. It is the stealth project, guised as concern for economic competence, dressed in populist clothes, to subvert a democratic process.
The truth of this is clear when you consider what a second referendum question would surely have to look like:
1. Are HM Government’s Brexit negotiations such a demonstration of incompetence that you would rather just Remain in the EU and be governed by them instead?
2. Are you still happy to pay tax and parking fines even though the social contract no longer exists, as long as there is economic stability?
Obviously with this last question, there would be no ‘Yes’ or ‘No’ response because the People will already have spoken through David Lammy and John Major. At least the youth of course would be particularly happy, and continue to enjoy open borders by moving to Romania in the vast droves that they have been doing since the former Soviet Bloc joined the EU.
But the disregard of democracy in the name of economic competence is most cynically combined in the Chequers plan. This has been crafted to maintain a technocratic ease for ‘economic stability’ without delivering the democratic mandate. Anna Soubry is right: Brexit is not being delivered. But the solution is not to shrink-wrap democracy to fit Theresa May and her team’s limited imagination, but to deliver Brexit. If that requires a different Prime Minister to do so, then so be it.
Economic vitality and democratic legitimacy do go hand in hand. One cannot be enjoyed without the other. Removing democratic legitimacy by subverting the plebiscite would be to significantly undermine the very basis of our thriving economy. Not only that, but the economic case for leaving the EU is compelling, and been described in some detail on this site.
And for those Remainers who think economic competence trumps democracy, their campaign’s best bet would be to suffer the UK to Leave. Their self-sacrifice, as their predicted economic Armageddon ensues, would surely be rewarded with a second referendum and a 100% Yes vote.
Outside of the EU, the referendum question would be a clear one: Do you want to join the European Union? Yes or No.
The people would know what they were signing up to: joining the EU, the euro, giving Brussels freedom to involve itself in the UK’s national budgets and social security, as well as increasingly run our military, diplomatic affairs, court decisions and the rest.
No more ever closer union by stealth, no more government leaflets with falsehoods about a ‘special status’ in a ‘reformed EU’.
For true Remainers, a ‘Join the EU’ Yes/No question, once Leave has been tried and tested, must surely be the way to really get stuck into the EU and to know that the people had chosen it.
But Remainers know this would be the end of their EU dream.
For once we have left the EU, voters will see it is possible to have both a flourishing economy and a vibrant democracy.
The Prime Minister describes the backstop as an insurance policy which no one in the UK or the EU wants or expects to use.
In fact the backstop was introduced by the EU and the EU has refused to concede the point, because the EU actually intends to use this legally-binding provision as a powerful lever in future negotiations.
If the UK signs a Withdrawal Agreement which includes any form of effective backstop, consider the negotiating position the UK would be in after we leave the EU.
During the negotiations on any future trade agreement, the EU would be in a position to demand whatever terms they choose: full compliance with all EU regulations, free movement of goods, services, people and capital and even compliance with EU taxation policy all under the jurisdiction of the ECJ. The UK could also be required to make huge payments to the EU for the privilege of permitting the EU to sell £95bn more goods to us than we do to the EU.
If the UK ultimately rejects the unreasonable trade terms offered by the EU, the transition period will ultimately end and the EU will exercise the backstop. Northern Ireland would become part of the Single Market and the Customs Union and be torn away from the rest of the UK with a border down the Irish Sea or the entire UK would permanently be locked into the Customs Union under the ECJ. That is precisely the reverse of what Theresa May says she is seeking to achieve.
The backstop is not an insurance policy which will never be needed or used. It is an ingenious device developed by the EU to create a comprehensive lock on the future trade and regulatory policy of the UK thereby ensuring that the UK would be under the absolute control of the EU and ECJ and could never effectively compete with the EU.
The EU’s negotiating strategy is brilliant and the UK would be the suckers. With any form of effective backstop, the UK would become a powerless vassal state with no negotiating position in terms of trade or any other policies that the EU chose to impose and the £39bn would have been committed irrevocably.
