Sentiment about a Brexit deal fluctuates wildly almost by the hour. Whatever the current state of speculation, we surely have to prepare ourselves for what happens if Chequers falls over.
I know this is anathema to many Brexiteers. But my personal view is that while No Deal would likely be fine in the long run, in the short term it would be an embarrassing economic fiasco. The consumer story from hell. It would be to Brexit what Gerald Ratner was to cut-price jewellery.
Instead of going down that risky route, I want to ask BrexitCentral readers to consider falling back on the UK’s membership of the European Economic Area. This is the so-called “Norway then Canada” or “Norway for Now” strategy advocated by myself, Nick Boles MP and others.
Please hear me out. It is quite possible that neither Chequers, nor “No Deal” nor trading on World Trade Organisation terms, nor a second referendum will pass in Parliament. In which case, the European Economic Area will be the only thing left on the table. Should we not seize it?
Far from reducing Britain to a “fax democracy”, where we have to pay huge sums into the EU and yet have no say over the rules and regulations passed in Brussels, the EEA is a commercial treaty between sovereign nations and could be a good resting point, outside the EU, the Common Agricultural Policy, the Common Fisheries Policy and the jurisdiction of the European Court of Justice – but with useful legal and economic options. We would effectively be members of the Single Market, but with sovereign protections.
George Yarrow, the Oxford professor who is the intellectual godfather of the strategy, also estimates that our payments to the EU – which would be limited to participating in relevant programmes – would fall from around £9.5bn to £1.5bn.
What is more, we are already contracting parties to the EEA. It is not true, as some have asserted, that we are leaving by virtue of having given notice under Article 50 to leave the EU. The EEA is a separate treaty, which we have signed on our own right, and has its own withdrawal arrangements. If we want to make the EEA treaty operative, all we have to do is to apply to the related European Free Trade Association (EFTA). This is the other “governance pillar” to the EEA.
There is not much the EU could do to stop us exercising our treaty rights without falling foul of a higher law, the 1969 Vienna Convention on the Law of Treaties. Don’t take my word for it. Take the word of Sir Richard Aikens, a former appeal court judge, on the Briefings for Brexit website. If the EU cut up rough, we could take them to the International Court of Justice (ICJ).
As for the infamous Irish backstop, the EEA would put in place the legal structure to make the technical border solution suggested by David Davis work. As we would be members of the Single Market, it would anyway be unnecessary.
On any measure, the EEA is also superior to the proposed transition arrangements. Inside the EEA we would have decision-shaping rights, and also the right to adapt and veto new legislation. We would, anyway, only be in the Single Market which accounts for just 28% of EU legislation.
If, while in the EEA, there was a dispute with the EU, it would be adjudicated by the EFTA Court, on which we would have two out of five judges. Contrary to myth, it is not bound by the ECJ. They do have to develop a homogenous area of law together but frequently the EFTA Court has disagreed with the ECJ.
Nor is it true that we would not be able to control freedom of movement. The EEA Treaty focuses in freedom of movement of workers and includes various measures to impose limits and restrictions, including an emergency break (as used by Liechtenstein). There is no common citizenship and British passports would be back.
Let’s be honest. It isn’t perfect. And it seems to me the biggest risk, which some Brexiteers have already pointed out, is we get stuck. Like Income Tax (introduced temporarily in 1798, it remains with us) the EEA might perpetuate itself. Some have called for a hard legislative commitment to leave before 2021.
However, I would contend that is a glass half empty way of looking at the EEA treaty. The exit mechanism, giving one year’s notice under Article 127, is much more permissive than the Article 50 process. Rather than put a hard stop on our departure date, which creates another cliff edge against UK interests and upsets the Norwegians, we should commit to a review and a break clause to be voted on by Parliament. If it did not work, we could leave to join a Canada-style free trade agreement. And in the meantime it might evolve into a congenial home for us.
The question to which the EEA is the answer is clear. So let me repeat it. What happens if Chequers falls over and the other options are blocked too? It is hard to see any other realistic, legally deliverable alternative. I urge Brexiteers not to rule it out.
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The British people’s historic vote to leave the EU – the largest democratic result ever in our country – is not something to be feared.
It wasn’t a vote to leave Europe or to pursue an isolationist future. It was a vote for us to become a strong, independent nation once again – a country that is not afraid of standing on its own two feet.
The British people recognise, as I do, that around 90 per cent of global economic growth will come from outside the EU in the years ahead, and that the EU now accounts for less than half of our overall trade. Over 90% of all trade travels by sea – and we are inextricably linked to this global network. As we leave the EU, the one thing which remains fixed is our geography. We will remain, as we always have been, an island maritime nation, outward-facing and trading across the globe. British goods and services are recognised as the best in the world and sought after by global customers. This will not change.
