Project Fear Mark 2??

The Buzz Feed website has obtained a leaked copy of the leaked Government analysis of different Brexit scenarios which claims that over the next 15 years, the UK would be poorer by 8% under “WTO rules”, 5% poorer under a Comprehensive trade deal with the EU and 2% poorer if we re-joined EFTA, which would allow us reasonably frictionless access to the EU’s single market.

However, this is hardly Project Fear Part 2.  Labour may be pushing for the Government to publish the findings, but they are wasting their time. The report matters not one iota.  Forecasting likely economic developments as far ahead as 2034 is an utter waste of taxpayers’ money.

I can say this with some confidence without having seen the report because government bodies and indeed many distinguished economists – especially if they carry the label “Keynesian” – have terrific form when it comes to making economic predictions which turn out to be utterly and completely wrong – even over a much shorter timescale than 15 years.

We recently pointed out that David Cameron had been caught on camera admitting that the first 18 months since the Brexit vote had not been anything like the disaster he had anticipated.  You don’t need long memories to recall Gordon Brown’s claim that there would be no more boom and bust – only a few years before the Great Recession erupted during his premiership. Going back to 1981, no fewer than 364 economists wrote a letter to the Times stating that Sir Geoffrey Howe, the then Chancellor of the Exchequer,  would cause mayhem if he raised taxes in the middle of a recession. It turned out that the controversial 1981 budget, far from exacerbating the recession, laid the foundation of the UK’s economic recovery under Margaret Thatcher.

What is more, it is asking the moon to expect civil servants to come up with a study showing Brexit to be beneficial. Steve Baker MP found himself in trouble for claiming that Treasury officials are conspiring against the government on Brexit, but like it or not, the Treasury has been reported on good authority as being keen to keep us in the Customs union, even though Civil servants are meant to implement, not decide policy.

John Mills is therefore correct in sharing our scepticism when commenting on the claim in the new report that “Officials believe the methodology for the new assessment is better than that used for similar analyses before the referendum.” He says  “The whole piece rests on the above assertion. There is no description of the previous methodology or of the changes that make this analysis better. Is the methodology different from the one used previously to “prove” that the UK economy would tank if it did not join the Euro?”

Let us apply a bit of common sense to the UK’s economic prospects instead of listening to the so-called “experts”. In the shorter term, a slight dip in economic growth is likely in the post-Brexit period as things settle down, even if a satisfactory exit solution is agreed with the EU. Fisheries and agricultural  products are not covered by Single Market legislation and trade with the EU may be reduced here (although the fishing industry can begin its revival as soon as we leave, assuming Fishing for Leave’s proposals are eventually accepted by the government.) The delay in providing any guidelines about what deal the Government is expecting is causing firms to hold back on investment decisions and some firms in the City are already contemplating relocating staff to other locations. The City of London may see a slowdown in growth given the EU is none too keen to strike a trade deal involving financial services.

There is also the question of trade with those countries with whom the EU has negotiated trade deals. The EU is most reluctant to let the UK continue to participate in these deals post-Brexit and if new deals are not negotiated in time (or the countries in question do not agree to continuing to trade with the UK on the same basis), the economy may suffer here. As it happens, most of the UK’s most important trade partners outside the EU, including the USA, China and Japan have not negotiated a full-blown trade deal with the EU, although the EU has made more limited mutual recognition agreements with these countries, which we may need to replicate quickly.

All these factors do suggest that even the smoothest of Brexits could well see a slowdown in growth in early 2019, although this is a long way from saying a recession will occur. The UK economy has proved far more resilient than the promoters of “Project Fear” expected. Of course, if we crashed out of the EU, the consequences could be far more serious.