Clearly, the EU planned from the start to neutralise all of the UK’s strongest negotiating cards by demanding that the £39bn payment be unconditional and developing the Northern Ireland border issue and then introducing the backstop as a mechanism ultimately to force the UK to remain under the EU’s overall control. Olly Robbins and the rest of the Civil service are probably complicit in this deception which would achieve their preference of keeping the UK in the EU, if necessary, by stealth.
The critical importance of this issue is to understand how the dynamics of the trade negotiations will inevitably unfold during the transition period if the UK walks naively into the EU’s Backstop trap.
What is at stake with the EU’s backstop is the entire future of the UK as an independent sovereign state. If the UK concedes any form of backstop then the UK will have conceded the country’s sovereignty on a scale unprecedented in the democratic history of the United Kingdom. There is no conceivable basis that agreeing to a backstop can be in the national interest and it is certainly not a price to be paid for so-called “frictionless trade” with the EU.
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Below is the text of Theresa May’s statement just delivered to the House of Commons
Let me begin with the progress we have made on both the Withdrawal Agreement and the political declaration on our future relationship.
As I reported to the House last Monday, the shape of the deal across the vast majority of the Withdrawal Agreement is now clear. Since Salzburg we have agreed the broad scope of provisions that set out the governance and dispute resolution arrangements for our Withdrawal Agreement. We have developed a Protocol relating to the UK Sovereign Base Areas in Cyprus. Following discussions with Spain – and in close co-operation with the Government of Gibraltar – we have also developed a Protocol and a set of underlying memoranda relating to Gibraltar, heralding a new era in our relations. And we have broad agreement on the structure and scope of the future relationship, with important progress made on issues like security, transport and services.
And this progress in the last three weeks builds on the areas where we have already reached agreement – on citizens’ rights, on the financial settlement, on the Implementation Period, and in Northern Ireland, agreement on the preservation of the particular rights for UK and Irish citizens – and on the special arrangements between us such as the Common Travel Area, which has existed since before either the UK or Ireland ever became members of the European Economic Community.
Mr Speaker, taking all of this together, 95 per cent of the Withdrawal Agreement and its protocols are now settled.
There is one real sticking point left, but a considerable one, which is how we guarantee that – in the unlikely event our future relationship is not in place by the end of the Implementation Period – there is no return to a hard border between Northern Ireland and Ireland. The commitment to avoiding a hard border is one this House emphatically endorsed and enshrined in law in the Withdrawal Act earlier this year.
As I set out last week, the original backstop proposal from the EU was one we could not accept, as it would mean creating a customs border down the Irish Sea and breaking up the integrity of our United Kingdom. I do not believe that any UK Prime Minister could ever accept this. And I certainly will not.
But as I said in my Mansion House speech: We chose to leave; we have a responsibility to help find a solution. So earlier this year, we put forward a counter-proposal for a temporary UK-EU joint customs territory for the backstop. And in a substantial shift in their position since Salzburg, the EU are now actively working with us on this proposal. But a number of issues remain.
The EU argue that they cannot give a legally binding commitment to a UK-wide customs arrangement in the Withdrawal Agreement, so their original proposal must remain a possibility. Furthermore, Mr Speaker, people are understandably worried that we could get stuck in a backstop that is designed only to be temporary. And there are also concerns that Northern Ireland could be cut off from accessing its most important market – Great Britain.
During last week’s Council, I had good discussions with Presidents Juncker, Tusk and Macron, Chancellor Merkel and Taoiseach Varadkar and others about how to break this impasse. I believe there are four steps we need to take.
First, we must make the commitment to a temporary UK-EU joint customs territory legally binding, so the Northern Ireland only proposal is no longer needed. This would not only protect relations North-South, but also, vitally, East-West. This is critical: the relationship between Northern Ireland and the rest of the UK is an integral strand of the Belfast Good Friday Agreement. So to protect that Agreement we need to preserve the totality of relationships it sets out. Nothing we agree with the EU under Article 50 should risk a return to a hard border, or threaten the delicate constitutional and political arrangements underpinned by the Belfast Good Friday Agreement.
The second step, is to create an option to extend the Implementation Period as an alternative to the backstop. Mr Speaker, I have not committed to extending the Implementation Period. I do not want to extend the Implementation Period – and I do not believe that extending it will be necessary. I see any extension – or being in any form of backstop – as undesirable. By far the best outcome for the UK, for Ireland and for the EU – is that our future relationship is agreed and in place by 1st January 2021. I have every confidence that it will be. And the European Union have said they will show equal commitment to this timetable.
