Brexit ten years on: unsettled and unsettling

It is fitting that virtually on the day of the tenth anniversary of the referendum yet another political crisis came to a head with the resignation of Keir Starmer. Within the next couple of weeks, or at most months, we are now set to have another Prime Minister, the seventh since the Brexit vote. With that have come three general elections, not to mention a massive churn of ministerial appointments. Taken together with the administrative bandwidth absorbed by Brexit, both before and since leaving the EU, it is fair to say that the British polity has been overwhelmed over the last decade.

It would be equally fair to say that the combination of current events has overwhelmed my ability to write about them concisely, so this is another inordinately long post.

Starmer’s downfall

Brexit is not the only reason for the shortening cycle of political leadership, and the UK is not the only European country (£) to have experienced it. But, for reasons I’ve discussed previously, there are multiple and complex links, both direct and indirect, between the referendum vote and the subsequent destabilization of British politics. In that sense, our political instability is one more piece of Brexit damage to be added to the long list which has accrued over the last ten years, and perhaps the one which was least predictable.

So far as Starmer, specifically, is concerned, the reasons for his downfall are various but Brexit was certainly part of the mix. In particular, ever since the referendum the Labour Party has been haunted by the possibility that the populists are right to claim to speak for ‘the people’ against ‘the elite’, a possibility which is deeply disconcerting to a party which regards doing so as its prerogative and foundational principle. In this way, Brexit exacerbated the longstanding difficulty Labour has had in facing up to the fact that its traditional electoral base in unionized manufacturing industry has been eroding for decades and, to the extent it does face up to that, still regards that eroding demographic as the template for the ‘real working class’. In its way, it is every bit as nostalgia-driven as Brexitism.

It is this which explains Starmer’s relentless focus on the sensibilities of leave voters in Labour’s erstwhile heartlands and his near disdain for the broader ‘progressive’ coalition characterizing most of the actual and potential support for Labour. This fed through most obviously into immigration policy and, closely associated, the ‘red lines’ on UK-EU relations. There was a logic to avoiding positioning Labour as a ‘rejoin’ party at the 2024 election, but Starmer went well beyond that in constantly seeking to appease Reform or Reform-curious voters’ hostility to immigration.

The result was always going to be that those voters would be unimpressed and, if anything, pandering to their ‘legitimate concerns’ made it more likely that they would support parties with more extreme ‘solutions’. Meanwhile, ‘progressive’ voters were alienated by this approach causing their support to leak away to other parties, especially the Greens.

That this is what has happened is borne out by academic research and further demonstrated by a YouGov poll this week, showing that 2024 Reform voters are most likely to feel that Labour are trying to appeal to them but least likely to say they will consider voting for Labour. The personal loathing which the public have for Starmer seems (to me, though not just to me) disproportionate, but the fact that it extends across the political spectrum to encompass both his ‘natural’ supporters and opponents is a reflection of the fundamental flaw of this approach.

All this, including of course the re-emergence of Nigel Farage from his post-referendum resignation to create the Reform party, refracts through Brexit and, along with other factors, created the context for Starmer’s demise. It meant that his party became convinced that he would fail the most basic and brutal test of a party leader: to win the next election. Worse, since the May elections, his MPs believed that he would lose it catastrophically  

Enter Burnham, stage left – or stage right?

There is much more that could to be written about all of this, but the immediate fact is that, once again, there is the instability of a change of Prime Minister, and that is not just an issue in terms of the disruption and uncertainty it entails. Prime Ministerial changes between elections also raise questions of legitimacy. Of course, everyone knows that in our political system the PM is not directly elected, and is the person who can command a majority in the House of Commons, so such changes are not constitutionally improper and have happened many times in the past. But for these changes to happen so frequently strains that constitutional convention, which in any case is strained if the incoming PM seeks to radically depart from manifesto commitments.