So we must look beyond the shores of our European continent and be prepared to walk away from negotiations if the deal offered by the EU does not deliver a real Brexit – and be unafraid of doing so. We only need to be ready to trade under World Trade Organisation (WTO) rules: international laws that regulate the trading relationships of 164 member states and around 98% of global trade.
We will be leaving on 29th March next year and only a good deal for the UK should be agreed to. Otherwise we will be insulting the democratic request given to Parliament.
It is starting to be more than a little boring to have to listen to the almost daily ritual of doom, gloom and scaremongering. We are told there will be border chaos, food and medicine shortages, hikes in prices, states of emergency, gridlocked motorways, catastrophe – even an end to peace in Northern Ireland and civil unrest.
Beyond the Westminster village, and certainly at the top of England in my constituency, 350 miles from London, people listen to all this with incredulity. Last week’s Budget implemented our-tax cutting manifesto promises early, lifting more of the lowest paid out of tax altogether. It announced an unexpected tax windfall that we’ve been able to spend on our vital public services. UK salary growth has now risen to 3.1%, the fastest growth in wages in almost a decade, employment levels are at their highest since the 1970s and we’re growing steadily as an economy. Our future has never looked brighter.
Voters comprehensively rejected establishment scare stories during the 2016 referendum debate – and it turns out that they were absolutely right to do so. Let’s not bore and patronise them further; let’s get to the heart of how beyond March 2019 should look.
My long-held view is that we can deliver a great future trading relationship – and more – after our departure from the EU club, by agreeing a mutually beneficial trade deal for the whole of the UK, similar to Canada’s. This arrangement would allow us to boost our global competitiveness and innovation, as well as help the world’s poorest countries by enhancing trade and investment opportunities that contribute to the economic growth of their less-developed economies.
This isn’t a “hard” or “extreme” version of Brexit. This would be, as Canada’s Prime Minister, Justin Trudeau, said of his free trade deal, about creating “good, well-paying jobs”, putting “food on the table for families”, helping to “grow and strengthen our communities” and ensuring that each generation is “better off” and has a “higher standard of living, than the one that preceded it”. Why would this sort of deal be so bad for us?
If the EU doesn’t want to negotiate this sort of free trade deal with us immediately, we won’t crash out of the EU over some invisible cliff edge. Far from it: there are protections in place for the UK under international law under a set of terms overseen by the World Trade Organisation. The US, China and India are among the EU’s biggest trading partners – and they do not have a trade deal with the EU. They trade on WTO terms.
No deal would be better than a bad deal because being tied into EU regulations without a voice would only mean their controlling our future success by anti-competitive actions.
Under WTO rules – putting the bluff, bluster and meaningless threats aside – the EU won’t be allowed to discriminate against UK businesses. It won’t be able to set tariffs on our goods that are higher than those they impose on other countries; and it will be forbidden from using other regulations or standards (non-tariff barriers) to discriminate against our goods and services.
Arbitrary health and safety inspections at borders would not be lawful and the WTO’s new “Trade Facilitation Agreement” would require the EU to maintain borders, which are as frictionless as possible, using all the modern technologies at its disposal.
The WTO has taken great strides in promoting global trade since its inception in 1995. And at its roots lie values we all share: an end to discrimination, more openness and transparency, increased competition, discouraging unfair practices, protecting the environment and ensuring less developed countries have extra time to adjust to WTO provisions.
We need to be having our own voice at the WTO, speaking up for the interests of British consumers and businesses. We don’t need the European Commission to do this for us.
The WTO option is an entirely acceptable, workable alternative to a free trade deal as we leave the EU and Roberto Azevedo, the Director General of the WTO, has said that he is looking forward to having the UK back as an independent champion of free trade.
The UK is strong enough to walk away from these negotiations. Future generations won’t forgive us if we agree a bad deal with the EU that means we have not left the controls of others over our decisions.
There is no cliff-edge, just a stepping-stone to the future that our extraordinary democratic voice shouted at us – let us become, once again, a self-governing, free-trading nation.
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In 2016 the greatest democratic event in this country’s history took place. 17.4 million people voted to leave the EU. They wanted us to become a strong, independent trading nation once again – a country unafraid of standing on its own two feet. That is why we’ve got to stop allowing ourselves to be bullied by our EU counterparts and start believing in Britain.
It’s only by accepting that we’re strong enough to walk away from the negotiating table – and thoroughly preparing to do so – that we will secure a trade deal with the EU that is good for our consumers and businesses.
We’ve heard some ridiculous suggestions from France recently. Apparently it will grind the Port of Calais to a halt unless we hand over £39 billion of taxpayers’ money, even if we don’t finalise any deal at all.