But the impasse we are trying to resolve is about the insurance policy if this does not happen. So what I am saying is that – if at the end of 2020 our future relationship was not quite ready – the proposal is that the UK would be able to make a sovereign choice between the UK-wide customs backstop or a short extension of the Implementation Period. And Mr Speaker, there are some limited circumstances in which it could be argued that an extension to the Implementation Period might be preferable, if we were certain it was only for a short time For example, a short extension to the Implementation Period would mean only one set of changes for businesses – at the point we move to the future relationship. But in any such scenario we would have to be out of this Implementation Period well before the end of this Parliament.
The third step, Mr Speaker, is to ensure that were we to need either of these insurance policies – whether the backstop or a short extension to the Implementation Period – we could not be kept in either arrangement indefinitely. We would not accept a position in which the UK, having negotiated in good faith an agreement which prevents a hard border in Northern Ireland, nonetheless finds itself locked into an alternative, inferior arrangement against our will.
The fourth step, Mr Speaker, is for the Government to deliver the commitment we have made to ensure full continued access for Northern Ireland’s businesses to the whole of the UK internal market. Northern Ireland’s businesses rely heavily on trade with their largest market – Great Britain – and we must protect this in any scenario.
Mr Speaker, let us remember that all of these steps are about insurance policies that no-one in the UK or the EU wants or expects to use. So we cannot let this become the barrier to reaching the future partnership we all want to see. We have to explore every possible option to break the impasse and that is what I am doing.
When I stood in Downing Street and addressed the nation for the first time, I pledged that the government I lead will not be driven by the interests of the privileged few but of ordinary working families. And that is what guides me every day in these negotiations. Before any decision, I ask: how do I best deliver the Brexit that the British people voted for? How do I best take back control of our money, borders and laws? How do I best protect jobs and make sure nothing gets in the way of our brilliant entrepreneurs and small businesses? And how do I best protect the integrity of our precious United Kingdom, and protect the historic progress we have made in Northern Ireland?
And, if doing those things means I get difficult days in Brussels, then so be it. The Brexit talks are not about my interests. They are about the national interest – and the interests of the whole of our United Kingdom. Serving our national interest will demand that we hold our nerve through these last stages of the negotiations, the hardest part of all. It will mean not giving in to those who want to stop Brexit with a politicians vote – politicians telling the people they got it wrong the first time and should try again. And it will mean focusing on the prize that lies before us: the great opportunities that we can open up for our country when we clear these final hurdles in the negotiations. That is what I am working to achieve.
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The transition period is supposed to be the time when businesses and Government adjust to the new arrangements for trade with the EU. Theresa May’s preferred own term of ‘implementation period’ makes clear that the original vision was for a period of time in which the practical systems would be put into place to allow the new trade agreement to come into force.
By definition, the implementation period therefore requires that before it begins we have an agreement to implement. Without an agreement to implement, a transition period is simply about delay and disguises the fact that while we may have left on paper, we are still effectively in the EU.
When I was involved negotiating for the UK Government with the EU on the terms of the future EU Constitutional Treaty – with Michel Barnier on the other side of the table – every negotiation concluded in the final days and even the final hours before the deadline.
The two sides can seem far apart but even so agreement generally emerges at the eleventh hour. That is why, if we can hold to a deadline for negotiations to end, we should not rule out an agreement emerging between the EU and the UK. It is, based on history, the most likely outcome.
However, we seem to be letting things slip. First we moved from a promise that the Withdrawal Agreement would include detailed heads of terms on the future trading arrangements with the EU. These have now apparently been diluted to a loose political agreement which it seems likely will contain sufficient ‘constructive ambiguities’ to allow the details of the future trading arrangement to be kicked down the road beyond the March 2019 deadline and into the transition period itself. Now the Government wants to extend the next deadline by delaying the end of the transition period.
We know that we hold maximum leverage in the negotiations before we agree to the Withdrawal Agreement which will see us hand over a potential £39 billion. We also know that businesses and individuals want certainty about what our future relationship with the EU will entail.