Already, there are contradictory reports about whether Andy Burnham has or has not ruled out an early election, and it’s worth recalling the potential traps this creates. When Gordon Brown took over from Tony Blair in 2007, he initially refused to rule out an election and there was much speculation that he would call one. When he decided not to, he earned the nickname ‘Bottler Brown’. Conversely, when Theresa May took over from David Cameron in 2016, she was adamant there would be no election and the perceived opportunism of her sudden decision to hold one the next year was one reason for its disastrous outcome.

Regardless of whether there is an election, it is unclear at this point what Burnham’s policy agenda will be and to what extent it will differ from that of the last two years, especially as he will face many of the same constraints. His supporters’ main hope seems to be that he will change the political mood, if not the political programme, by being more communicatively and strategically adept than Keir Starmer. And it’s true that he has more ease of manner than his predecessor, although that does not place him in an especially exclusive club. It’s also true that he comfortably beat Reform in Makerfield, but it’s not clear how much can be extrapolated from the rather unique circumstances of that by-election.

For what little it’s worth, my personal view is that, probably within short order, he will become almost as unpopular as Starmer, will be as unwilling to make and stick to difficult choices, and will be seen as equally lacking in strategic coherence. The veteran political journalist Philip Stephens is of much the same opinion but, clearly, other views are available including from Ian Dunt, a commentator with whom I often agree, and I’ll be happy if I am proved wrong.

One reason for my pessimism is that so much of Burnham’s pitch, at least so far, seems to have its own version of Blue Labour nostalgia. There may be much to agree with in his analysis that “Britain has been on the wrong path for forty years” but it is hard to see how he can deliver on the promise of “re-industrialization” or whether it is a viable strategy for the British economy. And he has already indicated that, despite his previous criticism of them, he is now committed (£) to the immigration policies being pursued by Shabana Mahmood (or has he changed his mind again?), which is certainly not a viable strategy for the British economy. He has also said that he “agrees with what Farage is saying” about the need to go further in controlling immigration, and that he would make greater use of migrant detention centres. At first sight, then, his approach, at least on this key issue, looks set to replicate Starmer’s in trying to appease Reform voters whilst being careless of progressive voters.

Ten years on: what is Brexit?

Closely related to Burnham’s overall political strategy is the question of what his approach to the EU is going to be (and, more generally, his approach to foreign policy, about which he has said very little). Just before Starmer resigned, the date for the next UK-EU summit had, finally, been set for 22 July. In one scenario for how the leadership contest (or non-contest) plays out, Burnham might actually be Prime Minister by then, but in any case the President of the European Council has announced that the meeting will be postponed.

Already that is being spun by the pro-Brexit press (£) as a sign that the EU is expecting Burnham to be a “soft touch” who will make “more concessions”, which re-written in adult might mean Burnham pursuing the “more ambitious” agenda that Starmer recently promised. But the reality is that nobody knew what Starmer meant by that and, certainly, nobody knows what Burnham’s agenda will be. It seems highly unlikely he will not proceed with whatever has presumably now been agreed on SPS regulations, emissions trading, and youth mobility, but whether he might go further, and what that might consist of, is at this point opaque. It is a reminder that there is still no agreed meaning of Brexit, and ‘Burnham’s Brexit’ has yet to be defined.

The fact that UK-EU relations are still in flux and their direction uncertain, and even the framing of that by Brexiters in terms of the UK being forced into “concessions” by having a “soft” leader, is a microcosm of why the tenth anniversary of the referendum has a rather different meaning from that which features in most of the tidal wave of discussion about it. I will come back to what that meaning is but, for now, will focus on the broader discussion. Since almost every commentator has had their say (myself included, for example in Byline Times (£) and on the Oh God What Now? Podcast) it would be impossible to consider it all here, so I will provide just a very brief outline.

Analysing Brexit

Much of the discussion consists of analysis of the effects, especially the economic effects, Brexit has had, and a very good overview of these was provided by the BBC’s Economics Editor Faisal Islam. In terms of specific research studies, an excellent example is John Springford and Anton Spisak’s report for the Centre for European Reform, which is especially useful in disaggregating the (much larger) negative impact of leaving the single market from that of leaving the customs union. Also excellent is a new paper by Eleonora Alabresa and others about the variation in the regional effects of Brexit which, whilst assessing the overall negative impact at about 7-8% (which is consistent with some other studies), shows this to vary considerably by region.

