Business investment since the referendum

The Department for International Trade, led by Liam Fox, has announced that it has secured almost £16 billion of extra investment in the UK since the Brexit vote. Unsurprisingly, Fox and other Brexiters have seized on this as a vindication of Brexit with Iain Duncan Smith saying that “this latest announcement is the turning point. You are now either in the camp that fundamentally believes that Britain can do anything, anytime and anywhere, or you are in the doom and gloom camp that doesn't believe in Britain”.

It would be difficult to think of a more asinine claim, and one which reflects what I called in my previous post the “bogus patriotism” with which Brexiters are trying to close down debate and to stigmatize those disagree with them.

I call it asinine because, even if you are the most ardent Brexiter, this announcement cannot possibly be interpreted in this way. There is no suggestion that this investment was the result of the vote for Brexit, and there is no reason why it could not and would not have happened had that vote not occurred. Nor are the deals that have been struck ones that require leaving the EU or the single market; indeed, we have not done so as yet. And the deals Fox is announcing do not arise from his supposed role in making new free trade agreements; no such agreements can be made until the UK leaves not just the EU but also the customs union.

On the other hand, what has happened as a result of the vote is that many investment decisions have been deferred or abandoned. These are so far estimated to amount to £65.5 billion (as at November 2016), a far larger figure, and they involve one-third of UK companies, rising to 42% of medium and large companies (which, of course, make the biggest investments). And note that this is just UK companies, it does not even include any deferred or abandoned foreign direct investment decisions.

Not only does the figure for reduced investment dwarf that of new investment but, to underline the point already made, the reduced investment is ascribed by those who have made the decisions to the referendum vote, whereas the new investment has not been ascribed by those who decided on it to the vote. I am not aware of a single domestic or foreign investor who has publicly stated that they have made a new investment that they would not otherwise have made because of the Brexit vote. That includes such well-publicized cases as the £1 billion investment by Google, which was not a result of the vote, about which its CEO expressed “reservations”, it was just that the plans, that had been developed some years before the vote, weren’t affected by it. And with the decision came with a warning that free movement was crucial to the tech sector.

The most that Brexiters can claim is that the vote has not caused all investment in the UK to cease. But no one ever said that it would. One of the hallmarks of the leave campaign was to respond to the warnings of, in this case, the likely reduction to investment by falsely claiming that these were hyperbolic predictions that it would end, which could then be dismissed as ‘project fear’. Now, they return to those false claims and retort, as Michael Gove did with respect to the £16 billion announcement, that the “prophets of doom have once again been found wanting”. In fact, the evidence so far is clear: the vote for Brexit has led to significantly reduced business investment, exactly as predicted. And that is before Brexit has happened and before Article 50 has even been triggered.

What is true is that since the vote there have been high (though lower than the previous year) levels of merger and acquisition (M&A) activity, with foreign firms buying up UK businesses, the earliest high profile example being the purchase of Cambridge high-tech pioneer ARM by a Japanese firm. This is attributable to the vote because it caused a huge devaluation of sterling (though the ARM sale would have been likely to happen anyway) which has made it cheap for foreign companies to buy UK companies. But this is not (other than for the investment banks and other firms who do the M&A work) good news for ‘UK PLC’. It’s just a cut-price selling off of national assets, with the ARM sale being described by its founder as a “sad day for technology in Britain”. And if one of the motivations for the Brexit vote was anti-globalization sentiment and a desire for protection of jobs then it’s certainly bad news as it puts even larger numbers of British jobs at the mercy of far-away boardrooms. So much for ‘taking back control’.

The end of the beginning of Brexit

The holiday season has meant that there have been few substantive developments, but the successors of the Leave campaign have made some high profile interventions in favour of hard Brexit. First, the Leave means Leave group have written to the Chambers of Commerce in all the other EU states asking them to put pressure on their governments for a tariff-free trade agreement for the UK. The initiative is really just a reprise of the familiar refrain that ‘German car manufacturers’ will ensure that the UK gets a good deal, and it suffers from the same difficulties. First, trade policy is not determined by business interests. If it was, there would be no question of the UK leaving the EU! Second, many EU businesses see great gains to be made at the UK’s expense if it gets a bad exit deal. And, yet again, the focus is on tariffs rather than the non-tariff barriers to trade the erosion of which are the main characteristic of the single market. It will be interesting to see what replies they get.

Hard Brexit was also promoted by Lord King, the former Governor of the Bank of England, as bringing “real benefits” but beyond the usual talk of the opportunities of doing new trade deals there was no detail of what these were, and he conceded that no one should think it was going to be “a bed of roses”. Although it was greeted with delight by Brexiters, it seemed to me a fairly cautious, even downbeat, assessment. Detail was provided by another hard Brexit pressure group, Change Britain, which estimated savings of £450M a week as a result. But as usual it was predicated on dodgy assumptions and bogus statistics, with Jonathan Portes of the National Institute of Economic and Social Research (NIESR) denouncing it as “junk” not least because it confused government revenues with exports. And, yet again, it was predicated upon airy expectations of future trade deals with third parties the terms and timescale of which are unknown.