Once decisions are made and when we know what we are doing, we can all get on with earning a living and making the most of the new opportunities. Delaying decisions will weaken our negotiating position and is likely to cost investment and jobs.
The Government says it hopes that by giving more time for a deal to be reached, an extension of the transition period would make it less likely that the EU’s demand for a backstop on Northern Ireland would ever come into effect. This is wishful thinking.
The problem lies with the backstop itself, which was never necessary and should not have been agreed to. It effectively commits either the entire UK or Northern Ireland to remain part of EU arrangements – including the Customs Union – on the basis of a flawed analysis of what the EU says is necessary in order to prevent a hard border between Northern Ireland and Ireland. Both the EU and the Irish Taoiseach have made clear there would be no hard border in the event of ‘no deal’, yet EU negotiators have refused to engage with proposals to ensure a smooth border in a future UK-EU deal.
If the Government agrees to this backstop, which it knows it can never accept, then the EU will use the threat of it as leverage to make it impossible to reach an agreement that is either in our interests or that delivers what people voted for. There is already talk that the extension of the transition would allow time to negotiate a customs union for the whole of the UK to satisfy the EU’s backstop conditions.
The Government has said it doesn’t want to stay in the Customs Union, the people voted to leave the Customs Union and yet this is the position we have got ourselves into.
The danger in the Government’s strategy is therefore that we remain locked in the transition period or accept a deal that satisfies the EU’s interpretation of its backstop conditions, either of which would keep us under the control of the EU and locked into EU institutions that we voted to leave.
The Government may believe that its customs proposals in the Chequers proposal can satisfy the EU’s backstop conditions, but the EU has made it clear it does not agree – and if we enter the transition period without these issues resolved, then the EU will hold all the negotiating leverage.
There is the further issue of cost, with estimates of an extended transition period ranging from an additional £10 billion to £15 billion. These are huge sums of money that belong to taxpayers, not to Government. The voters – the taxpayers – have already said they want them to stop.
There is a trap being set here and we must not walk into it.
Things would be easier if there were more trust in the process. Before Chequers, those of us who were involved in the Leave campaign and who had stayed in touch with Leave voters since the referendum had faith that the Government was committed to delivering a form of Brexit that would respect what people across the country had voted for.
The Government’s handling of the shift in policy that led to the Chequers proposal and the handling of negotiations since then has eroded that sense of confidence and trust. Now is not the moment to be giving the negotiators more time.
The post We must not walk into the trap of an extended transition period appeared first on BrexitCentral.
The Chequers Plan has to be withdrawn if we are to achieve a meaningful Brexit. Discussions between the EU and UK about allowing an extension to the transition period in return for dropping the unnecessary Irish backstop are only of relevance if it means a Canada-style deal can then go ahead – it should not be a precursor to accepting a Chequers-based agreement.
The reason for this is simple: in a new report published today by Global Britain we show the Chequers Plan is the Single Market by another name – and remaining in it (rather than accessing it) would be damaging to British economic interests.
The key myth propagated in favour of the Single Market is that it is central to UK prosperity. It is not. Our report demonstrates that the UK trades well with the world but poorly with the EU. This is odd as the UK has no special trade arrangements with the US, China or Australia yet runs a small trade surplus with the rest of the world, but a very large deficit with the very region with which we have a customs union – the EU.
For example, our report exposes the contradiction that the UK enjoys a trade surplus with the US – arguably the most competitive market in the world – without having a trade deal, but suffers a huge trade deficit of £96bn with the EU where Single Market membership is the equivalent of a trade deal.
Due to its bureaucratic approach, the EU is in structural decline. It has underperformed every other region in the world for a generation. This is not a coincidence as other advanced economies including the US, Canada and Australia have powered ahead. It is the institutional arrangements of the EU – and the single currency in particular – that have resulted in rapid economic decline and socially unacceptable levels of unemployment in much of the EU.
The EU’s trend towards centralised regulation undermines competition and increases regulatory burden. Within the Single Market framework provided by adoption of a common rule book, the UK would continue to be beholden to needless regulation and legal creep as EU lawyers interpret a definition of EU competence well beyond merely trading standards and into to many other areas of national life.