These two studies can also be considered together in that the Alabresa paper shows that Northern Ireland is exceptional in having had little or no economic damage, reflecting it being effectively still part of the single market for goods. A long time ago, I wrote that Northern Ireland would provide a kind of natural experiment to understand the economic effects of Brexit (I can’t now find it to link to, and I’m sure others have made the same point). And so it has proved but, in fact, the outcome was already implied in the perhaps inadvertently revealing remark made by Michael Gove in 2020 when he said Northern Ireland would “get the best of both worlds”. Then as now that prompts the question: why not the rest of the UK?

There has also been much discussion of the domestic political effects of Brexit, some of which I’ve already touched on in this post. A particularly revealing analysis was provided by Jonathan Vincent in the Financial Times (£), which includes some illuminating infographics showing how voters’ behaviour is still significantly structured by how they voted in the referendum, underscoring the persistence of ‘remainer’ and ‘leaver’ as political identities. Meanwhile, the experiences of EU citizens living in the UK, some of the people most traumatically affected by Brexit, are recorded in the Brexit Lived Experience Archive (BLEA) created by Professor Tanja Bueltmann and publicly launched to coincide with the referendum anniversary.

Possibly the most comprehensive overall analysis, not just of the last ten years but of the future possibilities for UK-EU relations, is the report produced by multiple authors from the UK in a Changing Europe (UKICE) centre. UKICE, which throughout the whole process has been, and remains, the single best source of analysis of Brexit, has also produced a variety of themed reports marking the tenth anniversary, notable examples including Joël Reland’s on regulation (showing how little regulatory divergence there has been) and Jannike Wachowiak’s on how the EU has changed during the period (providing an important antidote to what has been, as so often, a largely parochial discussion).

Defending Brexit

None of these analytical reports and commentaries suggest that Brexit has been a success and, as most contributions to the anniversary discussion acknowledge, the polling evidence that a consistent and increasingly large majority of the population view it as having been a failure and a mistake is clear. But, of course, there have been numerous pro-Brexit comment pieces which continue to defend the project. They are all fairly similar in nature, since the arguments are now well-rehearsed, so I will only focus on three, but that should not be taken to imply that these pro-Brexit views are in any way rare.

Strikingly, they almost all share one common feature, which is that they are defensive. That is, they are framed as a defence against what they recognize to be the established narrative that Brexit has not been a success. That in itself is important. In January 2021, as the transition period ended, I wrote that what happened then would “shape the post-Brexit narrative”. It did, and what was established was a narrative that it had been a failure. So, whilst Brexiters do not accept this to be true, they do accept that it is the narrative. Had the battle for that narrative gone the other way, the terms of this tenth anniversary discussion would be entirely, unrecognizably, different.

As has long been the case, one of the major defences of Brexit by its advocates is that ‘it was not done properly’. Tellingly, the banner front-page headline in the Express on the day of the anniversary was a plaintive demand to “Give Us Proper Brexit”. Equally telling was a Financial Times report about how the various leading Brexiters all blame each other (as well, of course, as remainers) for this failure to deliver ‘proper Brexit’.

Those mounting such arguments have never been able to explain a realistic way in which Brexit could have been done successfully, or even to agree about what proper Brexit means. But it is an argument that can always be made, since it is, strictly speaking, irrefutable (which is makes it a weak, not a strong, argument in that it is not susceptible to any meaningful test). As many people have observed, it is an argument with the same structure as that made by those who insist that ‘real Communism’ has yet to be tried.

One of the slightly better articles making this kind of argument is that by Matthew Jeffrey at Conservative Home, but it shows no understanding of why the regulatory divergence it proposes has not happened, and relies on a wholly unrealistic claim about what ‘mutual recognition agreements’ could make possible for international trade. Most glaringly, it advocates using post-Brexit freedoms to follow “aggressive tax competitiveness” citing as an example the strategy followed by, er, Ireland – an EU member state. The conclusion, inevitably, is that (like real communism) “the real Brexit is still to come”.

