I keep reading comments about the positives and negatives of Brexit. Some are useful, others not. I sometimes agree with some bits, but rarely with the entire message. So I have decided to collect all these points together and add my own opinions (starting 19 Jan. 2017). Opinions, comments, articles, news appear to fall into a number of different categories, and below is my best effort in trying to identify key topics:

The Elections 2017 / The Negotiation / The EU / What should Brexit really mean? / Cherry-picking and Punishment / Hard Brexit / Brexiters think that the UK will be better off / The EU is a mindless dinosaur / Immigration / Leavers must be held responsible / The Economy

Useful Sources of Information


Foundation Robert Schuman

The BBC has Webpages on Brexit (or UK Votes LEAVE), and also runs a “Reality Check” on topics such as The EU Referendum.

ei editorial intelligence


The Elections 2017

May has called a general election for Thursday 8 June 2017. One comment was the “strong and stable” May against a “coalition of chaos”. Another comment noted that all Conservative candidates will have to sign up to May’s manifesto, thus reinforcing her influence over the party. No matter what is said this is, as was highlighted in an FT article, the first single-issue election since Edward Heath asked voters to choose between his premiership and trade union power in 1974.

As one commentator wrote “in the age of Trump, who seriously expects any honesty and consistency from their political leaders”?

Here is a collection of comments, ideas, etc. about the elections:

May (18 March 2017) is likely to emerge with carte blance to choose the Brexit path she wants

May’s Conservative Party (19 March 2017) looks set to increase its majority in parliament by more than 50 more seats

The Tories (25 April 2017) have hit on a way of getting votes by presenting the election as about “strengthening the prime minister’s hand in the Brexit negotiation”, May’s imperious dictum is “Every vote for the Conservatives will make me stronger when I negotiate for Britain”

Labour more of less accepted (26 April 2017) the hard Brexit line, leaving the Single Market

Don’t give May a blank cheque (27 April 2017)

A YouGov poll (27 April 2017) found that 45% of voters agreed that, with hindsight, Britain was wrong to vote to leave the EU, while 43% said it was right and 12% did not know

Angela Merkel, the German chancellor, spelt out (28 April 2017) “that some people in Great Britain still have illusions”

The Guardian's Jonathan Steele (28 April 2017) suggested that the Labour manifesto should say that an incoming Labour government would abort the Brexit negotiations immediately. There would be no Brexit and no talks about how to achieve one. Labour would then transform the current campaign

In the FT Chris Giles (28 April 2017) talked about the UK economy and said Britain had to decide what sort of country it wanted to be: Britain was stuck in the middle without low US tax rates, without German public services and without even Italian productivity levels

In The Times Ed Conway (28 April 2017) was worried that economic growth did not seem to be a priority and that what mattered most was stability

The Guardian's Ian Birrell (2 May 2017) thought that the general election was called with one clear aim: to crush a weak and divided Labour party

In The Times Rachel Sylvester (2 May 2017) argued that the Tory leader was an unlikely figurehead for an election campaign. Uncharismatic, cautious and controlling, she did not look like the natural winner of a popularity contest

The Guardian's George Monbiot (3 May 2017) believed that the powers that Theresa May will grant herself threatens to become a maelstrom of destruction on behalf of the party’s funders and associates, and another comments was that the virtues of compromise and pragmatism have not lost their intrinsic value, so hopefully there will emerge a “centre-ground” alternative (but the problem is that many now think that Conservatism has become radicalism, and as such is now considered “moderate” by many)

Local election results (5 May 2017) showed that UKIP was dead, Lib Dems were not the party of the 48%, Labour had been rejected by the people, and the key for Tories was to simply bash Brussels

InFacts (10 May 2017) talked of May vs Corbyn as “the vacuous meets the hopeless”, and was this not a golden opportunity to agree on a single pro-European candidate (at least in the pro-European constituencies)

At this time (10 May 2017) the parties priorities were: Conservatives wanted to leave the ECJ jurisdiction, stop free movement and leave the single market and customs union, Labour wanted tariff-free trade and no new non-tariff barriers (they accepted Brexit and the need to quit the single market and customs union), Lib Dem wanted to stay in the single market and customs union and they wanted a referendum on the final deal, as did the Greens

Gerald Kaufman, the one time Labour MP, famously described his party’s 1983 election manifesto as “the longest suicide note in history”. There is no need for such epithets this time around, since the party has already effectively committed suicide by choosing an unelectable leader. Does the Labour manifesto make the Tory position any saner?