What was really alarming about this was that Portes – a heavyweight figure, formerly the Chief Economist at the Cabinet Office – was then denounced by Michael Gove of Change Britain as a remainer who should have learned some “humility”. In fact, Portes never publicly endorsed either side of the Brexit campaign, leading Gove to challenge him to declare how he had voted. This seems truly monstrous: are we now required to reveal our vote (to leave) in order to be regarded as a legitimate voice in the debate about what to do now?

This mind set is reflected in another alarming development. The leader of the First Division Association (FDA) – in effect the trade union of senior civil servants – has said that politicians, including the Prime Minister, lack the political courage to acknowledge the complexities of Brexit. As a consequence, whenever civil servants raise these complexities they are attacked as seeking to subvert ‘the will of the people’. There are real dangers in all this, both in terms of effective policy-making and also in terms of an incipient totalitarianism in political culture.

One aspect of this is the growing narrative amongst Brexiters that we all somehow have a patriotic duty the ‘get behind’ Brexit. Thus Tory MP Charlie Elphicke responded to the Change Britain report by saying that “now everyone, Remainer or Leaver, has a duty to get on with the job of delivering a brighter future for our land”. Many similar views have been expressed across internet discussion forums. It is nonsense, for the reasons I set out in a previous post (‘Why remainers shouldn’t move on’) and most fundamentally because there is nothing patriotic about getting behind (whatever that really means) a course of action that will be catastrophic for our country.

This bogus patriotism should be completely rejected, as should the emerging Brexiter meme that all would be well if the EU were not refusing to give us a good deal – by which they mean full membership of the single market without free movement of people, budget contributions or EJ jurisdiction. But such a deal was never in prospect and nor is there any reason whatsoever why it should be on offer. That was abundantly clear before the Referendum, but Brexiters refused to accept it. So for them now to try to whip up ‘patriotic’ fervour about it is ridiculous: what it reveals is the mixture of lies and unrealism of their campaign.

On a perhaps lighter note – or is it? – take a look at this mashup video on Brexit ('Brexit means Brexit and we’re making a mess of it’) by Cassetteboy. Next year, we’re going to begin to see the full extent of the mess. It will see (presumably) the triggering of Article 50 and the revelation of whether the UK is seeking hard or soft Brexit. If, as seems increasingly likely, the former it will very likely mean a catastrophic further fall in the value of sterling and significant disinvestment in the UK. It won’t be the beginning of the end of the Brexit process, but it will be the end of the beginning, as the Phoney War of the hiatus between the referendum and A50 finishes.

A transitional deal?

For the last few weeks, the idea of a ‘transitional deal’ has been floating around the Brexit debate. It arises from the realization that the two year period specified by Lisbon A50 is too short to allow for exit terms, still less future terms, to be agreed.

It is worth pausing at this point to recall the Referendum campaign during which the leave campaign was warned that this was so by, to take one important example, Sir Gus O’Donnell the former Cabinet Secretary. This was dismissed as (of course) Project Fear and as “nonsense” by, to take another high-profile example, Fraser Nelson of the Spectator. Nelson opined that the UK could take as long as it liked, by having informal negotiations for as long as it took before triggering A50. But that was, indeed, nonsense as was said at the time and has now been shown to be true: the EU will not enter into negotiations before A50 is triggered. It’s really important to keep recording and reminding about how mislead people were during the Referendum, not just on the headline claims of the Leave campaign but on these perhaps lower-profile, but crucial, points.

At all events, the Chancellor Philip Hammond has today stated that a transitional deal will be likely to be necessary to avoid the ‘cliff edge’ which the Prime Minister recently told business leaders that she, too, understood to be a danger. The cliff edge, to make it clear, refers to the overnight collapse of the trading, regulatory and legal system if there is no agreed deal within two years of the triggering of A50. What Hammond and May are saying is no more than a pragmatic recognition of an obvious reality, but it runs into three problems which encapsulate the problems of the Brexit mess.

The first problem is the internal politics of the government. David Davis, the Minister for Brexit, said just last week that he was “not really interested” in a transitional deal, and went on to say that he would only consider it to be “kind” to the EU – implying that it was something that was of no importance to the UK. So this contradicts Hammond both with respect to the need for such a deal and also with respect to the Chancellor’s formulation that such a deal would be in the interests of both the UK and the EU. Meanwhile, again just last week, Foreign Secretary Boris Johnson said that 18 months would be “ample time” to conclude negotiations. So there is no clear government agreement on this.

The second problem is that of wider politics. Hammond’s statement received a furious reaction from readers of the Brexiter press, as the comments under this report in the rabidly pro-Brexit Express show. More generally, many leave voters are becoming frustrated with what they expected to be an immediate exit from the EU, and if the Tory government go into the 2020 election without having delivered Brexit they will be likely to lose a lot of votes to UKIP, who are now committed to the (crazy) idea of leaving the EU without even triggering A50, let alone having a transitional deal.