The EU has also failed to sign global free trade deals with many of the world’s most important partners including the US, China and Australia. Inside the EU, the UK cannot strike its own deals with the many much faster growing nations. Because the EU is a diverse group of 28 nations, agreement is highly problematic and cumbersome, hence the failure to reach agreement. Outside the EU, the UK can much more readily strike free trade deals.
It is now apparent from comments from the US, China, Australia, India and others that far from being ’at the back of the queue’, other countries are very keen to strike mutually beneficial free trade deals with the UK. This will allow the UK to rebuild its historic mission of encouraging global free trade that has gone off track over the last 40 years as the UK has surrendered its trade policy, so unsuccessfully, to the EU.
It is also a myth that the UK needs to be part of the Single Market to trade with it. This is clearly not the case. All nations have access, outside a tiny number under sanction (North Korea and Syria for example) so long as they comply with local regulations. One does not need to join China to trade with it any more than one needs to join the EU.
It is clearly in the EU’s interests to agree a zero tariff deal with the UK – such as a Canada-style agreement. There are many reasons for this but the primary one is simply because the EU sells more to the UK than the UK sells to the EU. It would be nonsensical to undermine its own trade particularly at a time when EU growth is so weak.
If, however, the EU refuses to do so within a reasonable timeframe, the UK should leave the EU without a formal agreement on 29th March 2019, relying on WTO rules and striking free trade deals with our global partners. This outcome would be far better than what the Chequers Plan offers because the UK would otherwise be saddled with no say on Single Market regulation.
To remain under the jurisdiction of the common rule book, effectively still under EU jurisdiction, having left the EU, is a Remain option that delivers a sovereignty illusion – with no say, low growth and a high regulatory burden that would lock in perpetual trade deficits. That is why Chequers must be chucked and a Canada-style deal for the whole UK used as the template for a new relationship.
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In his letter of 23rd August to Nicky Morgan, Chair of the Treasury Committee, the Chancellor, Philip Hammond, repeated the Treasury’s prediction of an 8% reduction in GDP over the next 15 years under a no-deal Brexit.
This is exactly the same prediction that his predecessor, George Osborne, gave during the referendum campaign in his short- and long-term analyses of the economic consequences of a Leave vote. Mr Osborne said that the short-term analysis:
“…comes to a clear central conclusion: a vote to Leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000, GDP would be 3.6% smaller, average real wages would be lower, inflation higher, sterling weaker, house prices would be hit and public borrowing would rise compared with a vote to Remain”.
Only one of these predictions was realised, namely the weakening of sterling – which actually had significant benefits in terms of boosting both exports and the returns on investments held overseas.
The Chancellor’s letter also notes the support for his projections from organisations such the IMF, the OECD, the LSE and NIESR. Those organisations use the so-called ‘gravity model’ of international trade – as did the Treasury at the time of the referendum. This model predicts that more trade will be done between closer, larger economies than more distant, smaller ones. However, the predictions of the ‘gravity model’ have been very poor since the referendum. A particularly poor prediction was the impact on employment. Instead of falling by 500,000, employment has risen by 600,000.
The gravity model would also have been a poor predictor of trading relationships well before the referendum. For example, it would have failed to predict that Britain’s principal trading partners in the nineteenth century were not European, but rather the US, Canada, the West Indies, Argentina, Brazil and China. These are the very trading partners we can re-engage with now once we now longer have to rely on Brussels taking seven years to negotiate a typical trade deal which is then subject to a veto by Wallonia.
As a result of the poor predictions, the Treasury has changed its model, but it won’t reveal how. It is now believed to be using a ‘computable general equilibrium’ model of trade called GTAP (from the Global Trade Analysis Project at Purdue University). This is a more ‘classical’ model of trade and has both a ‘supply’ side (involving production functions with factors of production, such as labour and capital) and a ‘demand’ side. This is very different from the gravity model, so it is surprising to hear the Chancellor continuing to assert that the IMF, the OECD, the LSE and NIESR support the new Treasury model, unless they have also switched models and kept quiet about it.
