Skirmishes in the Brexit phoney war

It is increasingly evident that Theresa May’s July comment that “Brexit means Brexit” was simply a device to buy some time over the summer in order to allow some heat to go out of the fractious debate. Today’s return of parliament following the summer recess marks the point at which the government has to get down to some hard thinking about how it wants to implement any sort of plan.

Today’s domestic highlight was the speech by Brexit minister David Davis outlining the government’s position on Brexit. I use the word “position” because plan is too grandiose a word to describe what we know so far. The key message from Davis was that it is “very improbable” that the UK will remain a member of the EU single market. This comes a day after the US and Japanese governments warned PM May, in China for the G20 summit, of the consequences of Brexit for trade and investment. The US indicated that securing a trade deal would not be a priority for the US, which is seeking to conclude negotiations with the far larger EU, whilst the Japanese government issued a 15-page report outlining the problems which Brexit could cause for Japanese firms. It pointed out that “a number of Japanese businesses, invited by the Government in  some  cases,  have  invested  actively  to  the  UK,  which  was  seen  to  be   a  gateway  to  Europe.” In other words, you invited us in and took the money we brought but you have changed the rules of the game. The thrust of the document was a plea for business conditions to remain broadly as they are now, otherwise “this could force Japanese companies to reconsider their business activities.”

It is, of course, still very early days, but the events of the weekend highlight what many us pointed out all along: first, that changing the economic rules will have consequences for UK jobs and, second,  that the rest of the world was not necessarily going to jump at the chance to negotiate a special deal with the UK. If you can do a trade deal with a market of 500 million people, it is likely to yield far bigger benefits than negotiating one with 65 million. All this throws Davis’s comments into stark relief and highlights the rock and hard place dilemma facing the government. In order to make a success of not taking part in the single market, the UK has to secure trading relationships with non-EU nations – a process which has not got off to a good start. If it proves difficult to build these relationships, the government will find that it is in its best interests to maintain closer ties with those EU countries which it just spurned than many people might find desirable.

A curious element of PM May’s speeches in China was that she ruled out the adoption of a points-based system to manage immigration flows, despite the fact that this was a key element of the Leave camp’s plan, and left her open to the charge of backsliding (though she never advocated it, so that charge seems rather spurious). She argued that they are not an effective means of controlling migrant inflows. I am less sure about that – as a means of controlling absolute inflows they have their uses. But they do have other shortcomings, as even the Australian government admits. For one thing, many of those coming in on such schemes often tend to be under-employed which drives them down the value chain to compete for unskilled jobs, and for another they allow government to dictate labour supply rather than the needs of employers.

But by torpedoing one of the key planks of a policy advocated by Boris Johnson and Nigel Farage, PM May is sending a signal that some of the simple ideas put forward by the Leavers will not be implemented. Maybe this is clever politicking designed to restrict the Brexiteer’s options in a bid to expose some of the fallacies inherent in the case for leaving the EU. It will certainly make life harder for David Davis as he puts together his plan to take the UK to the next level. However, much that we have heard so far tells us only what the government is opposed to, not what it is in favour of. Brexit may indeed mean Brexit. But it may also end up being a slogan designed to hold the Conservative party together in much the same way as David Cameron’s pledge to hold a referendum in the first place.