There are around 60 sailings to my constituency port of Dover from Dunkirk and Calais every day. The cross-Channel trading route is a huge success story. More than £120 billion of trade moves through Dover’s docks every year and when you add Eurotunnel to the mix, the Channel Ports account for about a third of the UK’s trade in goods.
Clearly the French and the Europeans want to keep this flowing after Brexit day next year. Indeed, a desire for any other outcome would be irrational economic self-harm. EU nations sell twice as much to us as we do to them, so any extra tariffs or traffic slowdowns would hit French farmers and German car-makers twice as hard.
Yet the public continue to be spoon-fed doom and gloom about border chaos, food shortages, price hikes, gridlocked motorways and even civil unrest from within this country – the latest manifestation of Project Fear. These vacuous threats from across the Channel represent a serving of Projet Peur 3.
To find the source, look no further than the Élysée Palace in Paris. President Macron and the EU want to bully us into accepting a bad deal. They think Britain’s greatest days are behind us and that we must be punished for daring to leave.
They are wrong about the British people. We know what it takes to stand up to bullies.
Fortunately, Xavier Bertrand – the forward-thinking boss of the Calais and Dunkirk region – takes the opposite view to President Macron. M. Bertrand knows the Port of Dover is an economic powerhouse that benefits the people of Calais and Kent. He wants to do the right thing, keep trade flowing and look after the people he serves.
But while calling out empty threats from across the Channel, we’ve got to strengthen our hand in the negotiations as well. We need to turbocharge preparations to leave the EU on World Trade terms and get serious about preparing to strike a World Trade deal. Unfortunately this week’s Budget did no such thing.
The truth is this work should have started the day after the 2016 referendum. I have long argued we need to be ready on day one for every eventuality – deal or no deal. No-deal preparations seem to have been held up by Whitehall officials who never believed Brexit would happen, and certainly don’t want it to now.
This week was crunch time and the Chancellor had the perfect opportunity in his Budget to prepare, ambitiously and positively, for a no-deal outcome. Instead he chose to set aside an extra £500 million – a drop in the ocean in terms of both government spending terms and what is actually needed.
He should be announcing an expansion of off-road lorry parking and committing to significant investment in our borders. The M2/A2 to Dover needs to be upgraded and widened. And we must start modernising our border systems, joining the likes of Singapore as world leaders in frictionless trade and security.
I state again that 17.4 million people voted to leave the EU – well over three million more than have ever voted for a political party in an election. They all believed in creating a better country for our children and grandchildren, where everyone has the chance to get on and succeed, where we are free to run our own nation and economy in a way that works best for us – not Brussels. Remainers are right when they say Brexit is the most important challenge our nation has faced since the Second World War. But they are wrong when they ignore its exciting opportunities, and dismiss what we must do to take them.
We need our leaders to start demonstrating a full commitment to making it work – no matter what happens in the negotiations. By continuing to talk our country down, allowing us to be bullied by idle threats from abroad and failing to prepare for any eventuality, all we’ll achieve for our country is a bad deal.
A bad deal would shackle us forever. EU rules are bad for hard-working taxpayers, as they allow giant corporations to dodge taxes. EU regulations are bad for business, as they protect those firms from honest competition. EU tariffs are bad for consumers, as they increase the cost of food and clothing. And all of it is bad for the rest of the world, as we cut off developing nations, as well as allies who not so long ago fought beside us for our freedom.
That’s why it is so important to agree a deal with the EU that works for us. And if we can’t agree one, we will walk away. Many countries are waiting in the wings, ready to strike free trade deals with their old friends. We cannot let the opportunity slip.
We must believe in Britain. We are strong enough to go our own way. Future generations won’t forgive us if we become so desperate to secure a trade deal with the EU that we do so at the expense of Brexit’s great opportunities.
Let’s stop being defeatist. Let’s become a truly free-trading, global nation again. We have had some great days. But if we hold firm, the greatest yet lie ahead.
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So here we are in the last days of the negotiations. Our Government stands on one side of a rhetorical gulf, terrified of No Deal and having made no significant preparation for it, its finest minds baffled by the impossible Irish Rubik’s Cube constructed for it by the EU.
On the other stands the EU, sure from the outset that the UK would, in its delicate phrase, “take dictation” and now convinced that the strategy will pay off. No doubt the British officials leading the negotiations are assuring the Government that a deal can still be pulled off.
But what a “deal” it will be: a binding treaty in which the UK gives away large amounts of money and what seems to be a perpetual lien on Northern Ireland and in exchange gets an expensive “transition” period (with an option, it seems, to pay more for an even longer one) and a non-binding “framework” (possibly only a few pages long) that will guide the trade talks we will begin (but can hardly hope to conclude) in the never-ending “transition” period. During that “transition” we shall be fully subject to EU law but have no representation in its legislature (in possible contravention of the European Convention on Human Rights, but what the heck).