Despite using a new model, the Treasury has clearly calibrated it to produce exactly the same dire predictions as the previous gravity model – a strategy known internally as ‘policy-based evidence making’. The new model was then used to produce the ‘Cross Whitehall Briefing’ forecasts that have informed preparations for the UK’s departure from the EU across all Whitehall departments. Yet the only information about the new model that the Treasury has put into the public domain – very reluctantly – is the poorly photocopied set of PowerPoint slides on the parliamentary website. These reveal nothing about the structure of the model or how it was calibrated. Even the Prime Minister describes the new Treasury model as a ‘work in progress’.
Even more disappointing is the fact that the Treasury refuses to publish the results from the new model under the assumption that the UK implements the kind of free trade agreements (FTAs) that our main trading partners are begging us to introduce once we leave the EU in March next year.
Fortunately, it is possible to assess the benefits of these FTAs using a similar ‘computable general equilibrium’ model built by Professor Patrick Minford of Cardiff University and Chair of Economists for Free Trade (EFT). EFT have used the model in our new Budget for Brexit Economic Report – which forecasts huge economic gains in the event that Britain leaves the EU under a SuperCanada deal. The report also calls for a Post-Brexit Fiscal Fund to demonstrate that ‘Britain is open for business’.
Minford calculates that by 2020, there would be £25 billion per annum for the Post-Brexit Fiscal Fund and by 2025 this will have increased to a huge £65 billion per annum. To give an idea of the type of policies this could fund, Minford says:
“A 1% rate cut in
- Corporation tax would cost £2.6 billion in 2020 (hence £3.2 billion by 2025-6)
- The standard rate of income tax £4.9 billion (£5.8 bn in 2025-6)
- The standard rate of VAT £6.4 billion (£8 bn.)
- The top rate of income tax £1.3 billion (£1.6 bn.)
- The very top (‘additional’) rate £0.2 billion (£0.3 bn.)
From 2025, the further dividend of £40 billion per annum could be taken. At this point,
- The standard rate could be cut by 2%, at a cost of £12 billion (raising the tax threshold is very expensive and hardly affects any marginal rates, mainly going in the form of lower taxes to the better off, barely helping the less well-off because they lose benefits); or else VAT could be cut by 1.5% for roughly the same cost
- Corporation tax could be cut another 3%, costing another £10 billion; and
- The top rate could come down by 2%, costing around £3 billion.
- The remaining £15 billion could be used on spending.”
These figures give a very different view of the prospects for the UK economy post-Brexit. It is clearly unacceptable that key economic decision-making about the future of this country’s economy depends on a ‘work in progress’ model by the Treasury that is not in the public domain or subject to independent scrutiny. Even the Treasury’s two pre-referendum models were put in the public domain and were subject to the criticisms they justly deserved.
It is time for the Treasury to immediately release a technical report outlining the structure of the model and the assumptions it used to calibrate it. A key set of assumptions that were used in the ‘Cross Whitehall Briefing’ study is that the UK will impose the same set of tariffs on trade with the EU that we are forced to impose on the rest of the world under the Common External Tariff. These increase the cost of food and manufactures to UK consumers by an average of 20% once non-tariff barriers are taken into account.
It is in the gift of the UK Government to set the tariffs it imposes on imports from abroad after we leave the European Union. The Government could immediately agree to reduce these tariffs on imports from all countries in order to benefit UK consumers as EFT have been recommending for some time. For example, it could reduce tariffs by 12%, the same as the devaluation of sterling at the time of the referendum, so that the prices of imported goods are no higher than before the referendum.
This would greatly benefit UK consumers, but the Treasury has deliberately not modelled this scenario either. The Treasury must therefore immediately release full details of the new Treasury model so that others can use it to estimate the huge economic benefits from cutting taxes and import tariff as well as the other benefits to Global Britain pursuing free trade deals around the world.
The post The Treasury’s policy-based evidence making on Brexit has got to stop appeared first on BrexitCentral.
Imagine if there was a march demanding a re-run of a General Election. It would be inconceivable and absurd – yet those marching through the streets of London yesterday had the sole intention of overturning the largest democratic exercise in British political history.