The third problem is the EU itself. All of the UK Brexit debate is occurring in a vacuum, as has so much of the discussion about the EU for decades. But Michel Barnier, the EU’s chief Brexit negotiator has indicated that he is opposed to a transitional deal that simply allows the UK to cherry pick terms for single market access. Manfred Weber, conservative leader in the European Parliament and a key ally of Angela Merkel, has been similarly scathing. Others, such as Luxembourg’s Prime Minister Xavier Bettel have been even clearer: there is no half-in, half-out deal on offer. All the indications are that the EU will offer a hard Brexit, with no transitional deal.

This is the realpolitik of Brexit in general, and a transitional deal in particular. Again, it is worth contrasting this with the blithe assurances given by Brexiters during the referendum campaign. Again and again they insisted that ‘the German car industry’ would ensure the sweetest of Brexit deals. It was said to be nonsense then; it has been proved to be nonsense now.

Hammond’s statement about the need for a transitional deal is reasonable, so far as it goes. But unless the UK economy is going to be completely wrecked then at some point – and time is running out – the Prime Minister is going to have tell the British people the truth that Brexit itself is unworkable. That would be hugely politically dangerous for her; but the greater danger to her may lie in not doing so, and having that truth emerge when her currently high poll ratings have slumped. Now, she could lead what is going to happen; then she will have to apologise for it.

The Article 127 challenge

It’s probably a fair bet that few of us thought much about – if we had even heard of – Article 50 of the Lisbon Treaty until recent months. Now, just as that is becoming part of every news story, we need to give attention to Article 127. This is not (as is sometimes being misreported) an article within the Lisbon Treaty, but rather within the European Economic Area (EEA) Agreement of 1992, to which the UK was a signatory. The significance of this is that as such, it may be that the UK remains a member of the EEA – which means the single market – even if it leaves the EU after invoking Lisbon A50. This is because to leave the EEA arguably requires invoking A127 of the EEA Agreement. Whether or not this is so is to be the subject of a judicial review in a case being brought to the High Court by campaigners to stay in the single market.

The complex legal issues at stake are discussed in Professor Steve Peers’ ever-useful EU Law Blog, and I will not repeat what he says (and am not competent to add to it). The political consequences if it were upheld that A127 also needs to be invoked would be interesting. At one level, this could simply be done in the same way as with A50 – by the government, with or without parliamentary authority (depending on the outcome of the Supreme Court case). But the dynamics might be very different.

The Referendum asked about EU membership, so the result makes it difficult for Remain MPs to withhold consent to triggering A50. However, nothing was asked about leaving the EEA, so withholding consent to trigger A127 would be politically easier. This is a version of the point I’ve repeatedly made on this blog, namely that the referendum did not mandate hard Brexit; but it gives an important legal ballast to that argument, since it would mean that a specific legal process (A127) must be followed for hard Brexit to occur.

Of course all this may be rendered irrelevant if the judicial review does not uphold the argument that A127 must be invoked in addition to A50 in order to leave the single market; or, equally, it could be irrelevant if the government decide for a soft Brexit of their own accord (on which, we are no further forward than when I last posted).

Inevitably this latest case has outraged Brexit politicians and press, but they are going to have to get used to the fact that the Referendum was not the end but the beginning of a very long and complicated set of political and legal processes. That is a consequence of voting leave, and if those who did so don’t like it they should have listened to the many warnings – dismissed as ‘project Fear’ – that this would be so. In a similar way, the call today from Gisela Stuart, the Labour MP who was a leader of the official Leave campaign, to guarantee the rights of EU citizens in the UK and vice versa prompts an obvious thought. She should have thought about what it would mean for those affected before she lent her weight to the ferociously anti-immigration campaign.

The Leave campaign - as they delight in telling us - won, and now they must take responsibility for all of the consequences and for delivering Brexit. They are no longer a campaign against ‘the ruling elite’; they are the ruling elite. So they will be held to account both for the promises they made, including the £350 million a week for the NHS which they now disown, and for their lack of planning for what the process and outcome of leaving the EU would consist of. So, as in the present case, they can hardly complain that the courts must decide on whether A127 is relevant: they should have worked out what needed to be done to leave the single market as well as the EU before they recommended that people vote for them. On which subject, there is a pervasive attempt amongst Brexiters to claim, now, that they had always made it clear that a vote to leave the EU was also a vote to leave the single market. As this instructive video shows, they did not. So just as they are trying to re-write history by dropping the £350M slogan, they are inventing claims they did not make.

Implications of the Richmond by-election

The surprise LibDem victory in the Richmond Park by-election yesterday could have considerable significance. Winning on a strongly anti-Brexit platform, it opens the possibility that the LibDems could make further gains in some areas. It also tells us that ‘remain’ voters cannot simply be ignored.

Much attention has focussed on the possibility that pro-Brexit MPs (especially Labour) might be vulnerable, especially to UKIP, in constituencies that voted to leave the EU. I am not entirely convinced by that because voting patterns in the referendum were different to those in parliamentary elections in that many who voted leave do not normally vote at all. In any case, about two-thirds of habitual Labour voters voted remain, so the idea that Labour’s core vote is capturable by UKIP is unlikely. Nevertheless, there are important issues for Labour in all this: are they going to be an anti-Brexit party or not? If not, they will lose out in their London heartlands; if so, they will have to struggle with UKIP in their Northern heartlands. My feeling is that the Brexit vote in combination with Corbyn’s agnosticism on the EU means that Labour are finished as a political party.