The problems of defending Brexit whilst claiming it has been betrayed, or not done properly, are all too obvious, which is perhaps why Michael Gove’s article in the Spectator mainly takes a different tack. Asking the question ‘The Brexit decade: was it worth it?’ (to which his unsurprising answer is ‘yes’), Gove attempts to itemise how Britain has benefitted from Brexit. As with any such list, there are questions about the veracity and desirability of each claimed benefit, but the fact that he includes the demonstrably false ones that Brexit enabled a faster vaccine roll-out (a lie which Boris Johnson has also repeated this week), allowed the UK to support Ukraine, and provided “much more than £350 million a week extra for the NHS” makes it hard to take any of them very seriously.

Moreover, as is again typical of such lists of benefits, it is meaningless because there is little or no recognition of the costs of Brexit. In particular, Gove, with presumably knowing outrageousness, reprises his infamous line from the campaign in deriding “experts from organisations with acronyms who have got things consistently wrong in the past”. In fact, the Treasury’s pre-referendum long-term analysis of the impact of Brexit, giving as its central estimate of the scenario of a negotiated bilateral trade agreement – as happened – that GDP would be 6.2% lower after 15 years (see p.7 of the document), is remarkably similar to most of the credible estimates of what is actually happening which mainly lie in the range of 4% to 8% [1].

In the end, though, Gove simply falls back on the standard get-out that, whether the effects have been positive or negative, Brexit is definitively justified on the abstract grounds of ‘sovereignty’, with national politicians making national laws and being held accountable for them (though not, it seems, being accountable for advocating Brexit). As ever, there is no recognition that sovereignty-sharing is an act of, rather than a negation of, sovereignty; nor of the many ways in which EU members exert sovereignty and hold national politicians accountable; nor of the many ways that all sorts of international regulatory systems (including but not limited to those of the EU) continue, necessarily, to impinge on the UK; nor of any of the many other ways that the ‘taking back control’ thesis is flawed.

Effectively the same argument, though from a different part of the political spectrum, is made by Larry Elliott, the ‘Lexiter’ economics commentator at the Guardian. He, too, takes issue with the economic consensus about the damage of Brexit, in particular questioning the OBR’s estimate of 4% less GDP after 15 years. He does so on what, for an economist, is the rather innumerate basis that, if true, it would mean the economy would be “4% bigger today” [emphasis added]. Otherwise, he opines that “Brexit showed that class still matters in politics” (who knew?) and, like Jeffrey and Gove, that Brexit “creates an opportunity for change” though, in his case, that change should be to ‘reverse forty years of neo-liberalism’ which, he hopes, is what Burnham intends to do. In this, once again, we see the capacity of Brexit to have multiple, incompatible meanings amongst its adherents but also, more specifically, how already a Burnham premiership is being anticipated in the Telegraph as a ‘soft touch’ which will take the UK closer to the EU and by Elliott as the saviour of the Lexit project.

Reframing the anniversary

Thus, rather as I anticipated in a recent post, this latest ‘national conversation’ about Brexit is in many ways the same as that which we have had for ten years and more. And, in another recent post, I quoted the second edition of my book about Brexit pointing out that according to its advocates and supporters Brexit “certainly wasn’t proposed as, or supposed to be, the prelude to a country permanently divided on the wisdom of Brexit, still less to an interminable debate about whether it had been the right thing to do ….” (p.285) and I went on to quote David Frost saying (in 2022) that “one piece of evidence of failure [of Brexit] would be if we are still debating this in five- or six-years’ time in the same way. I think [if] it is to succeed it needs to settle in the British polity.” 

In those terms Brexit has failed. It has not settled. This week there have been no great public celebrations of ‘national independence’, whilst the prospect, whether positive or negative, of rejoining (or joining) the EU has been very much part of the anniversary discussion. But, more than that, Brexit continues to be profoundly unsettling.