In the longer term, however, there is every reason to expect the UK to perform at least as well outside the EU as if we had remained a member state – if not better.  It will be far easier to reorientate our trade away from the sclerotic EU to the up-and-coming economies of Asia from outside the EU.  The massive deregulation advocated by some Brexiteers in the run-up to the referendum vote is not realistic, given how many  regulations originate from global bodies such as the WTO or the ILO, of which we will still be members. Some regulations could be scrapped or re-written if they originate from Brussels and are not in our national interest. We would also have the option to cut taxes to boost the economy in a way which would not be possible as an EU member state. VAT could be scrapped, for example.

Then thee is the issue of freedom. A strong correlation exists between freedom and prosperity. Freedom is a relative term, but being able to make our own laws, being able to remove those people holding real power via the ballot box if we don’t like them and our common law legal system will put us higher up the freedom index once we leave the EU. How tyrannical the EU is likely to become remains to be seen. Vladimir Bukovsky, the former Soviet dissident, said of the European Union, “I have lived in your future and it didn’t work.”  We are, of course, a long way from the gulags, the persecution of Christians and the extreme censorship of the former USSR, but a number of EU officials have made clear their disdain for real democracy. To quote one example, when the European Constitution was rejected in two referendums in France and the Netherlands,  Valéry Giscard d’Estaing, the former French Prime Minister, said “Let’s be clear about this. The rejection of the constitution was a mistake that will have to be corrected.”

Given that we will be free from all this, it is inevitable that Brexit will have a positive effect our prosperity. It is ironic that the young people, who were the strongest supporters of remaining in the EU, are likely to be the biggest beneficiaries of our leaving it. Mrs May has insisted that, in spite of these government studies, we will indeed leave the EU.  Mind you,  it would be a serious cause for concern if she had been influenced by it for, as one government minister said “It also contains a significant number of caveats and is hugely dependent on a wide range of assumptions which demonstrate that significantly more work needs to be carried out to make use of this analysis and draw out conclusions.”

In other words, it isn’t worth the paper it was printed on.

 

Mr Davis’ Brexit bridge to nowhere

Some of us will no doubt remember learning the song Sur le pont d’Avignon in our French classes at school. If you are careful, the bridge in question, the Pont St. Bénézet, may be a possible venue for dancing, as the song suggests, but it no longer fills its original function of providing a crossing of the River Rhône as only four of the original 22 arches, which date from approximately 1345AD, are still extant. When the river flooded, the arches tended to collapse and by the 17th century, the authorities gave up their attempts to repair the damaged masonry, leaving its four surviving arches as a bridge to nowhere.

David Davis is now engaged in a hard sell, trying to convince MPs and the general public that his proposed transitional deal is a stepping stone to full severance from the EU. He called it a  “bridge to the future.” If this deal is agreed by our parliament and the EU, nothing could be a less accurate description. Like the Pont St Bénézet in Avignon, it is a bridge to nowhere.

Those Tory MPs making a statement on these lines (and there have been some recently who have use somewhat different terminology to say the same thing) have been denounced as “swivel-eyed” by Claire Perry, the energy minister. The uncomfortable reality is that from what we know of the terms of this deal, it is nothing less than an unmitigated disaster.

We can start with the words of the Brexit secretary himself. Here is his speech. He talks about “strictly time limited implementation period,” yet not only did Mr Davis not specifically mention 21 months but already, rumours are circulating that it may be extended to last for three years.

And during this period, for all Mr Davis’ evasive language and hard-selling, yes, Jacob Rees-Mogg is correct, we would be a vassal state of the EU with no representation yet forced to accept all its laws. Our friends in Fishing for Leave have analysed both Davis’ speech and the EU’s terms for the implementation (aka transitional) period. You can read the analysis of the speech here and a summary of the Commission’s recommendations to the EU council about the terms and conditions for the transitional arrangements here.