However that may be, the neglected issue is what remain voters now do. With Brexit now being the dominant political issue and voter cleavage predictions are difficult. From Richmond, it seems that the one third or so of voters who are habitually Tories but who voted remain might be willing to support the LibDems, as, in certain constituencies, might be Labour Remainers. So although the national opinion polls show the LibDems at something like 8-10% in places like Richmond where the remain vote was high the picture could be different. That would be relevant in several parts of London, as well as Cambridge, Oxford, Bristol, Exeter etc. and could translate into several seats at a future General Election.

Regardless of electoral arithmetic, Richmond is important in another way. It’s a reminder that the country is bitterly split on Brexit, and that there is no mandate at all for a hard Brexit (it appears that many Tory Leave voters supported the LibDems in Richmond). If the government try to force a hard Brexit in order to appease one (minority) group of their backbenchers, there will be an electoral price to pay. Equally, or more, significant the traditional financers and supporters of the Tory Party in business and the City will strongly oppose it.

Underneath all this there is a harsh and controversial truth – controversial, that is, within the prevailing discourse that the Brexit vote was ‘the will of the people’. Because the demographics of the vote show very clearly that those who voted Brexit were more likely to be economically inactive and/or in lower social classes. Now of course everyone’s vote is worth the same – but is a Tory (or any) government really going to prioritise the wishes of the demographic that voted leave over the professional and corporate middle class? At the end of the day, like it or not, pensioners in Lowestoft are not going to be the cultural or economic future of the UK; young pan-European teams of scientists spinning businesses out of Cambridge University are. So although everyone’s vote rightly counts for the same in a referendum, there has to be a realism beyond that piety, at least for any half-way sensible government.

That ‘realeconomic’ has its counterpart in the realpolitik of what kind of Brexit can be achieved, and in the last couple of days there have been signals from the British government that a soft Brexit is in prospect. I don’t attach much meaning to that, because the government are sending out so many contradictory messages. Even so, some kind of EEA deal would seem to be the most obvious way out of this situation, both as regards negotiations with the EU and also as regards the British electorate. That is to say, about half of the country don’t want to the leave the EU but almost all of them could probably just about be satisfied with EEA membership; just about half the country want to leave the EU and some of them would be happy with EEA membership. So, if we are really concerned about the ‘will of the people’ then EEA membership is probably about the best way forward. And in a way it would, actually, reflect where the UK has always been, ever since accession in 1972: a kind of semi-detached member of the EU.

A dangerous limbo

We remain in a situation of complete limbo as to what the government plans to seek for Brexit, possibly because of the forthcoming Supreme Court case but also, presumably, because they have no agreed plans.

A chance photograph of some notes, apparently from a briefing meeting, was seized on by the media for what it might disclose about these plans, but I am not sure that any of the speculation was warranted by what it showed. Instead, it seemed only to suggest an almost embarrassingly naïve and thin set of ideas. Very basic options (EEA, Canada, ‘having our cake and eating it’) were noted, along with the idea that services will be difficult to do a deal over because of ‘the French’ (services are difficult to deal with full stop; the idea that this is because of Gallic ill-will is banal). It seemed to be ‘Janet and John learn about Brexit’, and if this really is the level at which discussions are occurring within government then we are in serious trouble.

What is becoming ever-more clear is the massive damage already being done, even before we get to the point of triggering A50. The recent budget predicted a £100bn fiscal black hole over the next five years as a result of Brexit. This is not, of course, the full price tag of leaving the EU, just the effect on the government’s budget and, moreover, it was a cautious estimate provided by the independent Office for Budget Responsibility (OBR) – the reality may well be much worse.

Even this cautious estimate brought forth howls of anger from Brexit politicians and newspapers, with the OBR viciously attacked. This is now the habitual mode of conduct of the Brexiters. Unable to come up with any plan or any forecasts of their own, they simply lash out at anyone who injects any kind of realism into the situation. This is what happens when a protest movement founded on lies and fantasies actually wins: they continue to be a protest movement but get angrier and even more detached from reality.

Another indication of that is the response of the Brexiters to the refusal of the EU to agree a deal on the rights of existing (including British) migrants within the EU. There is a very good reason for that – it can only be agreed as part of the exit negotiations, which cannot start until A50 is triggered. But for the Brexiters it is just another occasion to proclaim victimhood at the hands of the EU, as if the consequences of Brexit were something that had been forced upon them, rather than something they had agitated for.

At the forefront, if only because the media afford him such attention, of the most spiteful Brexiter rhetoric is the Conservative backbench MP Jacob Rees-Mogg. Described as a ‘leading Brexiter’ (although he played little role in the campaign) this epitome of establishment privilege (Eton, Oxford and the City) depicts himself as an anti-establishment voice and specialises in ill-informed invective against any who dare prick the bubble of Brexiter fantasy. His repeated baiting of Bank of England Governor Mark Carney – about the only person to keep the UK economy on the road since the referendum – is noteworthy both for its nastiness and for its ineffectiveness. Carney, a sophisticated and highly intelligent technocrat, is well able to look after himself and his critics were humiliated by having to beg him to extend his term of office, knowing that his departure would cause a further collapse of the pound.