It is this which, I think, gives this tenth anniversary discussion a rather different meaning than most contributions to it suggest. It is not really a stock-taking exercise, still less a planning one. Nor is it a commemoration, or even a retrospection. Rather, just as the current political crisis is the latest episode within the continuing process of instability bequeathed by Brexit, this tenth anniversary is itself the latest episode within the continuing process of contestation to which Brexit has consigned the nation.

 

Note

[1] Gove made implicit reference to the Treasury short-term forecast, which is admittedly harder to defend, especially given the way it was used by George Osborne. But it is worth recalling that the value of sterling has never fully recovered since its very sharp fall immediately after the referendum result, and also that the forecast model did not assume any action by the Bank of England which, in fact, under the then Governor Mark Carney, immediately announced a programme to stabilize the financial system, which may well have averted some of the economic turmoil of the short-term forecast.

A reply to John Redwood

John Redwood’s blog post (“Brexit policy and how to negotiate”, 1 August 2017) may be taken to represent the views of the more hardline Brexiters about the current situation. Indeed, to the extent that he is regarded by Brexiters as one of their leading intellectual lights it may be taken as representing their strongest case. This post is a reply.

Redwood: “I am glad the PM has made clear we will end freedom of movement and have our own migration policy on exit, as I reminded people here on this blog last week”.

Response: The PM’s position on freedom of movement is not clear, in fact, as Ian Dunt’s analysis (“No. 10 announcement on free movement completely without meaning”, politics.co.uk, 31 July 2017) explains. What is clear is that with her authority diminished by the General Election result, this and other policies are a matter of dispute within the government, with different ministers openly articulating different positions.

Redwood: “She has also clarified the issue of a transitional Agreement. The UK has not asked for one. We still have 19 months left to negotiate a proper Agreement. Negotiating a transitional one would require prior consent to a full Agreement, then allowing discussion of how to transition from the one to the other. It is not intrinsically easier to negotiate a Transitional Agreement than a permanent Agreement, and requires consent to where the two parties are going during transition”.

Response: This is correct both as regards the fact that the UK has not asked for a transitional agreement and as regards the incoherence of the position of those arguing for one without any clear idea of what the end state of the transition would be. However to say that there are 19 months left is to forget that the agreement needs ratification. So there are really more like 14 months left.

Redwood: “There are those in the Opposition, the media and business who seem to want to turn the EU/UK talks into a negotiation amongst ourselves about what we are trying to achieve. This is damaging to the UK’s official negotiating strategy, as it leads some in the EU to think that if they delay and prod the UK will change its mind and offer to carry on with budget contributions, freedom of movement and the other items that so favour the rest of the EU”.

Response: This is misleading in that it is those within the Tory Party and more especially the Cabinet who are conducting this internal negotiation, precisely because there is no agreement amongst them as to what the UK’s strategy should be. In this they have been extraordinarily irresponsible (to an extent without precedent in modern British political history) since they have already chosen of their own volition to trigger Article 50 without having reached such an agreement. What we are seeing, as we have since at least 2015, is the internal divisions of the Tory Party overriding any sense of care about the national interest, as pointed out by former Tory MP Matthew Parris in a recent excoriating article (“The Conservatives are criminally incompetent” The Times 28 July 2017 [£]). What is damaging to the UK’s negotiation from an EU perspective is their dismay that the UK has no clarity or detail. It is true that business groups are trying to open up the possibility of a transitional agreement, and the reason for that is obvious: businesses are well aware that an agreement within the Article 50 period is impossible and that without a transition there will be catastrophic effects for business. That is simply pragmatic business self-interest: what is surprising is that the current Tory Party are so remote from business and so pre-occupied with pursuing an anti-business policy in the form of Brexit.

Redwood: “MPs and others in senior positions in the Labour party keep changing their minds about membership of the single market and customs union, long after Parliament has voted decisively both to send the Article 50 letter and to exit both the single market and Customs Union”.

Response: Correct. The Labour position is completely incoherent.

Redwood: “Let’s have another go at reminding people what the UK has already decided. The people voted to leave the EU. They did so with both official campaigns pointing out this meant leaving the single market and customs Union. They voted leave to take back control, especially of our money, our laws and our borders”.