This will be mendaciously described by some as a “good deal for Britain that delivers the referendum result” and the Government will set out to frighten and cajole MPs of all parties into supporting it, with the clock ticking and the fanciful “cliff-edge” just a short hop down the road.
It is a scandal, really. But is the alternative “crashing out with no deal”, as some put it? No. It is still possible for the UK to take back control of the negotiations and achieve a successful and workable Brexit. But to do that means being willing to embrace the prospect of leaving without a trade deal. And it requires a proper understanding of what the EU intends the Irish backstop to achieve.
Our politicians have largely failed to present the backstop to us in its proper light. They say it is a transitional measure, one that will cover a gap between next April and a new trading relationship that will be so close as to make it redundant. They talk freely therefore of an “end-date” to the backstop, anticipating that close relationship as permanent.
But the EU perfectly understands that, once we leave the EU, there is nothing they can legally do to stop us from diverging, piecemeal or suddenly, from our new trading relationship. Michael Gove has told them that is exactly what we intend to do, after all. And if we do that, they may feel forced to erect a border on the island of Ireland to “defend” their Single Market. They want a guarantee that they can never be obliged to do that.
So what the EU is seeking in an Irish backstop is not a transitional or temporary thing. It has to be permanent (“workable, enforceable and all-weather”, as Michel Barnier put it recently, “all-weather” being the new euphemism for “permanent”). It will not be effaced or rendered null by a future trading relationship. It is what it says: a backstop, a perpetual insurance policy ensconced in international law that will come into play if ever we want to change our future trading arrangements in a way that could be judged by the EU to necessitate a “hard” land border between the UK and the Republic of Ireland. The EU thinks they have made this sufficiently clear and they look in bafflement at British interlocutors when they say there must be an end-date to the backstop!
In short their view is that Great Britain (not the United Kingdom) can strike any reasonable trade deals it can manage, with the EU or with other countries, but that, if we do so, we must leave Northern Ireland behind in the Customs Union and large parts of the Single Market, permanently deprived of a say in substantial parts of the laws affecting it, and with a goods border in the Irish Sea.
And since no British Prime Minister will ever propose abandoning Northern Ireland (unless it freely and lawfully chooses to join the Republic under the terms of the Good Friday Agreement), the whole UK will be trapped in perpetual subservience to the EU, tied to their rules and laws and having no say in them. That is what signing it means. Like a virus, the backstop may lurk in the marrow for many years unnoticed, but it will pop out if ever we seek to make a real break for freedom. Properly understood, it destroys the notion of some Brexiteers that surfaced in mid-year that we can “get out and fix it later”. We can’t fix it later: not while maintaining our territorial integrity.
If that is the price of a “deal”, clearly we must go for No Deal. But there are in fact two deals: a Withdrawal Agreement, as envisaged by Article 50 and a future trading relationship, formal talks on which will not begin before we leave. We would do well to split them. We can certainly offer a Withdrawal Agreement acceptable to us, but uncoupled from a deal on the future relationship.
Old-fashioned diplomats, going into negotiations, always sought to avoid being in the position of the party seeking something: the demandeur in diplomatic parlance. Our weakness in the negotiations is that we are desperately seeking something and the EU, through canny sequencing of negotiations (in which we lazily and stupidly acquiesced), has managed to make out that it is not. The only way to break out is for us to cease to be the demandeur. And the only way to do that is to embrace leaving on WTO terms and be willing to do so.
What we need to say now to the EU is that we no longer wish to discuss our future relationship as part of these negotiations. We are under no legal obligation to do so. We will have the default relationship that any independent country has with the EU, just like the USA and many other countries do. But we will sign a Withdrawal Agreement that will involve our paying our dues and agreeing citizens’ rights and the other administrative matters that it has suited both sides for practical reasons to include to date in the draft Withdrawal Agreement.
Our proposed Withdrawal Agreement will also contain a promise by both sides to use best endeavours to have a minimal Irish border and will remit the question of practicalities to technical talks outside the Article 50 process. In effect, we will offer the EU money for their coffers and stability for their and our citizens. We will also recognise that underlying legitimate Irish concerns about the “border” are more fundamental issues about the economic and social future of Ireland and we shall offer to work together to address those.
Our proposed Withdrawal Agreement will not include a “transition” period. But we will offer more money should the EU agree a strictly time-limited one, concluding in December 2020. Both sides can use this to prepare in more detail (if needed) for trading on WTO terms.
It is an offer that will be understood by Parliament and the British people as proposing an exit that is neither “disorderly” nor “chaotic”. With luck, it will maintain a smidgeon of goodwill with the EU and allow closer relations to be rebuilt over time. Crucially it will preserve the independence and the territorial integrity of the UK.