The Rees-Mogg versus Carney mismatch is a microcosm of a much more serious problem. For it cannot be said often enough or forcefully enough how dangerous the current situation is. Just about every person who is competent to make a judgment knows that Brexit will be a disaster – a disaster that is already happening – and that a soft Brexit is the least-worst way of enacting the letter of the Referendum decision. But there is no political mechanism to enforce that judgment. The entire future of the UK is now being held to ransom by a small group of Conservative MPs, such as Rees-Mogg, who are completely detached from reality and who will not allow anything other than the hardest of Brexits to occur. Meanwhile UKIP, under its new leader, is, as I predicted in a previous post advancing the even more insane idea of leaving the EU without triggering A50 at all.

I have just returned from France where, understandably, most political conversation is concerned with the forthcoming Presidential election there. But there is also plenty of interest in Brexit and the overwhelming sense is one of bemusement; bemusement about the referendum decision itself, and about the UK government’s lack of clarity about what it wants. But more than that an amazement that Britain, which is seen in France, as in many other countries, as a bastion of pragmatism and political stability should have become, as one person put it to me ‘completely crazy’. It’s a truism that if you hear your country criticized when abroad you instinctively defend it, whatever your own reservations may be. It is a mark of how desperate the current situation is that I felt neither inclined nor able to offer any defence.

Victims of their victory

A report in today’s Observer suggests that the EU will “force Britain into hard Brexit”. Under the headline, it is clear that this is nonsense. What is being said is that if the UK does not seek soft Brexit – meaning single market membership – then hard Brexit is the only alternative. The idea, persistently floated by Brexiters and the British government, that somehow the UK could be in the single market but exempt from freedom of movement of people and from ECJ jurisdiction is nonsense. There is nothing new in that, and it was explained repeatedly by EU leaders and remain campaigners during the campaign.

The Observer is a pro-remain paper but, predictably, its report is being taken up by the Brexit press as if it were an outrageous piece of bullying by the EU. That notion is likely to gain considerable traction in the coming months, the narrative being that all would have been well with Brexit had it not been for EU. It is a strange narrative, because just yesterday it was reported that a group of Conservative MPs, including leading Leave campaigner Michael Gove, have written to the Prime Minister urging her to a hard Brexit. So why would they complain if the EU wants to give them what they want? It is a similar breakdown in logic to that which leads them to be furious that, having campaigned for the sovereignty of the British Parliament, it is an outrage that the High Court has ruled that decisions must be made by ... the sovereign British Parliament!

The idea that the Brexiters have been betrayed when their unrealistic promises encounter the reality of their victory is also evident in emerging claims that the complexity of Brexit is a remainer plot. Gove, again, has been first in the starting gate here, arguing that civil servants were over-complicating the process and that but for that a “quickie divorce” would be possible. There is an overwhelming consensus amongst all those with any knowledge at all of the issues involved – the Institute for Government being a prominent example - that this is not true.

The key point here is that the core of the Brexit movement is a narrative of self-pitying victimhood, in which Brexiters are the down-trodden victims of ‘the establishment’ and ‘the elite’. Now that they have won the referendum and are in a position to implement Brexit they find themselves completely unequipped to deal with the realities of what it means and are casting about for ways to return to their preferred ‘victim’ role.

News round-up

With so much happening – and not happening – around Brexit, it is hard to keep up with developments and certainly beyond my ability to post about each and every one. So in today’s post I will provide a round-up of some of the more interesting and important articles, news items and opinion polls I have read in the last few days.

Much attention is focussing on the emerging realities and complexities of undertaking Brexit, given added emphasis by the leaked memo from consulting firm Deloitte about the lack of an exit plan and the chaos within the civil service in seeking to develop one. Although dismissed by the government, the memo seems consistent with The House of Commons Library’s briefing on the “legal, constitutional and financial unknowns” of Brexit, published last week.

The theme of constitutional and civil service chaos is taken up by Anand Menon on KCL’s UK in a Changing Europe site. The LSE Brexit blog carries a good post on the “legal and political headaches” involved whilst on the New Europeans site Charles Freeman has an excellent essay on the Brexit emperor’s lack of clothes, a metaphor also deployed by Rafael Behr in an article in the Guardian to point out the government’s lack of a Brexit strategy. Bloomberg is also carrying a withering assessment of the chaos and an IPSOS/Mori poll for the Evening Standard shows that 48% of the public think that the government are handling Brexit badly (though presumably for various different reasons).

In a sign that the Labour Party are beginning to develop a potent line of attack against the government, Jeremy Corbyn used today’s PMQs to quiz the Prime Minister effectively on what its approach would be, a line also pursued by the SNP leader in Westminster. Teresa May’s response got no further than to say that she would “seek the best possible deal” for Britain. One reason why this is a difficult line (or non-line) to hold is that her ministers are far from shy in being more explicit than May is prepared to be. Most notable this week was Foreign Secretary Boris Johnson’s statement that the UK would “probably leave the customs union” (although, apparently, also staying in the single market and having restrictions on free movement of people).