Response: This is simply untrue. The Leave campaign never clearly specified that voting to leave the EU meant voting to leave the single market and the customs union. Indeed many leading Leave campaigners including Daniel Hannan and Owen Paterson explicitly said that it did not mean leaving the single market. Moreover when the Treasury put out its long-term economic forecasts for Brexit in April 2016 it explicitly identified three variants of Brexit: continued single market membership, a free trade agreement, and WTO trading. There was never any sense given to the electorate that leaving the EU meant any one thing. This is a matter of record and to deny it is simply to lie. Indeed, the whole situation that the government now finds itself in derives from the fact that the Referendum result was a vote against membership of the EU but not a vote for what should happen next. That is absolutely fundamental to any honest discussion of Brexit, as is a recognition that the country was virtually split down the middle by the Referendum and the need, therefore, to find a way forward that reflects this.

Redwood: “Remain supporters then forced legislation and Parliamentary votes to test out the will of the people. Parliament voted overwhelmingly to leave the EU. The Commons since the election has voted to leave the single market and customs union as part of that, as was always implied in the previous Parliamentary votes”.

Response: ‘Forced’ is a peculiar way of putting the fact that as a matter of law a Parliamentary vote was required, but the fact of the result of that vote is not in dispute.

Redwood: “Some Remain supporters now want to invent a Transitional Agreement, requiring the UK to go on paying budget contributions, accepting freedom of movement, and continuing to accept new EU laws. This is not government policy, and is clearly against the wishes of the people as expressed in the Referendum”.

Response: The idea of a transitional agreement comes from Cabinet Ministers, such as Philip Hammond, who may have supported remaining in the EU but now accept that the UK is leaving. Whatever its merits, it cannot be said to be either for or against the wishes of the people as expressed in the Referendum, since they were never asked that question.

Redwood: “When asked why they want this, they usually argue that the other EU member states will damage their trade with us and our trade with them if we do not accept continuing features of EU membership. It is a cruel irony that the most pro EU are the most negative about the nature and likely actions of our EU partners”.

Response: This, to be both frank and charitable, is childish. It is the UK which is choosing to leave the EU, not the other way around, and that choice has consequences for the trading relationship. Redwood and Brexiters in general need to have the courage and honesty to take responsibility for that choice. If ‘we do not accept continuing features of EU membership’ then of course we do not continue to trade on the same terms. To coin a phrase, Brexit means Brexit. The issue isn’t about any benevolence or lack of it on the part of the EU, it is just a matter of reality: if the ‘will of the people’ is for the UK to be a third party state then that is what it will be, with all the consequences entailed.

Redwood: “They are also going to be proved wrong on this as on so much else about Brexit. WTO rules work fine, if the rest of the EU really does want to damage its valuable exports of agricultural produce and cars. Their more voluminous exports will attract far more tariff than our sales to them. Under WTO rules and international law the EU cannot stop companies and individuals in its territory buying and selling things with the UK”.

Response: This is a repeat of the usual ultra-Brexiter mantra and exhibits its usual detachment from reality by invoking the car industry (see here for discussion) and the UK trade deficit (supposedly an advantage, and yet we have a services surplus so what of that?) and failing to recognize that a far higher percentage of UK trade is with the EU-27 than EU-27 trade is with the UK. But more fundamentally it ignores the fact that tariffs are not nearly as important as non-tariff barriers and that WTO rules, far from ‘working fine’ would be a catastrophe for the UK as has been repeatedly explained for example in summary by me, but also by trade experts, by businesspeople, by journalists, and by the better-informed Brexiters such as Peter North who concludes: “One can say, unequivocally, that the UK could not survive as a trading nation by relying on the WTO Option. It would be an unmitigated disaster, and no responsible government would allow it”.