The European Council has now (today 29th January) published an annex to its guidelines of 29th April 2017 which covers the transition period. You can read the document here and an analysis of it here. “Vassal State” sums it up well. In case anyone is in any doubt, Clause 13 insists that during the transition period, “The Union acquis should apply to and in the United Kingdom as if it were a Member State. Any changes to the Union acquis should automatically apply to and in the United Kingdom during the transition period.” We’ve got to accept the whole caboodle and we don’t have any say in what may come our way. Davis assured the Select Committee that it takes a long time for new EU laws to pass through the system so it was unlikely that anything which was still only in the pipeline on Brexit Day would actually get through onto our statute books at the end of the transitional period. This is wishful thinking, The Common Fisheries Policy was rushed through in three months in order to be in force when the UK joined in 1973.

The Council document also denies us the right to sign any trade deals during the transition period without the EU’s permission. Clause 16 states:- “During the transition period, the United Kingdom may not become bound by international agreements entered into in its own capacity in the fields of competence of Union law, unless authorised to do so by the Union

The Council document interestingly did not repeat the Commission’s refusal for us to piggyback on any deals which it has signed with third countries. Clause 14 of the Commission document was  unequivocal: “It is also recalled that as from the date of its withdrawal from the Union the United Kingdom will no longer benefit from the agreements concluded by the Union, or by Member States acting on its behalf, or by the Union and its Member States acting jointly.” In other words, we would have to agree not to ask the countries in question if they still wished to keep the same trading arrangements with the UK. We would essentially be under “WTO rules” with the rest of the world. Is its absence a “concession?”

Whatever, we would be stuck in the EU’s customs Union. As we have mentioned countless times before, if we are in the Single Market, there is NO NEED to be in the Customs Union. The two are NOT joined at the hip. “Davis, come here, you bad boy. Your punishment is 100 lines; write out the following until the message sinks in:- we do not need to be in the EU’s customs union after Brexit. “

Add to this an insistence that the ECJ will have an ongoing role in the UK’s affairs (Clause 10 of the Council document) and a continuation of free movement of people (Clause 16). The Council document only briefly mentions the EU budget (Clause 17) but the Commission’s insistence on a payment into the EU’s coffers which is little different from our current payments as a member state appears to be implied.

Naturally, during this transition period, we will be subject to the Common Fisheries Policy (see Clause 21 of the Council Document) which is a disaster. Indeed, if it is extended beyond the current 21-month period, there will be very little left of our fishing industry, which would be catastrophic given that Fishing for Leave’s proposals would have turned the UK into a world leader in fisheries management and would have revived our coastal communities.

What is more, any concessions made to the EU in any transitional deal cannot easily be revoked when it is replaced by a long-term arrangement. Because this “transition” is part of a new treaty AFTER Article 50 terminates the current relationship, and because we will have agreed to replicate and adopt all EU laws, we will create a “continuity of rights” under Article 30 and Article 70 of the Vienna Convention. As this new transition treaty will not terminate with a clinical Article 50 clause where “the treaties (& obligations) cease to apply”, the EU will have grounds to argue that because we undid Article 50 and re-adopted the entire Acquis with no clear exit clause that their rights and obligations established under the transition treaty should continue past 21 months.

The EU may be eventually proved wrong to argue so, but protracted litigation on what is a grey area of international treaty law could tie this country in knots and quickly erode the minuscule resistance within the British establishment to concede to any EU demands.

To say therefore that this transitional arrangement is unacceptable, even if by some miracle a new deal could be signed in 21 months with no continuity, is hardly the language of “swivel-eyed loons.” It is merely stating what over 17 million people voted for in June 2016 – in other words, we must leave the European Union. Adopting the transitional terms on the basis of the Commission and Council documents would be like having a dance on Pont St Bénézet in Avignon – once the fun is over, your only choice is to walk off the bridge at exactly the same place where you walked on. In other words, we would not be out of the EU in any meaningful sense of the term – not in 2019, not in 2021, maybe not ever. It is a complete surrender – the worst of all worlds. The sooner the likes of Claire Perry, David Davis and indeed Theresa May realise this, the better.  If they don’t, their party will face the wrath of voters all too soon and could find itself in the middle of its worst crisis since the repeal of the Corn Laws in 1846. Thankfully one MP has realised this. His colleagues need to  wake up quickly. It really is that serious.

