The depth of the constitutional, political and economic crisis facing the UK is becoming cleareri. The government, parliament and courts are struggling over how to interpret the narrow referendum vote to leave the EU. The calamitous consequences of leaving the single market and the customs union, and the impossibility of the government achieving its stated negotiating aims, may yet result in a rethink. The UK may find a way of staying in both the market and the union.
A representative democracy where Parliament is sovereign, is having to react to a narrow referendum vote to leave the EU, which, under the constitution, is only advisory although this was not made clear to voters at the time. The government is choosing to interpret the vote in the most extreme way, even though the government itself, most parliamentarians, and informed opinion judge that this will damage the country[i].
By aiming to leave the single market and possibly the customs union[ii] – the so-called ‘hard Brexit’, the government has chosen to divide the country still further rather than trying to bring ‘leavers’ and ‘remainers’ together, for example by staying in the single market.
The government’s aim is to negotiate a new free trade deal – ‘FTA’ although the EU has said that it will not be possible to cherry-pick bits of the single market and customs union. Trade deals with other countries are also promised, once the UK has left the customs union in 2019.
The prime minister’s statement of aims, has been praised as a welcome clarification but also criticized as wishful thinking, ignorant, insular, triumphalist, and tribal[iii].
At the end of the hard Brexit process, trade with the UK’s largest export and import market will be reduced and the country could be worse off than it would have been, by 2%-10% of GDP according to most forecasts[iv].
The concern is that after leaving the single market and customs union, during the years spent negotiating departure, if there is no transition deal, the UK will have to revert to trading under WTO World Trading Organisation rules.
This would see tariffs on exports going to the EU, and new delays and checks at borders as free movement of goods and services came to an end.
The government has said that ‘no deal is better than a bad deal’, and ‘we would be free to change the basis of Britain’s economic model’[iii].This suggests reduced business taxes, reduced employment standards, social, consumer and environmental standards and denuded services in order to attract international investment, rather like an off shore tax haven.
This whole process will further exacerbate the well-known weaknesses of the UK economy – chronic income and wealth inequality, low productivity, a big current account imbalance, growing insecurity in employment, and unaffordability of housing[v].
A referendum is a very problematic procedure, even in a country with a written constitution which specifically provides for them. They often require a two thirds or otherwise sizeable majority, in order to be establish ‘the settled will’ of the people in favour of a big change. A referendum can destabilize and polarize society and wreck the quality of public and political discourse – as recognised by Attlee and Thatcher[vi] – ‘alien to all our traditions’, ‘a device of dictators and demagogues’.
The leadership of both main political parties seem to have over-interpreted the narrow vote to leave as the settled will of the people, which cannot be changed or reversed, rather than it being the people’s view at a point in time, based upon partial, and indeed false, information.
General election results are often reversed within a few years, so it is surprising that more politicians have not been prepared to suggest that the result of an evenly balanced referendum, which itself has no formal place in a Parliamentary democracy, can also be reconsidered. As the High Court has noted ‘the judges know nothing about any will of the people except in so far as that will is expressed by an Act of Parliament[vii].
EU and the UK
The EU needs reform[viii] – especially the single currency, which has imposed austerity and unemployment on Southern Europe, and the Common Agricultural Policy which subsidises the largest landowners most and conflicts with environmental and biodiversity goals.
The economy and taxation system needs radical reform so it benefits middle and below income people rather than the wealthy. But this also needs a global reform to stop the biggest corporations and wealthy individuals monopolizing markets, and personal information, avoiding tax and hiding money in tax havens.
The EU’s original aim to ‘make war unthinkable’ is still fundamental to its existence[ix], and one reason why Eastern European countries were so keen to join. The simple idea is that cooperation – on trade, climate change, security, and global corporations can be more effective than pure competition.
Britain leaving could destabilise the EU at the very time when nationalist, xenophobic parties are growing across Europe[x]. Russia and even the new US president seem happy to see Europe fall back into the competing nation states which gave us two world wars[xi], and which will create further dangers for the UK economy and security.