The People’s Vote campaign is a piece of spin as essentially it is a call for a second referendum in all but name. The question is unknown. I can’t see three options on the ballot paper as Remain, Leave with the potential deal and Leave with no deal would split the Leave vote. Any true ‘People’s Vote’ with the intent of ratifying the negotiated settlement would be accepting the deal or Leaving with no deal.
As it stands, the UK’s political landscape is toxic and it is ludicrous to suggest and attempt to justify that a second referendum would miraculously heal this scarring division in the country. It will take policy in the communities rather than a plebiscite to solve this.
Re-running the 2016 vote would produce a greater disconnect between the politicians in Westminster and the people. Representatives in Parliament and the Prime Minister are trying to act in the national interest, as seen with the PM trying to fudge some sort of compromise with the EU, potentially now with the dilemma of a customs union or a no-deal Brexit. This was despite the Prime Minister ruling out customs union membership in her Lancaster House and Mansion House speeches as the fifth-largest economy would not be able to act globally by signing new trade deals with the United States, Mexico, Canada, Japan, Australia, New Zealand and so on.
It feels as if I’m being patronised by a privileged elite when the likes of Andrew Adonis, Alastair Campbell, Nick Clegg and Tim Farron suggest the motives behind voting for Brexit were misinformed. But, they weren’t! Former Prime Minister David Cameron and the then Chancellor, George Osborne, constantly said that Britain would be quitting the Single Market if the people voted to Leave. Not to mention the fact that leading Leave campaigners, Boris Johnson and Michael Gove, reiterated this. Any calamitous fudge deal will not be acceptable to the 17.4 million who expected to take back control of their borders, laws, trade policy and money.
The EU has essentially made the bed for those campaigning for a People’s Vote. The EU is particularly sceptical of public opinion in its member states. In July 2015, the Greek population voted to reject draconian measures imposed by the European Commission (and Angela Merkel) in a highly dictatorial fashion. Yet pressure from the Commission forced Prime Minister Tsipras to accept the bailout package. In 2009, the people in Ireland were made to vote again after rejecting the Lisbon Treaty in the first referendum and in 2005, the French and Dutch rejected the Constitutional Treaty. The Constitutional Treaty was essentially rebranded as the Lisbon Treaty and implemented through the backdoor.
If the turnout for our 2016 referendum had been a measly 30 per cent, then the other side would have an argument as a low turnout questions legitimacy. But the turnout was 72.2 per cent – the highest turnout in a UK-wide electoral event since the 1992 election!
Speaking of 1992, John Major has been pretty vocal about Brexit and the Leave campaign in recent days: the same individual who weaselled out of a referendum to ratify the Maastricht Treaty. Major never called a referendum out of self-interest because he knew the British electorate would reject the Maastricht Treaty and his political career would have been over.
Then of course came Tony Blair (and his sidekick Alastair “People’s Vote” Campbell) who relied on Tory votes when it came to a parliamentary vote on going to war in Iraq. Blair, in particular, was driven by his special relationship with George W. Bush as somewhere between 750,000 and 2 million people marched in opposition to that decision to go to war. If there had been a referendum on the war in Iraq, then it is perfectly reasonable to assert that the UK electorate would have voted against the invasion. Referendums are only popular when they suit one’s political advantage.
The post We already had a “People’s Vote” and the people voted to Leave the EU appeared first on BrexitCentral.
Here is the text of the statement Theresa May has just delivered to the House of Commons, updating MPs on the Brexit negotiations:
With permission Mr Speaker, I would like to update the House ahead of this week’s European Council.
We are entering the final stages of these negotiations. This is the time for cool, calm heads to prevail. And it is the time for a clear-eyed focus on the few remaining but critical issues that are still to be agreed.
Yesterday the Secretary of State for Exiting the European Union went to Brussels for further talks with Michel Barnier. There has inevitably been a great deal of inaccurate speculation. So I want to set out clearly for the House the facts as they stand.
First, we have made real progress in recent weeks on both the withdrawal agreement and the political declaration on our future relationship. And I want to pay tribute to both negotiating teams for the many, many hours of hard work that have got us to this point.