 

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Still eating his words in 14 months’ time? Let’s hope so

The consequence of the Brexit vote  “wasn’t as bad as we thought.” David Cameron’s off-the-cuff comment to steel tycoon Lakshmi Mittal was caught on video, as you can see here. However, he did actually say, “it’s a mistake not a disaster. It’s turned out less badly than we had thought but it’s still going to be difficult”.

Over 18 months since the Referendum the UK economy has performed well. The  official guidance to voters, in a letter sent by HM Treasury to each and every household, said that on a Leave vote, “Britain’s economy could be tipped into a year-long recession. Further, at least 500,000 jobs could be lost and GDP could be around 3.6% lower following a vote to leave the EU than it would be if we remained in the EU.”

The reality is that unemployment has fallen to a 43-year low of 4.3%, GDP has continued to grow and exporters are doing well, with September 2017 being the best month ever  Project Fear has looked very discredited and even one of the two men driving it has finally admitted the truth.

The last part of Cameron’s statement is also true as well, unfortunately. The next 14 months are going to be difficult and the difficulties for the government are already mounting as opposition from Tory MPs in particular to the proposed “transitional deal” is beginning to grow.  We have outlined many of its unsatisfactory features on this website and are pleased that our concerns are now being voiced within the corridors of Westminster.  Readers may enjoy this exchange between Jacob Rees-Mogg MP and Brexit secretary David Davis, whose jocular manner cannot disguise the discomfort he clearly felt as Mr Rees-Mogg put him on the spot.

We yet remain hopeful, even if the conflict over this issue is likely in the short-term, that David Cameron will still be eating his words in 14 months’ time.

Macron and Marr muddy the waters as Brexiteers speak out against the ECJ

The headlines in Open Europe’s daily e-mail sounded very promising:-  “UK could have a bespoke arrangement between full single market access and a free trade deal, says Emmanuel Macron.” Isn’t that what everyone has wanted? Could it even be “having cake and eating it”?

Not if one reads the small print. Macron’s comments were made during an interview for the Andrew Marr Show. Nicola Shawson of the Guardian listened to the full interview and pointed out that Macron insisted that there would be no cherry-picking:-

Pressed on whether there would be a bespoke special solution for the UK, Macron said: “Sure, but … this special way should be consistent with the preservation of the single market and our collective interests… and you should understand that you cannot, by definition, have the full access to the single market if you don’t tick the box.”

So nothing new here. We will get a deal giving us some degree of access to the single market, but not full access. It will be worse than the access we enjoy as a full member. Fine. We already knew that.

Another person who listened to Macron’s interview with Andreew Marr was Richard North, who pointed out that Macron contradicted himself:-

By definition, he said, the relationship will be “less deep than today”. The deepest possible relationship is being a member of the European Union. But he then adds: “As you decided to leave you cannot be part of the single market”.

Now this is confusing because he goes on to say that “you can have some deeper relations and some others”. For instance, he says, “we have a deeper relation with Norway than the – the one we have with Canada”. So it depends on the outcome of the Brexit negotiation but, unless you change your mind, you will not be part of the single market because you will not be part of the European Union.

Addressed to someone like Andrew Marr, who already has a slender grasp of the basics – to say nothing of the body politic in general – this sort of confusion, where he elides membership of the EU and the Single Market, can be fatal.

Certainly, the French President seems to contradict what he was saying last week in the aftermath of the Anglo-French summit at Sandhurst.

It’s therefore not only our side which is getting into a muddle over Brexit.

Macron and Marr were discussing a longer-term EU-UK relationship, Turning to the transitional arrangements, it is encouraging to note that opposition is mounting among Conservative MPs to any role for the ECJ and to free movement of people after 29th March 2019 – Brexit day.  Jacob Rees-Mogg didn’t mince his words about free movement nor the cost of the Brexit settlement, while ex-ministers Iain Duncan-Smith, John Redwood, Owen Paterson and Lord Lawson also made clear their opposition to any involvement of the ECJ once we are formally out of the EU.

