Why is the UK making such a mess of A50 negotiations?

The obvious answer to this question is that the negotiator, the UK government, is completely split on what it wants. But that is only part of an explanation for this shambles. In the first year I think actions were dictated by a completely unreal perception about power, and perhaps more recently by a need to avoid a coup by the hardline Brexiteers.

The people who might have thought about the negotiations before the vote itself, the Leave side, didn’t do so partly because they didn’t expect to win. But they also had completely unrealistic expectations of the relative power of each side. This was an advantage during the campaign, because they could say ridiculous things about the economic consequences of Brexit without knowing it was a lie. But once they had won, there were only two ways to go, and either of them led to an early implementation of Article 50.

The first possibility is that after the campaign they continued to believe that German car makers would pressure the German government and the EU to give us what we want, so why not bring that on by triggering A50. The second was that they began to doubt this, but that in turn led to a fear that once the people found out they had been told falsehoods about leaving they would change their minds. That too lead to an urgent need to trigger A50 before this happened.

But Leavers did not have a majority in parliament. Remain MPs must surely have realised that the EU had much more power than the UK (the proportionate cost of no deal is much greater for the UK), and that once A50 was triggered the clock was ticking for the UK, not the EU. David Allen Green has justifiably said I told you so, and I knew when I wrote a post entitled “The Folly of triggering Article 50” in November 2016 that I was just repeating expert opinion, and to be honest common sense. As I said there

“this has absolutely nothing to do with whether you voted to Remain or Leave. Anyone who actually wants a good deal from the EU when we leave should realise that the UK’s negotiating position becomes instantly weaker once Article 50 is triggered.”

The worst explanation for why the majority of MPs ignored this advice was that they didn’t hear it. (We know the Prime Minister did hear that advice from Sir Ivan Rogers.) Almost as bad was that they heard it but thought it was just a desperate ploy by experts to delay leaving. Those who want to say it is all because of mixed motives from the Labour leadership will do so. But I suspect there is a simpler explanation: MPs felt voting to delay was ‘politically impossible’.

Part of the reason it was ‘politically impossible’ is that the standard of reporting and debate among broadcasters on these issues is so poor that the argument that triggering A50 was bad tactics would simply not have got a proper hearing. In addition the tabloids would have screamed “enemies of the people” just as they did when three judges allowed MPs a vote. In this sense our media not only gave us a Leave vote, they forced an early triggering of A50 which was not in the country’s interests.

As I wrote in that earlier post, it “would only be a slight exaggeration to say [triggering A50] allows the EU to dictate terms” which is exactly what they are doing. In these circumstances, the best approach to the negotiations is to treat them as a cooperative exercise rather than a zero sum game. Yet we were led by Theresa May and David Davis, who were instead determined to treat this as a classical zero sum negotiation where, because you had more power, your best hope was to make the other side believe you will walk away. Yet that walking away threat was never credible, partly because of reasons already given, but more importantly because a deal on the EU's terms was better than no deal.

But despite this, in our negotiators minds the delusion that we have power in these negotiations as long as we threaten to walk away seems to persist. The lack of flexibility by the EU can be dismissed as them playing hardball. As firms move abroad because they need to plan and they cannot be certain of any transition arrangements, the cost of delusion will be paid for in lost UK output and lower incomes.

It is just possible that both May and Davis have begun to realise this, but the delusion of power has been replaced by something else, which is the fear of a coup by Brexiteers. The pro-Brexit views of Tory party members makes such a threat credible, but any coup would have to happen well before the negotiations ended. Perhaps the reason May is now being so slow to move is to make the possibility of a coup less likely. But perhaps that involves a level of strategic thinking the Prime Minister is not capable of and Davis has simply given up.

Whatever the motivation, the end result has one certain consequence: the economy is damaged. As one final example, take the length of the transition period. The logical thing to do is to have a transition period until a new trade agreement is agreed. Anything else involves significant economic and administrative costs. But the UK government does not seek this because it pretends a trade agreement can be done quickly, and it pretends this nonsense to avoid a confrontation with the hardliners.

Even if this turns out to be pretend and extend, because the transition period will keep on being rolled forward at the last minute, this arrangement suits the EU and damages the UK. It is good for the EU because their exports to the UK do not suffer. It damages the UK because the uncertainty continues to make moving production to the EU rather than exporting to the EU attractive. Just one more way that the fantasies of Brexit hardliners are costing us all.

The Single Market was Mrs Thatcher’s great achievement for the UK

Parliament should be able to vote on whether leaving the EU means destroying this legacy.

The story of how Mrs Thatcher helped in the creation of the Single Market is told by Helene Von Bismarck here. She believed it would be of great benefit to the UK, and she was right. Here is a nice chart from this CBR report I discussed in my last post.