In March we agreed legal text around the Implementation Period, citizens’ rights and the financial settlement. And we have now made good progress on text concerning the majority of the outstanding issues. Taken together, the shape of a deal across the vast majority of the withdrawal agreement – the terms of our exit – are now clear.
We also have broad agreement on the structure and scope of the framework for our future relationship, with progress on issues like security, transport and services.
And perhaps, most significantly, we have made progress on Northern Ireland – where Mr Speaker, the EU have been working with us to respond to the very real concerns we had on their original proposals. Mr Speaker, let me remind the House why this is so important.
Both the UK and the EU share a profound responsibility to ensure the preservation of the Belfast Good Friday Agreement, protecting the hard won peace and stability in Northern Ireland and ensuring that life continues essentially as it does now. We agree that our future economic partnership should provide for solutions to the unique circumstances in Northern Ireland in the long term.
And, while we are both committed to ensuring that this future relationship is in place by the end of the implementation period, we accept that there is a chance that there may be a gap between the two. This is what creates the need for a backstop to ensure that if such a temporary gap were ever to arise, there would be no hard border between Northern Ireland and Ireland – or indeed anything that would threaten the integrity of our precious union.
So this backstop is intended to be an insurance policy for people of Northern Ireland and Ireland.
Previously the European Union had proposed a backstop that would see Northern Ireland carved off in the EU’s customs union and parts of the single market, separated through a border in the Irish Sea from the UK’s own internal market. As I have said many times, I could never accept that, no matter how unlikely such a scenario may be.
Creating any form of customs border between Northern Ireland and the rest of the UK would mean a fundamental change in the day-to-day experience for businesses in Northern Ireland – with the potential to affect jobs and investment.
We published our proposals on customs in the backstop in June and after Salzburg I said we would bring forward our own further proposals – and that is what we have done in these negotiations. And the European Union have responded positively by agreeing to explore a UK-wide customs solution to this backstop.
But Mr Speaker, two problems remain.
First, the EU says there is not time to work out the detail of this UK-wide solution in the next few weeks. So even with the progress we have made, the EU still requires a “backstop to the backstop” – effectively an insurance policy for the insurance policy.
And they want this to be the Northern Ireland-only solution that they had previously proposed.
We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom. And I am sure the whole House shares the government’s view on this. Indeed the House of Commons set out its view when agreeing unanimously part 6, section 55 of the Taxation (Cross-border Trade Act) on a Single United Kingdom customs territory.
“It shall be unlawful for Her Majesty’s Government to enter into arrangements under which Northern Ireland forms part of a separate customs territory to Great Britain.”
So, Mr Speaker, this message is clear – not just from this government, but from this whole House.
Second, Mr Speaker, I need to be able to look the British people in the eye and say this backstop is a temporary solution. People are rightly concerned that what is only meant to be temporary could become a permanent limbo – with no new relationship between the UK and the EU ever agreed.
I am clear we are not going to be trapped permanently in a single customs territory unable to do meaningful trade deals. So it must be the case, first, that the backstop should not need to come into force. Second, that if it does, it must be temporary. And third – while I do not believe this will be the case – if the EU were not to co-operate on our future relationship, we must be able to ensure that we cannot be kept in this backstop arrangement indefinitely.
I would not expect this House to agree to a deal unless we have the reassurance that the UK, as a sovereign nation, has this say over our arrangements with the EU.
Mr Speaker, I do not believe the UK and the EU are far apart. We both agree that Article 50 cannot provide the legal basis for a permanent relationship. And we both agree this backstop must be temporary. So we must now work together to give effect to that agreement.
Mr Speaker, so much of these negotiations are necessarily technical. But the reason this all matters is because it affects the future of our country. It affects jobs and livelihoods in every community. It is about what kind of country we are and about our faith in our democracy.
Of course, it is frustrating that almost all of the remaining points of disagreement are focused on how we manage a scenario which both sides hope should never come to pass – and which if it does, will only be temporary. We cannot let this disagreement derail the prospects of a good deal and leave us with the no deal outcome that no-one wants.
I continue to believe that a negotiated deal is the best outcome for the UK and for the European Union. I continue to believe that such a deal is achievable. And that is the spirit in which I will continue to work with our European partners.
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