The choice will then be for the EU to accept the proposal or to invite us to leave with No Deal. Our offer will remove EU leverage from the negotiations, since if they refuse it, we will simply leave it on the table. They may come round one day and in the meantime they will look wholly unreasonable, to the world and to their own citizens. And we will be out.
Of course, as I say, this does mean we would leave on WTO terms. But, if the EU decided to accept our payment for a transition period, it is more than possible that a working trading arrangement, if not a full all-UK/EU Free Trade Agreement, could be worked out in that 22-month period. However, we would not be seeking that: we will no longer be the demandeur.
The art of leadership, if you don’t know the answer to the question, is to change the question. That is what the Government needs to do. But to do so, we must be seeking nothing, and so remove the EU’s negotiating leverage.
Here, therefore, is the letter Mrs May should now write to Mr Barnier:
We wish to take a new approach to the negotiations surrounding our departure from the EU.
The UK will cease to be a member state on 30th March next year. We no longer seek to conclude a framework agreement with you on our trading relationship with the EU after that date as part of the current negotiations. Nothing in Article 50 requires us to do so. This will mean a degree of disruption to both of us, but we will cope and in due course we will, as separate states, start to repair the web of relationships that geography and mutual interest imply between two neighbouring but independent entities with so much in common. But it is clearly the case that we find it impossible to agree those things now in a way acceptable to both sides, so we need to let time and good sense take their healing course.
As a responsible state, however, we are willing to enter into a Withdrawal Agreement as contemplated by Article 50 to cover matters of common interest relating to our departure in an orderly way and on a mutually acceptable basis.
The Withdrawal Agreement we propose will cover:
- The orderly assignment of assets and liabilities between us, to be assessed and adjudicated by an impartial, independent body;
- The rights of EU citizens resident in the UK and of UK citizens resident in the remaining EU states, though with no role for EU law within the UK beyond an eight-year time limit;
- An agreement to work together in good faith outside the Article 50 process to establish and implement the minimal proportional customs arrangements on the land border between the Republic of Ireland and the United Kingdom consistent with the status that will subsist between us as “third countries”; these discussions will be undertaken by competent technical officials from the United Kingdom, the Republic of Ireland and the EU and, in our view, will build on technological monitoring, electronic filing and remote enforcement. The shared objective will be to have as “invisible” a border as can be agreed; and
- Other matters of a practical character already agreed between us.
We note that the current draft Withdrawal Agreement includes payments by the United Kingdom covering our budget contribution during an implementation or transition period of some 22 months from next March. These payments would no longer form part of the Withdrawal Agreement we propose unless the planned implementation or transition period were retained. The United Kingdom would be willing, however, to make those budget contributions if the implementation or transition period were retained on a basis fully consistent with the European Convention on Human Rights and we believe it would help minimise disruption for both parties, should that be agreed.
We are conscious of our legal and constitutional responsibilities under the 1998 Belfast Agreement and are fully committed to their fulfilment. Outside the Withdrawal Agreement, but alongside it, we therefore propose to work closely with the Irish Government and all communities on the island of Ireland to ensure that the legitimate concerns and aspirations of all communities embodied in the Belfast Agreement remain fully credible after Brexit. The assistance of the European Union in facilitating those discussions in support of the peace process would, of course, be welcome.
We hope you will accept these terms. If not, we will, if so obliged, proceed to leave in March without a Withdrawal Agreement.
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Fiscal activism underpinned by a resilient and sound economy was the main message of this Budget. In recent months it became clear the budget deficit had turned the corner and was on a credible improving trend. The Chancellor has taken advantage of this not to pay down debt and achieve a balanced budget sooner, but rather opt for what he called a balanced approach to the public finances. This means spending more, not raising net taxes and instead allowing the budget deficit to persist, albeit at low levels. This fiscal year the budget deficit is 1.2% of GDP and is projected to be 0.8% by 2023/24.
Despite this, the Budget was trying to be all things to all people, and heavily interventionist, with 86 new tax and spending measures.
The Budget confirmed a sizeable net £103.5 billion fiscal boost over the six fiscal years from 2018/19 to 2023/24. Of this, £98.5 billion was increased spending, the vast bulk being the previously announced boost to NHS spending. For four of the six fiscal years, net tax cuts were announced, and these will be particularly large next year at £4.2 billion, led by an increase in personal tax allowances.
The Chancellor stressed a “Double Deal Dividend” but was unable – probably because of the ongoing negotiations – to focus on saying whether there will be any Brexit Dividend. Brexit was the elephant in the room. Of course, it is not just Brexit, but what you do when you leave the EU that is key and that will help deliver this dividend.
I agree with the idea of a Deal Dividend in that once there is clarity about what lies ahead then this will trigger a rebound in investment. Uncertainty over the last two years is likely to have dented or delayed investment plans. The Double Deal, as the Chancellor called it, is that he is keeping back some fiscal fire power in case he needed to act and boost demand in the event of a No Deal. But it is the Brexit Dividend – including how to spend domestically the sizeable sums we send to the EU, as well as delivering a pro-growth economic agenda that is key.