Indeed, public and political debate is still going around in circles over the issue of trade versus immigration, partly because of the continuing lack of understanding of the difference between single market access and single market membership. Thus a poll today from NatCen Social Research shows that the public generally support “free trade” with the EU but also limits on EU migration, a combination that EU leaders, most recently Carlo Calenda, the Italian Economic Development Minister, have repeatedly said is impossible. Calenda also described as “insulting” Boris Johnson repeating to him (a version of) the evergreen Brexit meme that EU exports (in this case of Prosecco, rather than the more usual ‘German cars’) must mean that the UK will get a good deal. It seems almost unbelievable that the British Foreign Secretary is still parroting these kind of nonsenses despite, presumably, having received detailed briefings from his civil servants.

In this context a statement yesterday by Angela Merkel that free movement may be negotiable was seized on as a sign of a significant shift, but as this New Statesman piece makes clear this was not a proposal for a special deal for the UK, or an abandonment of the free movement principle; rather an indication of some possible EU-wide changes around benefits eligibility. It is not entirely insignificant, though. I continue to think that a soft Brexit on this kind of basis could be fudged and, with skilful political leadership, sold to the British people. Back on the KCL site, a version of this based on the kind of association agreement that Ukraine has with the EU is mooted in an interesting article by Andrew Duff.

Within all this uncertainty, one ray of hope for those of us who view with alarm the loss of our EU citizenship: a proposal has been made to the European Parliament that citizens of member states leaving the EU be eligible to apply for associate citizenship of the EU, allowing continued free movement. How likely it is to come to anything I don’t know, but it is interesting not least because I suspect that for many ‘remainers’ it would do much to sweeten the Brexit pill, and could therefore make it easier politically for the UK government to enact a hard Brexit. Interesting, too, but also depressing to see the furious reaction to this proposal from Brexiters who decided that it meant that only those who voted ‘remain’ would have access to this, were it to happen. Interesting, because why should those who want nothing to do with the EU complain about being excluded from the rights associated with being in the EU? Depressing because of course the proposal does not discriminate (and would have no way of discriminating) between leave and remain voters: even in their moment of supposed triumph, Brexiters continue to lie. Oxford Dictionaries have today announced their word of the year: it is “post-truth”.

Is Article 50 reversible?

It is being reported that the government are considering a change in the arguments they will make in their appeal to the Supreme Court to overturn the High Court ruling that parliament must vote on the triggering of Lisbon Article 50. The reported change sounds highly technical but it has potentially far-reaching implications.

At the High Court case, both sides accepted as common ground that, once triggered, Article 50 was irreversible. This was very significant, because if that was so then, the High Court ruled, it would inevitably lead to the repeal of the 1972 European Communities Act. Since only parliament can revoke that which it has done, then only parliament could authorise that which would inevitably lead to that outcome. It is now being reported that the government is considering not accepting this is as common ground, and instead arguing that the Article 50 process is reversible, and that it would subsequently be possible not to go through with leaving the EU. If so, this would undercut one of the main reasons for the High Court ruling and might allow the government to win its appeal.

If this is indeed what the government end up arguing, it will have several consequences. First and foremost, it makes it likely that the Supreme Court will seek advice from the European Court of Justice (ECJ), not to make a judgment about this case (the ECJ has no jurisdiction to do so) but about whether on a point of EU Law Article 50 is or is not reversible. The Supreme Court could ask the ECJ this question even if both parties still accepted it as common ground that A50 was irreversible (as could the High Court have done, had it wished). But it becomes much more likely that they will do so is it is not accepted as common ground (although it is in their power to take their own view on reversibility that might lead to subsequent problems and even legal action if it turned out not to be true once A50 was invoked).

If the Supreme Court does ask the ECJ for advice it will certainly lead to outrage from Brexiters, who will regard it as interference in UK affairs (even though, as noted, it would not be an ECJ ruling, just clarification of the EU process which, after all, has to be followed if the Brexiters wish to leave the EU). It would also make it highly unlikely that the government’s timetable for triggering A50 by the end of March 2017 would be possible, because the ECJ would take some time to give its advice and until it did the Supreme Court could not give its ruling. This in turn would make it unlikely that the A50 process would be completed before the next scheduled General Election or before the next European Parliamentary elections.

If, after all this, the government won its appeal on these grounds, then it would have a big impact upon the politics that would follow. If they had won on the grounds of the reversibility of the A50 process, then it would make viable the proposals from LibDem and other parliamentarians for a second referendum on the terms of exit. At the moment, as I have argued in another post, this idea makes no sense because if A50 is not reversible then what would be the alternative on the ballot paper to accepting whatever the negotiated exit terms were? But if it has been established that A50 is reversible, then the question could be to accept those exit terms or to simply stay in the EU.

There is good logic to the idea of a second referendum in that form, because whilst the June vote was to leave the EU, it was not a vote for the terms of leaving. A recent opinion poll shows that only 33% of voters would vote to leave the EU on any terms; for the others, the issue would be what the terms on offer were. Personally, I am not sure whether such a referendum would be wise (the experience of the last one does not suggest that the campaign would address the real issues) and a parliamentary vote might be preferable. However, the latter course would also carry grave risks.