It shows the share of UK exports as a percentage of the GDP of the area exported to, for both the EU and the rest of the world. The rapid increase in the UK export share, doubling between 1990 and the beginning of the financial crisis, has to be largely down to the Single Market. [1]

But didn’t the CBR report say that the benefits of the Single Market had been exaggerated by the Treasury? Yes it did. Here is some of its reasoning. That growth in UK export share after the Single Market is not as impressive as it looks, because there is an underlying 6% 3.5% ** positive trend in the share relative to non-EU penetration, which you can detect before we joined the EU. That looks pretty on a picture, until you realise it is nonsense. A 6% 3.5% trend rise in an export share will imply that at some point not too far away UK exports to the EU will be as high as total EU GDP. UK exporters are just not that much better than exporters in other countries. There is no underlying trend rise in the UK’s export share.

As I say in The Independent, the rationale for going down the route of leaving the Single Market is completely wrongheaded. First, the Brexit vote was close - hardly a ringing endorsement for undoing Thatcher’s legacy. Second, all the evidence we have is that large numbers of Leave voters are not prepared to accept a reduction in their living standards as a price for reducing immigration, a reduction which is in the process of happening right now as a result of the collapse in Sterling. If you say we have no real evidence for this, show me your evidence that the referendum vote was a vote to leave the Single Market. If May really believes it when she says that the recent strength of the economy has convinced her that the costs of Brexit will not be that great, she is a fool. Third, the logic of saying that we cannot accept Single Market rules because we would have no say in what they are makes no sense because we will be worse off not accepting them. Once again, a majority of the country does not want to ‘take back control’ if it costs them money.

I say in The Independent that this is happening because May wants to finally show that she can bring down immigration, after 6 years trying and failing. It is also because she thinks she has to do this to keep her party together. But what Brexit means should not be up to the Prime Minister, particularly one who cannot be objective about immigration and who is a hostage to the Eurosceptic half of her party. The Single Market decision should be up to parliament. Leaving the Single Market was not on the referendum ballot paper, so it is not the ‘will of the people’. It does not follow automatically from the Leave decision, as many Leave campaigners correctly assured us before the vote.

Parliament should decide on whether we leave the Single Market as part of leaving the EU, not Theresa May. That is what living in a parliamentary democracy is all about. If the government denies MPs the chance to vote for leaving the EU but against leaving the Single Market, then that is effectively a coup against our democracy. MPs should block approval of invoking Article 50 until they get the opportunity to vote, in a way that is binding on the Prime Minister, to stay in the Single Market.

** I made a mistake in the original version of this post: corrected figures and clarifying text are in italics. For more details see this post

[1] The chart also casts doubt on the argument that being in the EU has held back UK exports to the rest of the world. This share was falling before we entered the EU, but has stabilised while we were a member.  

The folly of triggering Article 50

Immediately after the Brexit vote, all the analysis I saw argued that Article 50 would not be triggered for some time. They all made a simple mistake: they were thinking rationally about what would be best for the UK. Rick has an excellent analogy that elaborates on one that I and others have used, and it really would be best if you read his blog rather than for me just to repeat it. The conclusion, which this earlier analysis I mentioned had also come to, is that triggering Article 50 without any kind of idea about what any agreement would look like puts the UK in a very weak negotiating position.

This is why the EU were pressing for Article 50 to be triggered as soon as possible. Their real fear is that the prospect but not the actuality of the UK leaving would hang over them for years, and that was the UK’s strongest card. Before playing this card the UK could at least get a clear idea of what the EU might be prepared to offer, and possibly get some commitments that sketch the broad outlines of any deal. Once Article 50 is triggered, the UK will be far more desperate for a deal than the EU. It would only be a slight exaggeration to say it allows the EU to dictate terms. Triggering Article 50 was our best card, yet it is a card that Theresa May is determined to throw away.

Just to emphasise the point, this has absolutely nothing to do with whether you voted to Remain or Leave. Anyone who actually wants a good deal from the EU when we leave should realise that the UK’s negotiating position becomes instantly weaker once Article 50 is triggered. I do not know whether those who have successfully pushed for triggering Article 50 so soon simply live in a deluded state where they think that the UK will be in the stronger negotiating position, or whether they are desperately afraid that if it is not done soon people will go off the whole idea of leaving. But whichever it is, it is an act of folly, whether you want to leave or not. It substantially increases the likelihood of getting a bad deal.

As for Labour’s position, I’m afraid all I can say is you were warned. Jolyon Maugham describes Labour’s position as checkmating itself, but I strongly suspect this is a match the Labour leadership do not want to win. The fact that others in the PLP are content to go along with this does not make it any better. As I wrote at the time, all this was one very good reason for voting for Smith rather than Corbyn.

And if Labour wants to position itself as being the party that can make a success of Brexit, that road spells doom. If MPs think they can avoid losing votes to UKIP or the Conservatives in their traditional heartlands by adopting this line (or trying to be all things to everyone and therefore in reality champion of nothing), they will lose many more votes in their new heartlands than they will save in the old. Many voters feel much more attached to Europe than they do to Labour. This is something I have argued for some time, and this poll suggests I am right. If Labour backs Brexit they will get less votes than the Liberal Democrats. As I also wrote during the Labour leadership election, Brexit changes everything.

But I do not want to get distracted by that. The key point is that triggering Article 50 so soon does not make sense even if you voted Leave.