Of course, it is one thing to point out the bad features of a proposed deal and quite another to come up with a suitable alternative, particularly one which will satisfy the business community, which is desperate for some guidelines in time to plan for life outside the EU. Some compromises will have to be made as it is impossible to find even a short-term deal which will tick everyone’s boxes. A total surrender to the EU, however, turning us into a colony of Brussels for 21 months, is definitely not the answer and it is good that voices in Parliament are beginning to be raised which will hopefully force a re-think – and soon.

 

PS: Since this article was published, a further article which provides an indication of the scale of opposition to free movement of people and any role for the ECJ after Brexit has appeared in the Independent. Mrs May is going ot have a very tough time trying to get an agreement for the transitional deal as it stands, although a leadership challenge, as suggested by the author of the article, does look very unlikely.

Photo by LeWeb14

One step nearer….

It’s good to have some good news on the Brexit front after hearing of the hardening of the EU’s stance on the proposed transitional arrangement and the recent but unnecessary talk of a second referendum. Last night, something positive happened which takes us one small step nearer to leaving the EU – the European Union (Withdrawal) Bill passed its third reading in the House of Commons and will now go to the Lords.

Recently, the focus of Brexit has been on our future relationship with the EU once we leave. There is another equally important aspect of leaving the EU  – ensuring that we have sufficient laws in place to enable the country to run smoothly on Brexit day. Essentially, all laws passed by the EU which have then been included on our statute books derive their authority from the EU treaties, but these will cease to apply once we leave the EU and repeal the 1972 Accession treaty, so the resultant legislation also becomes null and void.

In order to avoid a legal vacuum, with no regulation at all covering areas of day to day life, laws originating with the EU must be “repatriated” so that they derive their authority from our Westminster Parliament instead and this is what the European Union (Withdrawal) Bill provides a framework for. They will not necessarily be transposed verbatim. Last year, we highlighted the problems with so doing using one particularly obnoxious law – the Fisheries Regulation 1380/2013 – as an example.

The debate over the Bill has centred on the scale of the task in ensuring all this legislation works for an independent UK. Labour has been concerned that the Government may try to twist the necessary re-wording of some directive and regulations for its own political advantage, bypassing Parliament in the process – commonly referred to by the media as the “Henry VIII powers”. However, all the proposed amendments were defeated (See here)

What is more, not a single Conservative MP voted against the bill. Even Ken Clarke and Anna Soubry trooped into the “Aye” lobby! Four Labour MPs – Kate Hoey, John Mann, Graham Stringer and Frank Field (along with the suspended Kelvin Hopkins), rebelled against the party whip to support the government which ended up with a majority of 29. They deserve our thanks. A further eight Labour MPs did not vote either way. A full list of how MPs voted can be found here.

For the benefit of anyone not familiar with Parliamentary procedure, bills normally pass through three reading before coming law. The final reding has now been completed. The predominantly Europhile House of Lords may try their hands with further amendments, but some of their number have thankfully acknowledged that it is not appropriate for an unelected body to try to mess up the democratic will of the people. There may, perhaps, be a bit of further Parliamentary ping-pong with any Lords’ amendment, but  essentially, we are one step nearer leaving the EU as very little now stands in the way of one vital piece of the Brexit jigsaw finally being put in its place.

Thanks but no thanks!

We have already reported Donald Tusk’s comments about his hopes that the UK might have “a change of heart” over Brexit. Now Jean-Claude Juncker, the President of the European Commission (how many Presidents does the EU have – or need?) has chimed in, saying in a speech to the European Parliament , “once the British have left under Article 50 there is still Article 49 which allows a return to membership and I would like that.”