At all events, if the government do proceed in this way at the Supreme Court and if they win their appeal on that basis it will open up many new issues and potential delays in, if not the scuppering of, Brexit. There are so many ironies here. It is an irony that Brexiters, who asserted the centrality or parliamentary sovereignty as a key reason to leave the EU, should even be trying to get legal permission to circumvent it. It will be doubly ironic if in order to achieve this they open up the possibility that, even if they get to trigger A50, they might end up not proceeding all the way to the exit door. Finally, it may be noted that, even if none of this happens, it is becoming less and less clear where that exit door is: it is beginning to be mooted that the UK will need to seek an interim deal after the end of the two year A50 process in order to avoid the chaos that would ensue from the fact that this time period will not be sufficient to complete the negotiations.

What might Trump's election mean for Brexit?

There are obviously many connections between Trump’s victory and the Brexit vote, some of which I have already written about and which I will not discuss here. Instead, I want to outline some preliminary thoughts about how the result might impact on Brexit. That is difficult, because Trump is an unpredictable figure, and little credence can be attached to his various statements.

One immediate issue may be the sterling-dollar exchange rate, although so far it seems as if any flight from the dollar is affecting the yen more than the pound, which recorded only a slight uptick today. This actually reflects the ongoing bad news of Brexit: sterling is not seen as a ‘safe haven’ currency any more. Still, the coming weeks may see some gains for the pound against the dollar and that would have some impact on post-Brexit inflation, especially as oil is priced in dollars.

The wider implication may be to make a UK-US trade deal more likely, as excited Brexiters are already proclaiming. Trump presumably spells the end of TTIP, and in his campaign he made noises about a willingness to sign a deal with the UK, and indicated an approval of Brexit, to the extent of referring to himself as ‘Mr Brexit’ and repeatedly drawing comparisons between his campaign and Brexit. However, he has also signalled a strong desire to only do deals which are ‘good for America’. Given that the UK will be desperate to sign a deal, any deal, one can only anticipate that any UK-USA FTA would be heavily loaded against the UK. In any case, no FTA could be created until the UK has left the EU, and even then only in certain circumstances, depending on the terms of Brexit.

At the same time, we can expect deteriorating relations between the US and the EU, both as regards TTIP and more widely. The UK government might think that this could re-ignite the ‘special relationship’, although there are significant foreign policy differences over Syria, Iran and, especially, Russia. Indeed, the most significant issue is likely to be NATO and its response to Russia. Trump has indicated a lack of enthusiasm for NATO and especially for members who do not spend 2% of GDP on defence. Key here are the Baltic States, where only Estonia meets the 2% criteria.

There is some complex and very dangerous geo-political territory here. It is not inconceivable that Trump’s election will embolden Russian military incursions into Ukraine and soft power incursions into the Balkans. It’s no accident that the Russian Parliament applauded the result. The nightmare scenario is military action in the Baltic States (or, if not military, then political and economic). Brexit exacerbates these dangers because it also contributes to the weakening of the US-EU-NATO nexus and, more generally, the post-war international order. But this also creates the possibility of an international crisis so severe that the UK government might seek (more or less willingly) to defer, or even abandon, Brexit. That, of course, would be an extremely dangerous situation and any ‘gain’ as regards Brexit would be more than offset by the calamity it would involve. So it is not that I am hoping for such a situation, just saying that because Trump’s election throws the geo-political chips in the air, the way that they settle may have an impact on Brexit.

On a lighter note, the report that Nigel Farage might be appointed by Trump as the US Ambassador to the EU was, I think, a joke (one can only hope so; though in this strange world who can say). That is about the only joke I can see in the present situation. With the UK and, now, the US having embarked on an unpredictable course of national populism – and the possibility of other countries doing the same – both those countries and the free world have entered a period of confusion and danger unprecedented in my lifetime.

Let's all take a deep breath

When Britain voted to leave the EU I thought it was a catastrophe. I still do, but things are turning out even worse than I feared, to the point that I think we are now entering a very dangerous situation.

One might have thought that with the vote having been very close, and won on the basis of claims, such as the £350M a week for the NHS, that were disowned within hours of the result, that an apparently pragmatist politician like Theresa May would have sought to find a common ground way forward. That would have meant, perhaps, a pause to look at options, then a relatively soft Brexit plan that could be just about acceptable to elements of both remain and leave. Instead, she opted to at least signal a hard Brexit, and poured scorn on anyone wanting to question that as trying to undermine democracy.

It may be that May thought that, having been a (lukewarm) remainer, she had to do this in order to run her party, and that by coming out hard on Brexit she could hold that party together. If so, she has made the same miscalculation that David Cameron made: her Eurosceptic MPs will always ask for more, whatever they are given. So she has implied that she wants to leave the single market and they have pushed her to leave the customs union; said she wants to invoke Article 50 and they have pushed her to unilaterally abolish the 1972 European Communities Act. As with the Referendum itself, attempts to manage the Tory Party’s extremists are dragging the whole country towards their extreme positions.