So if MPs, pro or anti leaving, had any sense at all, and any independence at all, they would vote against. Yes the right wing press will scream and brand you an ‘enemy of the people’, but if have the interests of the British people as your priority rather than your short term popularity that is what you will do. You could even get voters on your side if you explain why you are doing it. This is one of those moments, like the Iraq war vote, where it is utterly obvious what should be done. We are not yet a country that is run by the Mail and the Sun, but triggering Article 50 will make it look suspiciously like we are.

Freedom of Movement, Austerity, Labour and MPs votes on Brexit

In three important ways Labour’s current attitude to Freedom of Movement reminds me of their pre-Corbyn attitude to austerity. First, Labour while in government encouraged immigration from the EU, and the UK economy was probably a lot better off for it. But they now tend to say that was a mistake. To his credit Miliband never conceded that Labour while in government borrowed too much, but he deliberately chose not to strongly contest Conservative and media claims that they had.

Second, their policy for the future is now to call on some controls on Freedom of Movement as part of the Brexit negotiations. That is rather different from May’s view that ending Freedom of Movement is a red line, but I doubt many voters will notice the difference. The fiscal policy Labour campaigned on in 2015 was significantly more sensible than Osborne’s policy, but they chose not to campaign very much on the difference, insisting that they too ‘were tough on the deficit’. Immediately after 2015 a number of MPs argued that Labour should accept the need for austerity.

Third, in both cases - austerity and restricting Freedom of Movement - the policies as enacted or proposed by the Conservatives did and will damage the economy. Austerity cost every household at least £4,000 (it could easily be £10,000), and reducing immigration from the EU is likely to have a large negative impact on the public finances, both directly and because we will have to leave the single market. Yet because Labour in effect conceded the issue (on austerity) and concedes the issue (on FoM) they find it difficult to say this in public. That in turn means that the public hardly hear these economic arguments.

In both cases Labour is not assessing what policies best enable them to achieve their principles, but instead what they need to do to avoid losing votes. [0] With austerity Labour became convinced that voters could not see beyond simple ‘government like a household’ analogies. After Brexit (and in some cases before that) Labour is convinced that they will lose votes heavily in their traditional heartlands if they fail to argue for controls on European migration.

You might think this is just normal politics. If voters want something strongly enough, it is self-defeating to fight that. Better to move your policies towards what voters want. But that ignores my third point of similarity between austerity and Freedom of Movement. In the case of austerity, and for a significant number with Freedom of Movement, voters’ views are based on misunderstandings involving economics. As I argued in this post, many voters think restricting immigration will improve their own access to public services, whereas in reality it will do exactly the opposite.

If you think it just seems wrong for politicians to support (or not actively oppose) policies that would make people worse off just because people erroneously believe the opposite, I would agree. [1] But it is important to understand one important reason why they do this. It reflects an environment which gives virtually no time to economic expertise, by which I mean treating it as knowledge rather than just one opinion to be balanced against another. The BBC refuses to treat economics, unlike climate change, as knowledge whenever it is politically contested, and it is deliberately excluded from most of the tabloid press.

If you think that account is reasonable, now think about Brexit, and the vote which (hopefully) MPs will have on whether to trigger Article 50. The referendum was advisory (as even Nigel Farage admits), and won by only a tiny majority. They could say that on a matter of such importance that is too slim a majority on which to leave, but they will not. They could insist that given the closeness of the vote the government should try and again negotiate with the EU, but they will not. Labour MPs in particular might reason that because they opposed offering a referendum in the first place*, the argument that they have to respect the ‘will of the people’ makes no logical sense. [2]

Even if they do not vote against invoking Article 50, they could say that while a majority voted to leave the EU, that is not equivalent to leaving the single market, and therefore any negotiation that did involve leaving the single market would require a separate referendum. Probably a majority of MPs would like to vote that way, because they know the extent of the harm leaving the single market will cause. But the majority will not, because they will be branded by the tabloid press as denying the will of the people. They fear that will lose them votes, and perhaps even threaten their physical safety. Once again, as with austerity and EU migration, the media will prevent many MPs doing what they believe is right. [3]

[0] As Wolfgang Münchau correctly argues here, what centre-left parties around the world were actually chasing were short term votes, or worse still focus groups. Supporting austerity was a disaster for the centre-left in the medium term, just as alllowing Brexit will be for Labour. (One very minor but annoying point on Münchau's piece: we wrote our Brexit letter all by ourselves. No one 'got us' to do it.) 

[1] The alternative is that MPs like voters do not understand the economics. I’m not sure if this is better or worse.

[2] You do not want to hold a referendum because there are no grounds for doing so, and therefore it is not something a referendum should decide. Or because you want to stay in even if a majority said they didn’t. Actually holding a referendum does not change these views..

[3] The situation is of course much worse because of the stance taken by either leader. May’s statement that the headlines in the Mail and Sun after the court decisions were reasonable is quite extraordinary. Corbyn’s position is hopelessly compromised by his own antagonism for the single market, and it was naive if Labour party members who voted for him ever thought otherwise.

*Postscript (7/11/16) Although this was true under Miliband, in their shell shocked state after the election they actually voted in favour (thanks Sunder Katwala @sundersays for reminding me).