The UK has self harmed by aiming for a hard Brexit – not least diplomatically. By isolating itself from Europe, it can no longer claim to be a bridge between the U.S. and Europe, and there are already signs that it has lost leverage in both. The desperation in the prime minister’s rush to plead for an early trade deal with the new US President makes the country look much smaller on the international stage[xii].
Irreconcilable issues – unachievable aims.
Some of the government’s stated negotiating aims are mutually contradictory, and others seem much more difficult to achieve than the government acknowledges.
No trade-off on the single market. The EU has consistently said the choice has to be a ‘hard Brexit’ or ‘no Brexit’ , yet both main party leaderships in the UK still seem to hope there may be a trade off between market access and free movement of workers. Only if the EU as a whole modifies the way free movement works is that likely to happen.
No cherry picking. The government’s strategy after leaving the single market, will be to negotiate a way back into parts of it for specific sectors via a new FTA. The EU regards this as ‘cherry picking’ and it is unlikely to be conceded without some price – such as a continuing UK contribution to the EU budget and acceding to the European Court of justice to arbitrate the rules.. ‘If you get the benefits – you have to pay the price’.
The EU Court of Justice would have to be replaced. Any new FTA will need a dispute resolution mechanism on which both sides can agree. If it is not the EU Court of Justice, some other similar body will have to be created.
The UK does not need to leave the EU to trade outside the EU. Deliberately or not, the impression has been given that inside the EU we cannot trade with non- EU countries. The UK’s non EU trade has been increasing over the last few years. There are already agreements between the EU and other countries which enable UK business to get on with trading.
Reducing corporate taxes is a poor threat. The threat to turn the UK into an off-shore tax haven does not really add leverage against the EU, and it does not ‘take back control’, but rather hands it over to global corporations.
EU laws are UK laws – deals with other countries would mean other new laws. EU laws give effect to treaties and agreements the UK has freely entered into. In this sense they are UK laws. If the UK makes new trade agreements with non EU countries, this will mean – again ceding of some aspects of sovereignty.
Time scale too optimistic. The government suggests a new FTA can be negotiated almost alongside the leaving negotiations, or at most two years afterwards. But this is unlikely, so a transitional arrangement will be needed from the 2019 leave date to avoid businesses facing a ‘cliff edge’ change in the system.
Free trade – whose rules? In negotiating new trade agreements with countries outside the EU, the UK will have few bargaining chips, to resist reduction in standards and quality, against the larger economies with lower standards. The UK would have little bargaining power with China, the USA, India and other countries, compared with the power of a 500 million population EU.
Existing EU rules will still apply. European standards and regulations will still need to apply to goods and services traded with the EU, which will be the UK’s largest market even if the UK is outside the single market. This will limit the UK’s freedom to vary standards in making trade deals with other countries.
Destabilising the UK. Two of the UK’s countries – Scotland, and Northern Ireland, voted to stay in the EU, and there is now a risk that leaving will destabilise the UK itself, and lead to another Scottish referendum on independence.
The common travel area across Ireland and the peace settlement could be at risk. If an EU border has to be established between Northern Ireland and the Republic, it will have a very negative effect on the Irish economy, and it may also destabilize the power sharing agreement in Northern Ireland..
Invoking Article 50 too quickly may harm the UK’s prospects. Once the formal notice that the UK wants to leave the EU has been invoked, the UK will be at a disadvantage. The EU will be largely able to control the process, to veto a deal or to prolong leave negotiations, or to declare no deal. Some academics and lawyers suggest that article 50 can be revoked, but the consensus seems to be that this would not be easy – and the UK will have to leave with or without an agreement after two years.
This monumental set of contradictory, economic, political and administrative problems will be a supreme test of the UK’s famously ‘unwritten’ constitution, and will stretch parliament, the civil service and government machine more than any other crisis since the war. This will become clearer as the negotiation proceeds. At the end of the process, the UK may decide to stay in both single market and customs union, even if it has symbolically ‘left’ the EU[xiii].