The economy has suffered from a lack of demand. But it also needs a supply side agenda too and the Chancellor was right to acknowledge this. Given this, the economic and fiscal numbers were credible.
The good news is that the budget numbers are on an improving trend. As long as the market believes the projections are credible, and borrowing rates stay low, then the current economic environment provides a powerful dynamic in which the budget deficit can fall further, as it did post-war when public debt plummeted from 240 per cent of GDP. Last year’s debt of 85.2 per cent of GDP was a peacetime high and is projected today to fall to 74.1% by 2022/23.
This Budget was partially aimed at showing austerity is over. The trouble is, there is no clear definition of this, but you tend to know it when you see it. For many, it will mean an end of the squeeze on departmental budgets – and we will have to wait until next year’s Comprehensive Spending Review to see what will happen, particularly to the previously non-ring-fenced areas.
While I am an advocate of fiscal activism, the reality is that the UK needs to save in good times to be able to spend in bad. It did not do this and the financial crisis blew the fiscal numbers off course. Not only did austerity restrain demand at a time when the economy needed it, but also the government then missed the opportunity to borrow at record low rates to fund necessary infrastructure. Now, one could argue tax cuts should be high on the agenda, hence it is welcome that personal tax allowances were raised from next year.
Ending austerity should not mean unlimited public spending. There clearly needs to be ongoing reform, including regional wage policies. Ending austerity should not mean keeping taxes high to fund spending. It also does not mean sacrificing capital spending to fund current expenditure. Thankfully the Budget showed both a desire to avoid further tax hikes, an aim for cuts and to protect capital spending plans.
It is important to appreciate that the margin of error on these one year ahead fiscal numbers is huge. Thus, we should resist the temptation to aggregate forecast changes over the next five years, as it makes little sense to do so. The key is: what happens to growth?
The trouble is the UK’S economic picture is one of low growth, low inflation and, presumably, low interest rates. The UK’s trend rate of growth has previously been revised down since the global financial crisis. At this Budget the growth forecast was tweaked lower by the independent Office for Budget Responsibility (OBR), to 1.3%, and higher from 1.3% to 1.6% for next, and averaging around 1.5% up to 2023.
This leaves the UK vulnerable to any global setback. Vital is what happens to productivity growth and this would be boosted by increased investment and innovation – and it is helpful there were incentives to try and boost these. I would not be surprised if UK growth in 2019 is higher than expected: as consumption could be boosted by rising wages, higher employment and the announcement of an increase in personal allowances from next spring, while a Brexit deal would likely boost investment.
The most striking aspect is that the OBR projects a further 800,000 jobs by 2023, bringing to 4.2 million the net new jobs since 2010. This puts to shame Project Fear’s misplaced projection of massive job losses in the wake of a vote to leave.
Previously I have described the EU as like the Titanic. Despite warnings of impending problems and the need to reform, it will not change direction and we are lucky to be jumping ship. The trouble is, after a Budget like this, and with a Chequers Deal pending, the UK is in danger of becoming like the Marie Celeste – in touch of the new world, it is being left to drift with no-one at the helm. One hopes that once a credible deal is agreed the sense of direction will be clearer.
What about a no deal? Clearly we want to avoid a no deal, but a valid question is that the implied threat on the eve of the Budget that if there was no deal then the Chancellor would have to take action to make Britain universally competitive – including cutting taxes and easing the regulatory burden on firms, as well as to use fiscal policy to provide support to the economy – was a bizarre one. It must surely have been aimed at our EU neighbours, to encourage them to reach a deal.
But one wonders why this is couched in a threat and should it not be the focus of policy now – deal or no deal? Of course, the Chancellor is constrained from pushing this, while the negotiations are ongoing, but it should highlight that the UK should be in a better position once it can determine its own post-Brexit destiny. Of course, this makes it vital we do not box ourselves in with a Chequers-style deal and instead edge towards a free trade agreement like Canada Plus.
Photocredit: UK Parliament/Jessica Taylor
The post Brexit was the elephant in the room as Philip Hammond presented his Budget appeared first on BrexitCentral.
The Chequers proposal had two aims: (1) ensuring frictionless trade and (2) solving the Irish border problem. Its proposal to keep the entire country (not just businesses that trade with the EU) perpetually locked to EU standards in which we have no say, and from which we cannot depart to enable us to agree trade deals with other countries, was totally condemned by both Leavers and Remainers.