For the benefit of anyone not familiar with the entirety of the Lisbon Treaty (which is probably most of us!), Article 49 says, “Any European State which respects the values referred to in Article 2 and is committed to promoting them may apply to become a member of the Union. The European Parliament and national Parliaments shall be notified of this application. The applicant State shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent of the European Parliament, which shall act by an absolute majority of its component members. The conditions of admission and the adjustments to the Treaties on which the Union is founded, which such admission entails, shall be the subject of an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the contracting States in accordance with their respective constitutional requirements. The conditions of eligibility agreed upon by the European Council shall be taken into account.”

In other words,  we would have to go through a new application process just like any other country wishing to join the EU. This article merely sets out the conditions for applying. There is no mention of a “fast track” process for ex-members who have a change of heart.

Juncker feels a personal sense of responsibility for the Brexit vote.  Quizzed by a German MEP, he said, “I still feel the exit of Britain is a catastrophe, yes, a defeat we all have to take responsibility for.” He is most unhappy that a member state has voted to leave under his watch.  He then went on to say, “But the reasons for the British exit lie deeper. As Prime Minister (Theresa) May has said, the British never felt at ease in the EU and for 40 years they haven’t been given the chance to feel more at ease.”

It is hard not to be cynical about Juncker’s accommodating language only a couple of days after the EU toughened its terms for any transitional arrangement. Combining his words alongside the European Parliament’s guidelines for a transitional period for the UK,  you get a message which goes something like this:- “We’re really sorry that you’ve voted to leave; we’d love you to come back and as a sweetener, we intend to make it as humiliating and as awkward as possible – within the parameters of the EU treaties, of course – for you to get out.”  To which could be added “Oh, and by the way, there will be no derogations; you’ll have to join the €uro, you’ll eventually have to accept the supremacy of  Napoleonic inquisitorial law, you’ll have to let Spanish fishing boats plunder your waters again and you’ll still have to subsidise French farmers. “

“Thanks but no thanks” would be very much at the polite end of suitable replies to this. It is easy to forget just how many good reasons there were for voting to leave the EU. If we had had longer to explain more about the EU’s failings to our countrymen and if there had been a comprehensive exit strategy around which the leave campaign could have united, we would have won by a landslide and anyone talking of abandoning Brexit or holding a second referendum would have been referred to a psychiatrist.

Unfortunately, the government’s floundering has given the remoaners the space they have craved and they have made the most of it. On balance, it still looks extremely unlikely that Brexit will be stopped. In response to Juncker’s overtures, a spokesman for Mrs May stated that there was no question of a change of heart. We will be leaving on 29th March 2019, he insisted.

But would we ever want to come back?  Not if Brexit is managed successfully. It is unfortunate that Boris Johnson has insisted that the savings from withdrawal will, in fact, be higher than the controversial figure of £350 million per week which was bandied about during the referendum campaign. It is hard to follow his logic. In the short term, we are unlikely to be any better off financially, but in the longer term, there is every reason to believe that, free to make our own trading arrangements, to set our own taxes, tariffs and to make our own laws and regulations (or at least to have our own voice on the bodies that determine global regulation), we will be in a better position.

It’s not just a question of money, however. Brexit will wrest control of our country away from Brussels. More than that, it provides an opportunity to re-vamp our entire political structure. Our democratic process is in need of a major update to reflect the realities of the internet age. Politicians should face greater scrutiny and be more accountable to us, the voters who elected them and pay their salaries. Perhaps one of the best ways of weaning our young people away from their europhilia is to explain to them the exciting possibilities which direct democracy offers us. Young people are great petition-signers and originators. If we followed Switzerland’s example, their petitions could have a real effect on how our country is run.

And of course, Switzerland is not a member of the EU and has no desire to be one. A Swiss minister recently said that in his country, now “only a few lunatics” want to join the EU. If we can make a success of Brexit, Juncker’s overtures will fall on equally deaf ears in our country too.

Mind you, considering the headaches we Brits have given the EU in over 40 years of membership, one wonders whether it’s only really the lunatics who would seriously want us back – or is it our money they really want?

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