Most people think it is an election about Brexit, or more precisely what type of Brexit. The Tories clearly want out of the single market. Out of the customs union. And with the European Court of Justice no longer able to insist that EU law applies, without amendment or questioning, to UK citizens. There is talk of a “triple lock” of scrapping free movement of people from the EU; leaving the single market; and ending the jurisdiction of the European Court of Justice in the UK. And there is also talk of removing the “triple lock” on pensions. But the question is in the details. Will there be a “implementation phase”? And secondly no mention of “control of our money”. Also will the commitment to foreign aid be cut?

The FT thought that there were 5 non-Brexit issues for the election.

  1. 1.How to get the economy going again? Britain economy has been very successful at creating jobs since the financial crisis but not at raising the quality and productivity of the workforce. The result has been no growth in output per job for almost a decade, yet without productivity improvements living standards will struggle to rise and the public finances barely improve. Britain has had the worst productivity slowdown of any leading advanced economy since 2007, but the parties cannot agree on its cause or its cure.

  2. 2.To pursue or to drop austerity policies? All parties claim to support the NHS, the education system, an effective military and good policing. The deficit has already come down from 10% of national income in 2009 to a projected 2.9% this year. That has come as the result of severe spending restraints on public services. So everything from schools to social care are now feeling the squeeze of seven years of austerity. The Tories say borrowing needs to be eliminated in the early 2020’s for the sake of stability, the other parties are willing to continue to borrow so long as it is only for capital investment.

  3. 3.Pensions, taxes and wealth? Labour will seek to redistribute more from rich to poor and therefore support wealth taxes, as do the Liberal Democrats. The Conservatives are traditionally opposed. All main parties apart from the Conservatives oppose the proposed cuts to non-pensioner benefits, such as sharp reductions to payments of universal credit to poorer working families and the freeze on most other non-pensioner benefits.

  4. 4.Education and selection? May’s desire to end the ban on opening more grammar schools has encountered stiff opposition from Labour and the Liberal Democrats and even from within her own party. But enshrining new grammars in the Conservative manifesto will make it much easier to get the contentious policy through parliament, because this will make it harder for Tory rebels to object and for the House of Lords to block the plans. Jeremy Corbyn has suggested extending free school meals to all primary pupils, paid for by charging VAT on private school fees. The choice facing voters on this subject is relatively stark: Labour is defending comprehensives and attacking fee-paying parents, while the Tories, by promoting greater selection in the state education system, are challenging the consensus that grammar schools are bad for social mobility.

  5. 5.The Scottish independence question? The stakes could not be much higher for the SNP, which will campaign on the need for a second referendum on independence.

In The Times Philip Collins (21 April 2017) believed that every party has a reason for wanting the general election. The Tories to seek a crushing victory, the SNP to gain a mandate for a second independence referendum, the Liberal Democrats to lock in recovery and Labour to get shot of Jeremy Corbyn.

The Guardian's Gaby Hinsliff (21 April 2017) thought that with crumbling public services, a mountain of debt to repay, and an ageing nation of pensioners with a post-Brexit aversion to letting young, taxpaying foreigners move here all adds up to one logical conclusion: tax rises loom almost regardless of who wins in June. Will the parties admit to it?

The Negotiation

Once Art. 50 is triggered, negotiations must start. Always useful to keep in mind the original promises during the Brexit campaign, and here they are:

More money for the NHS. Was it £350 million per week? Or “just” £100 million per week? In any case they said leaving will not hurt the NHS

More money for farmers.

More money for scientists. With the money saved Britain will be able to increase funding to science and still save billions

More money in your pocket. Wages will be higher for working people outside the EU… because pay will no longer be undercut by uncontrolled migration

Scrapping VAT on fuel bills. Britain will scrap this unfair and damaging tax

No EU beneficiaries left worse-off. They said that there is more than enough money to ensure that those who now get funding from the EU – including universities, scientists, family farmers, regional funds, cultural organisations and others – will continue to do so…until 2020

No short-term economic disruption. There won’t be a sudden change that disrupts the economy

Britain will get brand new trade deals all over the world.

There’ll be no damage to trade with the EU. They said that there would be a European free trade zone from Iceland to the Russian border and Britain will be part of it… Britain will still have access to the Single Market…

Cooperation with the EU will continue. And will be even deeper in some areas (e.g. scientific collaborations and counter-terrorism)

Everything will be guaranteed in a treaty before 2020. Including a UK-EU free trade deal, by the next general election in May 2020

Britain will have no obligation to follow EU laws.