Final note: There is a huge irony here. It is precisely the fact that crashing out of the EU on WTO terms would poleaxe the UK that has driven the call for transitional arrangements from those trying pragmatically to salvage something from the year-zero ideologues such as Redwood. But for those of us who want to remain in the EU those ideologues are actually helpful, in that if they are successful in driving Britain to the brink of disaster they will assist our attempts to save our country from going over it, whereas the ‘pragmatists’ because they sound more reasonable are more likely to take us all the way to disaster, albeit more slowly. Of course it would be far better for Britain if we had not been put in the current position at all, and whatever now happens the Brexiters have irrevocably damaged our country, economically, culturally and geo-politically. Still, given that we are where we are, the position taken by Redwood (and his fellow ultra-Brexiters), dishonest and absurd as it is, might just help us to avoid the worst. If the ultras can defeat the pragmatists there’s just a tiny chance that the national catastrophe of Brexit will be averted.

[Updated with minor edits and reformatting, 2 August 2017] 

The debate about economic forecasts

The statement by the Bank of England that its forecasts of the effects of Brexit have proved wrong has been greeted with glee by Brexiters and led to economic forecasting in general being denounced. There is no doubt that economic forecasting is a problematic activity, but it is important to make several points about the Brexit forecasts.

First, they were an attempt to respond to the Leave campaign’s claims that the UK would flourish or at least come to no harm if people voted to leave. Those were every bit as much forecasts as those of the Remain campaign, even though they were not backed up with any analysis. Similarly, claims about the £350M a week for the NHS if we left, the fall in immigration if we left, and the prospect of Turkey and other countries joining the EU if we didn’t leave were all forecasts, and they have all now been disowned by leading leavers.

Second, like all economic forecasts, those made during the Referendum campaign were based upon assumptions and simplifications. Most importantly, many of them, including that made by the Treasury, assumed what was then believed to be inevitable namely that Article 50 would be triggered immediately after a vote to leave (see paragraph 1.42 of the Treasury short-term forecast). It wasn’t, and instead we have been in a limbo since. So far as the BoE forecast is concerned, it did not (bizarrely, perhaps) factor in the actions that it, itself, would take if the vote was to leave: quantitative easing and a cut in interest rates. Both those things happened, and mitigated the effects of the vote, but they were not cost-free and the price of them is being paid by pension funds and savers. So whilst some of the adverse effects the BoE predicted have not so far occurred, it is because of other adverse effects created by the BoE’s attempts to prevent their predictions coming true: the cost of the vote has been displaced and deferred, not avoided.

Third, it is simply not the case that the vote has passed without very severe economic consequences. The rapid fall of sterling is the most obvious, and would in any other circumstances have been understood as an economic catastrophe. The knock on effects of inflation are beginning to be felt. And there have been significant deferrals or abandonments of investment. Most economists continue to believe that the long-term effects of Brexit will be bad. At the very least, the jury is still out and some things can be said with certainty: whenever the government indicates that a hard Brexit is in prospect, the pound falls; and the government’s fiscal position has deteriorated to the extent of £59 billion over five years as a result of the vote. This isn’t just ‘forecasting’, it means real additional cuts in public services, which will affect real people’s lives, which wouldn’t have occurred if the Brexit vote hadn’t happened. Again, in any other circumstances this huge collapse in public finances would have been seen as a major economic crisis. Post-Brexit it is all but ignored.

Fourth, and it is a version of the first point, although Brexiters are now decrying economic forecasting, they are happy enough to take as gospel those that have recently been provided by lobby group Change Britain saying that hard Brexit would make the UK £450M a year better off and create 400,000 new jobs. If forecasting is so discredited then why should we believe these figures?

Similarly, much Brexiter attention has been given to a report by a group of Cambridge economists saying that the official forecasts were wrong and that there would be little economic effect from Brexit. Seldom can an academic working paper have been accorded such respect! What is striking about that is, first, that we can be sure that had reached different conclusions it would have been derided as the work of the elite (or ignored altogether) and, second, that what is being lauded is the application of a new and as yet unproven model of economic forecasting. In short, there is much confirmation bias in play here.