It is crucial to recall that the Leave campaign never specified a form that leaving would take. Some wanted a Norway model (meaning European Economic Area membership), some a Switzerland model (meaning EFTA but not EEA), some a Canada model (meaning an FTA with the EU), some a Turkey model (meaning outside the single market but inside the customs union), some a WTO model, some an Albanian model, and some a Liechtenstein model! So the vote to leave the EU was never a vote for any particular alternative. Yet the government, and the Brexiters, are now insisting that it gave a mandate for some kind of hard Brexit – though even the form of that they cannot agree on (Turkey, Albania, Canada, WTO are still in the frame; Norway, Switzerland and Liechtenstein apparently not).

All of that is chaotic, and highly damaging to the UK economy, as can be read from the value of the pound that falls whenever a hard Brexit looks more likely and rises when a soft Brexit seems more likely. What is not just chaotic but dangerous is the populist rhetoric around this. Given that the Leave campaign chose not to define what leave meant, it was inevitable that this would have to be decided by parliament. May tried to avoid this, but the High Court judgment confirming that it must be so led to perhaps the single most disgusting headline in British newspaper history: the Daily Mail’s ‘Enemies of the People’ (the other candidate for the title being the Mail’s ‘Hurrah for the Blackshirts’ support for the British Union of Fascists in 1934).

It is important to understand the resonance of the term ‘Enemies of the People’. It was used in Nazi Germany (Volksverräter) and the Soviet Union (vrag naroda), and so to see it used in a British newspaper is truly shocking. It cannot be dismissed, as some commentators have tried to, as being just the same as when papers criticise what they see as over-lenient criminal sentences. It is not an attack on the judgement, but on the institution of law. And what provoked it was not – as might be thought – a ruling that negated the Referendum vote, but one that simply upheld the longstanding principle of parliamentary sovereignty; the principle that Brexiters made central to the Leave campaign.

So we now have a situation where a narrow vote to leave the EU on terms unspecified is being translated into some mythical ‘will of the people’ for hard Brexit. We know that only 37% of the electorate voted to leave the EU, and we know that they did so for all sorts of reasons, and we know that on current opinion polls they would not do so now. There is no ‘will of the people’ for hard Brexit; there may not even be a will for Brexit at all.

But that is not the worst of it. Nigel Farage, the ‘interim’ leader of UKIP is now implicitly condoning, if not encouraging, street violence if his supporters don’t get a hard Brexit. We all, whether remainers or leavers, have to stand up now and condemn this. The referendum did not suspend the constitution or the rule of law. It does not give a licence to attack judges; it does not give a licence to threaten to gang rape people we disagree with; it does not give a licence to spit on schoolchildren; it does not give a licence to beat up and murder immigrants. I know very well that almost no one who voted to leave the EU condones any of these things. But they are being done in your name.

Whether or not we are in the EU is an important question, about which there are strong feelings on both sides. I have strong feelings about it. But we must not rip up our civility, our constitution or our law in the process. Important as it is, membership or otherwise of the EU is not that important. Let’s all take a deep breath.

Is there an alternative to Article 50?

With the High Court ruling (if upheld) having made it clear that parliamentary approval is needed to trigger Article 50, attention is now likely to shift to the possibility that there are other routes to leaving the EU. A pervasive meme amongst Brexiters has been that the UK could simply shortcut A50 and unilaterally repeal the 1972 European Communities Act. This idea has been adopted by UKIP leadership candidate Suzanne Evans, who recently said:

“Article 50 is not the way to go. That is an EU construct. The best way to do it in my view is to repeal the 1972 European Communities Act as soon as possible”

This course of action has also been recommended by long-time Tory Eurosceptic John Redwood.

Whilst this option was not explicitly considered by the High Court (which considered the repeal of the 1972 Act at the end of the Lisbon A50 process, rather than before and instead of that process), its ruling directly impinges upon it in that only parliament could repeal the 1972 Act. But would it, in any case, be a good idea? The EU Law expert Professor Steve Peers explains that:

“[P]olitically and economically speaking, this option is insane. It would leave many practical details of withdrawing from the EU unresolved, such as payments of EU funds to UK recipients. Even if the UK could revert its membership of the EEA, that would only govern the trade arrangements with the EU, not issues outside the scope of the EEA. For instance, it would immediately end the UK’s involvement in the European Arrest Warrant (EAW). Unless we had negotiated a transitional and/or replacement arrangement – which is obviously the point of having the two-year period set out in Article 50 – defence lawyers would argue that any EAWs which the UK had issued to other Member States, and any EAWs issued by other Member States which the UK was seeking to execute, were invalid. That would mean that no fugitives could be arrested or detained on the basis of those invalid EAWs, and those already detained would have to be released. More broadly, such a ‘unilateral declaration of independence’ would destroy the UK’s credibility as a negotiating partner with the remaining EU, and indeed with anyone else, given the clear contempt that it would display for the legal rules which the UK had previously accepted. It would be a long time before the UK could plausibly claim again that it had a record of ‘fair play’ in international negotiations.”

The impetus to ‘just do it’ will doubtless resonate with many Leave voters – I recently heard a voxpop where someone thought that we had already left the EU - but as with so much in the current situation the complex realities don’t fit with the populist simplicities.