The ‘common rule book’ was rejected by the EU for ‘cherry picking’ and undermining the Single Market; and the ‘combined customs territory’ was rejected by the EU which, justifiably, refuses to delegate its tariff collection to a third party. So Chequers was on life-support. The addition of “temporary” all-UK membership of the Customs Union is unacceptable to us without a time-limit and unacceptable to the EU without a backstop-to-the-backstop that could ultimately separate Northern Ireland from the UK. Finally, the idea of an extended transition (that wouldn’t necessarily solve the Irish border problem) has been universally rejected by all wings of the Conservative Party.
Even if Theresa May managed to pile in enough further concessions to solve the Irish border problem (if it really is a problem, not just a political device), that wouldn’t be the basis for a deal unless we were prepared to sign the Withdrawal Agreement and contract to pay £39 billion with no understanding of the nature of any future trading relationship (since Chequers has been rejected by the EU). Not even Mrs May – surely – would do that?
So, fortunately, through her successive and futile concessions to the EU, Mrs May seems to have put the final nail in the coffin of the Chequers plan, and left the way open for a fresh and possibly more sensible approach.
Boris Johnson’s Plan B or Canada+++, or whatever you want to call it, has been dismissed by critics, including Mrs May, as ‘fantasy’ because it does not solve the Irish border problem. Up to now, Mrs May has been able to claim that ‘only my plan can solve the Irish border problem’. That argument is now demolished.
So now a “no-deal” seems increasingly likely. There are some potential upsides: we will save most of £39bn (not all, because legal obligations will be honoured) and be free at once to negotiate Free Trade Agreements around the world. Downsides include the cliff-edge in March 2019 (although the Government is now, belatedly, making serious plans for no-deal); trading with the EU on WTO terms until a free trade deal is agreed with them; potential UK/EU border friction (at Dover, etc); and having to deal with the Irish border.
The exact wording of the backstop agreed in December 2017 was:
“In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.”
As Boris Johnson and David Davis were reportedly told, this wording and the implied definitions were pretty narrow and meaningless, i.e. that “those rules” which apply to goods exported from the UK to the EU across the Irish border must be aligned with EU regulations. That is seemingly obvious… and harmless. There’s not a word about Northern Ireland staying in the Single Market or having to follow the EU rule book for everything. “Those rules”, it says, not “all rules”. What the EU has been demanding is something far beyond what they agreed with the UK last December.
It must be perfectly plain that we will not allow the EU to try to split Northern Ireland from the rest of the UK (any more than they would expect Spain to split off Catalonia or France, Corsica or Normandy).
If there is no deal, the Irish border will still exist, and neither Ireland nor the EU will want to invoke a hard border. Britain certainly won’t. So some kind of pragmatic monitoring/enforcement arrangement would have to be agreed between the respective customs authorities in the event of a no-deal.
By offering one concession after another Mrs May is just manoeuvring herself and us further and further into a tight corner. Much simpler to say “no”, we won’t play your game, it’s no deal.
With no-deal, the EU will have to tolerate what they consider to be an unsatisfactory border arrangement and forgo their £39 billion. Why would they allow their intransigence force us into that situation when they could do a deal under which they tolerate – temporarily – that same unsatisfactory border arrangement and pocket their £39 billion?
So the choice for the EU becomes a simple one: do you want a no-deal-style Irish border arrangement with or without £39 billion?
As to future trading arrangements, Mrs May must be persuaded that the Canada-plus formula offered by the EU is the most favourable for the UK. While entirely frictionless trade would be very nice, the price she is proposing to pay – EU regulations imposed on all UK businesses including the more than 80% that trade only domestically or with non-EU countries; no say in regulations or trading standards or ability to challenge regulations that especially damage British businesses; no ability to innovate; no ability to negotiate trading standards as part of FTAs; cumbersome tariff reclaim procedures – is simply too high as an alternative to accepting some friction but minimising it. When encountering friction, you don’t scrap the machine, you apply oil: trusted-trader status for regular just-in-time supply-chain consignments; number-plate recognition that opens barriers at designated trusted trader lanes. Where is the friction?
Where are the obstacles? There is only one – the need for a firm negotiating stance.
Last Thursday, the same day that we read “Theresa May to trigger full-scale parliamentary no-deal planning ‘within three weeks’”, we read of Guy Verhofstadt brazenly insisting there’s a 0% chance of a deal unless we agree to the EU’s Irish border demands, apparently blind to the consequences to the EU – a no-deal Irish border problem and a £39 billion financial black hole.
On the other hand we have seen Wednesday’s news: “France threatens to block Calais port to the UK if we refuse to pay £39bn divorce bill”. The EU persists in making unjustifiable and unconscionable demands regarding the Irish border, aimed solely at keeping us in the Customs Union and so preventing us from entering into global free trade deals.
Their insistence on their childish game of chicken is getting beyond ridiculous. Is this how intelligent adults behave? Don’t intelligent adults just sit down and agree new feasible cooperative arrangements that will be to their mutual advantage? It’s called an amicable divorce.