Britain will cut immigration. Bringing it down to tens of thousands

A new system in place by 2020. A genuine Australian-style points based immigration system

No favours for EU citizens. Entry for work or study on the basis of skills without discrimination on the ground of nationality

Irish citizens will retain total free access.

Stronger border controls. Britain will regain control of their borders, including far stronger powers over who they can deport, and proper preventative checks at the border

No controls on the Northern Irish land border with the EU.

The union with Scotland will be stronger than ever.

A leaked EU documents (reported InFacts 21 April 2017) looked at reciprocal citizen rights. Some were straightforward, such as the need for residency documents to be “issued under a simple and swift procedure” (and not the current 85-page form required for an EU national to prove permanent residency in the UK). Will the 2019 “withdrawal date” be the cut-off for EU citizens to move to the UK before rights stop being guaranteed?

The Commission wants citizens’ rights guaranteed in perpetuity, as “directly enforceable vested rights for the lifetime of those concerned”. This means full rights to residence and benefits. What’s more, it wants rights for a wider range of people than May might like: economically inactive persons living in the UK before Brexit as well as workers and self-employed. The Commission also suggests any “family members who accompany or join them at any point in time before/after the withdrawal date” should enjoy these rights. That means, for example, a Greek living in the UK now could marry a Brazilian in 20 years’ time, who would then have the same rights enjoyed by EU citizens in Britain today.

The EU won’t agree a deal unless provisions to settle disputes after Brexit are in place. The document suggests that the “jurisdiction of the Court of Justice of the European Union (and the supervisory role of the Commission) should be maintained”.

In an InFacts article (11 April 2017) it was noted that the British government must replace the EU’s Common Agricultural Policy and its Common Fisheries Policy. There was a kind of devolved responsibility for these policies with Scotland, Northern Ireland and Wales, but will Westminster do the same? Many think London will want to exercise central control, and this might affect the regions exportations of beef, lamb and fish. If Britain negotiates new trade agreements this may include free access for New Zealand lamb and Argentinian beef.  

The Daily Mail's Stephen Glover (6 April 2017) warned that Spain craved Gibraltar, and would move heaven and earth to get it. And many British politicians would be happy to hand Gibraltar over to the Spanish. Evidently the press love this topic. Comments range from re-colonisation by Spain, an opportunistic grab, the Empire still exists, Spanish imperialism, and even the idea that Gibraltar is just a phantom limb on a post-imperial stump. In a separate article (8 April 2017) it was noted that the British linking an agreement with the fight against crime and terrorism, and the status of Gibraltar, were actually not big ticket items either in May’s Art. 50 letter or in the EU draft negotiating guidelines (sovereignty was not even mentioned). But the pro-Brexit press picked up on these items and blew them up out of all proportion to their real importance. What some of the press appear to want is to poison the negotiations and go for a “hard” Brexit, or even a “over the cliff” Brexit. Whereas everyone from pro-Brexit ministers to German SME’s appear to want a “softer” Brexit. 

Angela Merkel said (30 March 2017) “The negotiations must first clarify how we will disentangle our interlinked relationship. And only when this question is dealt with, can we, hopefully soon after, begin talking about our future relationship”.

At the end of the day a fast exist for Britain might be in the interests of everyone. Early agreements are unlikely, but the EU-27 might want to get on with other things, such as completing economic and monetary union, solving the immigration crisis, and coming up with a new “geometry” for cooperation and decision making.   

The FT's Philip Stephens (30 March 2017) believed that until Art 50 was sent in Brexit was about Britain. Now it is about Europe, and Brussels has taken back control.

Art. 50 was submitted on the 20 March 2017

In The Times Daniel Finkelstein (29 March 2017) thinks that the EU's core objective is to maintain the coherence, membership and power of the EU. They will want to avoid an economic shock, but they can’t agree to anything that makes it look as if leaving is advantageous. They are, as a result, insistent that any trading relationship Britain gets will be inferior to the one they had. Britain can not be seen to look like winners. Perhaps Britain should find a way to let the EU feel that it has won

In the Daily Telegraph Dominic Raab (29 March 2017) thinks that as an independent nation Britain can offer the EU the best trade deal, the most effective counter-terrorism cooperation, the strongest military commitment, and the most flexible immigration arrangements that any independent country has ever offered it before or is likely to in the future. It can, but will it do so?