With all that said, I have always been reluctant to try to quantify the effects of Brexit and in various talks I gave before the Referendum refused to do so. I have adopted the same approach on this blog (for example on last September’s OECD statement, and in the very first post I said that there was no point in following each and every economic indicator whilst we were still in the EU).  Instead, what should command out attention is the logic of different institutional arrangements. What I mean by that is that leaving the EU is a massive institutional change for the UK. That ought be to common ground between Brexiters (or else – why leave?) and Remainers (or else – why care that we are leaving?).

If that is so, then [given that 50% of our trade is with the EU and another 16% via EU trade deals – so – 66% of our trade – and given that some, at least of our foreign direct investment relates to single market membership, and given that many of our industries from agricultural harvesting to the most advanced science are dependent on free movement] how could it be anything other than true that it will have massive economic effects? No country has ever tried to simultaneously detach and re-attach itself to the global economy, with no clear process or timescale or terms for doing so, and that in itself makes predictions all but impossible, except to say that the consequences will be hugely destabilizing. For sure Brexiters might say, as some do, that any price is worth it. For them, no economic forecast matters. Or that in the long run the effects will be positive - and what is that other than an economic forecast, albeit based not on data modelling but on blind faith?

Reading today's OECD statement

Considerable caution is needed when dealing with both economic forecasts and media reporting. When the two are combined, it becomes positively hazardous as with today’s OECD statement on the impact of Brexit. Read the Independent and you learn that “OECD halves growth forecast due to EU Referendum vote”, but the Guardian’s pro-Brexit economics editor Larry Elliot reports that the OECD has “backtracked on its warning that the UK would suffer instant damage” from the vote. The pro-Brexit Telegraph takes the same line, but headlines it under the rather cautious formulation “Brexit not as bad as feared”. Of course, all three reports are in some sense true. The first report highlights the OECD cutting its prediction of UK growth in 2017 from 2% to 1%; the second and third increasing its prediction of UK growth for 2016 from 1.7% to 1.8%.

In any case, there isn’t any point at all in trying to read the economic effects of Brexit yet. Brexiters are keen to insist that what they call ‘Project Fear’ has been discredited because there has been no immediate recession as predicted by, especially, the Treasury. However that is meaningless because all of those predictions were predicated on the understanding that Article 50 would be triggered immediately after a vote to leave, as the then Prime Minister had said would be the case. The Treasury report on the immediate impact of a leave vote is explicit in stating this (paragraph 1.6 on p.12 and paragraph 1. 38 on p.24 of the link).

This didn’t happen – one of the few sensible decisions that Cameron made in this whole saga – and as a result the situation is in limbo. That doesn’t justify any celebration from Brexiters, as there are plenty of negative impacts already and not a single indicator that has shown a positive reaction to Brexit (the fall in sterling may be a positive for exporters, but it wasn’t a positive reaction to Brexit, and of course any positive for exporters is a negative for importers). If they were right about the new opportunities opened up by leaving, you might expect just one such reaction and if the best that can be said is ‘not so bad as feared’ it is hardly a ringing endorsement! Moreover, within that limbo, at least part of the reason why the economy has held up has been the very strong monetary intervention of the Bank of England - for which savers and future pensioners will pay a heavy price. 

The short-term predictions cannot therefore be evaluated until Article 50 is triggered, and crucial to the reactions to that will be whether by then it is clear that the government will seek soft Brexit and that the EU are likely to agree to that. If that is not the case (or even if, before Article 50, it becomes clear that it will not be the case) then we will see immediate and negative economic effects. Even so, it will be a long time before the full economic consequences of whatever version of Brexit emerges will be known.

The economic consequences of Brexit are anyway only part of what matters. Less easily quantifiable, and already starting, are the political and what might be called reputational effects. The status of Britain in the world, and its influence in shaping key debates and policies has undoubtedly been diminished. The former US Secretary of State Dean Acheson famously said in 1962 that “Great Britain has lost an empire and has not yet found a role”. In recent years that role had become that of the fulcrum between the US and the EU, and the peaceful post-communist transformation of eastern Europe was perhaps its greatest achievement. Whatever form Brexit takes in terms of trade arrangements that political role has now disappeared for good.