Theresa May's credibility dwindles by the day
I have been pointing out for months that an Article 50
extension was the most sensible outcome given parliament’s failure to agree
what it wants, and it is good to see that reason finally appears to have
penetrated 10 Downing Street. A bigger question is what took the PM so long to understand the reality of the UK’s
position? It is understandable that she wants to get parliament to accept
the Withdrawal Agreement negotiated in November, but her strategy of insisting
there was a choice only between her deal and no deal was never realistic.
More than anything the decision confirmed the impression of a prime minister whose authority has
disappeared like a badly fixed wig in a hurricane. Over the past two years
May has promised that the government would decide the timing of Article 50,
until the Supreme Court determined that it was a matter for parliament. She
gambled on a general election and lost her parliamentary majority. She promised
that “we will take back control of our
laws and bring an end to the jurisdiction of the European Court of Justice”
but is now pushing an Agreement with the EU in which “the UK’s domestic courts and authorities will be required to have due
regard to the case law of the Court of Justice of the European Union.” May
has also faced down a leadership challenge in which one-third of her party’s
MPs failed to support her and when the Withdrawal Agreement was put to the vote
it was defeated by the biggest majority inflicted on any government since 1924.
Then there is the small matter of the parliamentary rebellion two weeks ago by
members of her own party, which failed to offer support for the negotiating
position with the EU that they had instructed her to take. And now, the prime
minister who has promised parliament more than 100 times previously that the UK will leave
the EU on 29 March is prepared to renege on that commitment as well.
This lack of
credibility matters for what happens next. A three-month postponement of
the Article 50 deadline will nominally give the PM more time to renegotiate
with Brussels. But the EU has already stated that it will not renegotiate the
Irish backstop arrangement, which is such a sticking point for
Brexit-supporting MPs. Nor is it likely to grant major concessions to a leader
who cannot guarantee that they will be passed by parliament. In addition, May
cannot simply replay the trick of telling MPs that if they do not pass her
Withdrawal Agreement the UK will crash out of the EU at the end of June without
a deal, given that she has already blinked in the face of reality.
Nor is the economics credible
As if we needed reminding of the damage that a no-deal
Brexit could cause, DExEU yesterday published a summary document outlining the difficulties that the
economy would face. In short, it highlights
the lack of preparedness with government departments reported as “being on track for … just over two thirds of
the most critical projects.” The UK
has signed trade agreements with only one of its major trading partners
(Switzerland which was the 12th largest export market in 2017) though does have
arrangements in place with Chile, the Faroe Islands, members of the Eastern and
Southern Africa (ESA) Economic Partnership Agreement, Israel and the
Palestinian Authority (which makes me wonder what Liam Fox has been doing since
autumn 2016).
In addition, DExEU also speared one of the options put forward by Brexit
supporters that Article XXIV of the General Agreement on Tariffs and Trade
(GATT) will allow tariff-free trade with the EU for a ten-year period. As DExEU
pointed out, “This is a misunderstanding
of what the rules are … [since] it would require the agreement of the EU.”
And as the Secretary of State for International Trade told the House of Commons
on 14 January this year, the “suggestion
would not deal with all the regulatory issues—the non-tariff barriers—that are
so important to many businesses.”
DExEU also pointed out that “there is little evidence that
businesses are preparing in earnest for a no deal scenario, and evidence
indicates that readiness of small and medium-sized enterprises in particular is
low.” Other gems include the nugget that 30% of the UK’s food supply comes
from the EU and “the potential disruption
to trade across the Short Channel Crossings would lead to reduced availability
and choice of products” with the result that “food prices are likely to
increase, and there is a risk
that consumer behaviour could exacerbate, or create, shortages in this scenario.”
The report goes on to point out that the “service
sector (which makes up around 80% of UK GDP) is supported by free movement of
people and a range of cross-cutting regulation such as mutual recognition of
qualifications. In a no deal scenario … the UK would risk a loss of market
access and increase in non-tariff barriers.” It concludes that a no-deal
Brexit on 29 March “does not allow
Government to unilaterally mitigate the effects of no deal.”
None of this comes as
any surprise to the economics profession, which has been warning of these
issues for more than three years. Given the complexity of the issues outlined
in the report, matters will be no different on 30 June. Of course much of this
can be avoided if the UK signs the Withdrawal Agreement. But this would make
the UK an EU rule taker, which is (i) a much worse position than the one we
enjoy today as an EU member and (ii) not a position the Brexiteers have shown any
willingness to sign up to. That said, in an interview this morning in the Financial Times,
Jacob-Rees Mogg, the keeper of the Brexit flame, suggested he was prepared to back
down from his hardline position on the Irish backstop. Perhaps he now realises
that if he blocks the Withdrawal Agreement, the bad Brexit that would result may be the only one he will get
given that the Labour Party has moved towards backing a second referendum which
may reverse the 2016 result.
Those suggesting we should just “get on with it” because
“that’s what the people voted for” are wrong. There are no good outcomes – only
less bad ones. But it would help if
certain politicians, starting with the prime minister, were more honest about
the trade-offs that Brexit entails. That way, voters might be able to make
less ill-informed choices rather than relying on slogans painted on buses.
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