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Theresa May talked the talk when she said ‘Brexit means Brexit’ and ‘no deal is better than a bad deal’ to such an extent that one couldn’t help but be reminded of Shakespeare’s ‘the lady doth protest too much, methinks’. So now is her chance to show that she can walk the walk.
The Prime Minister is right not to be provoked into walking out, insisting on proper and constructive negotiations; but she should not feel inhibited about coming back without an agreement; the vast majority of the British people want the Government and Parliament to get on with it and a no-deal outcome has always been a possibility.
The media has taken to presenting the EU negotiations as a game of chicken, a game of bluff. Who will blink first? Would the DUP really go ahead with their threat to vote down the Budget if the deal that the PM comes back with results in further checks on goods crossing the Irish Sea? Amongst all this speculation, one thing is certain: the 17.4 million who voted to Leave the EU were not bluffing and they have no intention of blinking.
We have become used to the warnings of the dire consequences of Brexit; warnings that adorn our news bulletins on a daily basis from car manufacturers who threaten to cut and run through to the IMF and assorted bankers predicting economic recession. We were even told that ‘planes will not be able to take off’ presumably because the laws of physics will be suspended once we leave the EU as well. But in spite of all that, the people have remained steadfast with poll after poll showing no change in their desire to leave the EU.
Yet, the metropolitan elite refuses to accept the result of the referendum and continue to call for a second vote, a ‘People’s Vote’, when one has already been held. The disconnect of the British establishment, and the schism between the elite and ordinary working people, is comparable only to that of the House of Louis XVI in late eighteenth century France. When the people gathered outside the Royal Palace asking for bread, Marie Antoinette told them to eat cake. When the people voted to leave the EU, the elite told them to vote again. Marie Antoinette lost her head, literally. The British establishment lost its head, metaphorically; they refuse to come to terms with the fact that we are leaving the EU on 29th March 2019.
The nearer we are to that date, the more desperate they become, with the wealthy, well-to-do and the comfortable instructing workers on what is best for them. The recent open letter from ‘Bob Geldof and friends’ is their latest lame offering. In their letter – and without any sense of irony – unelected and unaccountable ‘Bob Geldof and friends’ described the implementation of the vote to leave the EU as ‘the undemocratic fiat of mediocre politicians’. And even though there was no mention in the letter of a second referendum (obviously, his ‘friends’ refused to endorse a second vote), it was spun by Geldof and an obliging media as an endorsement of it.
It’s not clear if the Prime Minister has rejected the EU’s open-ended ‘backstop’ designed to keep the UK in the Customs Union in perpetuity. She seems to see an extension of the transition period as a way of avoiding the backstop, which makes any sense only if the transition period is indefinite, keeping us in the EU indefinitely. An unspecified extension of the transition period would have the same effect as an open-ended backstop and that’s why it was suggested by the EU in the first place; it is equally unpalatable. Just how bad does a deal have to be before a no-deal becomes preferable?
The EU has treated the Government, and Theresa May in particular, with contempt. Instead of working with the Government to find solutions, the EU ‘demands concrete proposals from the Prime Minister’ as if Brussels is a third party to the negotiations with no responsibility to search for answers.
They insist on a solution to the Irish border before the details of a trade agreement can be negotiated, a solution that can only be found once an agreement on our trading relationship has been reached – the very thing the EU prevented when it insisted on phasing the negotiation in such a way that solutions to problems that can only be resolved once the second phase has been concluded were to be found before the second phase begins. It is like looking for a plug to fill a hole in a wall before you have any knowledge of the size of the hole that has to be plugged.
Since a solution to the Irish border can only be found when the trading relationship with the EU is finalised, an insurmountable hurdle was created. This was no accident or a miscalculation. The sequencing of negotiations was designed to make an amicable UK departure difficult; a warning to any member state that might be tempted to follow the example of the UK – and there many of these.
Theresa May was sanguine and allowed the EU to dictate the pace and the process.
The Prime Minister’s task is not to satisfy this or that group of MPs, this or that section in Parliament; it is not a numbers game, regardless of what we are consistently told by the media. Brexit belongs to the people and the people have been its driving force. Her task is to satisfy the desire of the people to leave the EU; if she does, parliamentary approval will follow in the same way as an 80% Remain-supporting House of Commons voted by an overwhelming majority to invoke Article 50 and to repeal the 1972 Accession Act. If she fails to do that, she must make way for someone who can.
Photocredit: Zero 2010
The post The nearer we get to Brexit Day, the more desperate the metropolitan elite are becoming appeared first on BrexitCentral.
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Brexit: Theresa May pours cold water on move to renegotiate deal as cabinet ministers call for rewriteThe prime minister will visit Jean-Claude Juncker this week for further talks focussing on the outline future relationship