Theresa May and her ministers have made a number of strong commitments ahead of Brexit talks (28 March 2017). These are:

Britain will not be required to contribute huge sums to the EU budget. The EU has made clear it is looking for around £50 billion to meet our past commitments

Britain wantsa comprehensive free trade agreement and a comprehensive customs agreement that will deliver the exact same benefits as we have. Seems impossible

Britain wants to ensuring that there is no disruption of our free trade with Canada, or any other partner, is a top priority for my department. Doing this for the 50-plus countries with which the EU has trade deals looks challenging

Britain wants to build a more united nation, and never allow the union to become looser or weaker. And what about Scottish independence?

Britain wants a practical solution that allows the maintenance of the Common Travel Area with the Republic of Ireland, while protecting the integrity of the United Kingdom’s immigration system.

Britain will … bring an end to the jurisdiction of the European Court of Justice. It could make it tricky to reach a transitional trade deal

Britain wants to guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals in other member states, as early as possible … giving people the certainty they want straight away, and reach such a deal now. “Straight away” never happened

Britain will keep the protect workers set out in European legislation, and they will build on them.

From space exploration to clean energy to medical technologies, Britain will remain at the forefront of collective endeavours to better understand, and make better, the world in which we live. May said her government would “welcome agreement to continue to collaborate” on science and technology, but much of this is linked to immigration.

Britain want to keep their justice and security arrangements at least as strong as they are.

There’s a strong common interest in doing so, but what about the European Arrest Warrant? Will they keep it? Can they keep it?

Britain wants to get net migration down to sustainable levels and the government believes that is tens of thousands but it will take some time to get there. It’s a common trick by politicians to set a numerical target without a deadline – or vice versa

Britain wants a phased approach, delivering a smooth and orderly Brexit. Totally at odds with Theresa May’s assertion that “no deal is better than a bad deal”.

One big problem (24 March 2017) is the role of London in clearing euro-denominated instruments. Some want this business ($150 trillion annually in interest rate swap clearing and 83,000 jobs) to be in the EU, and under the jurisdiction of the European Court of Justice.

In an InFact article (24 March 2017) the author argued that in the case that no agreement was found with the EU, the Vienna Convention would apply and that all existing obligations would remain unchanged. In addition should no agreement be found concerning residency rights then all vested rights as they stood at the time would remain guaranteed.

It was reported on 23 March 2017 that Barnier, once he has the guidelines agreed by the European Council, will not want to discuss trade issues until the principles of an “orderly withdrawal” have been settled. I guess that means the size or the bill!

It was also said that any trade deal must be, by definition, “less favourable” that the current arrangement. Sounds logical.

Finally it was said that any transitional arrangements must be subject to European law, i.e. the European Court of Justice. Conservatives will not like this.

A leaked EU negotiation position appeared on 22 March 2017. It included the following:

The first chapter insists that the EU-27 are united and that access to the internal market requires acceptance of the ‘four freedoms’, including freedom of movement of workers.

The second chapter say that the EU-27 wants the 3 million EU citizens who are currently in the UK to be able to stay, keep their jobs and right to health care. In return, they would be prepared to guarantee the same for the approximately one million Britons who reside in the EU. This chapter also deals with the UK’s “liabilities” or “exit bill”. The idea would be to negotiate a calculation method. Furthermore, as Britain will no longer recognise the European Court of Justice (ECJ) as the arbiter in disputes related to the exit negotiations, the International Court of Justice in The Hague may fulfill this role.

The third chapter deals with the UK’s status after Brexit. Here, the proposed EU-27 insist that EU membership should be rewarding, meaning that the UK should lose some of its trade “benefits”.

The fourth and final chapter discusses the principles of the negotiations itself, with “loyal cooperation” being pushed forward as the key principle.

The EU

The FT's Timothy Garton Ash (17 March 2017) thought that where European policies are causing damage, we must say so and change them, but national politicians should stop blaming all the bad things on Brussels and taking all the credit for themselves. They should listen carefully to the legions of unhappy voters, then develop policies to address those concerns and convey their solutions in direct, appealing language that reaches those caught in the internet-enabled echo chambers of populism. Like every political community, the EU will only survive if enough of its people (and peoples) want it to survive.

The Guardian's Rafael Behr (15 March 2017) said May has shown willingness to alienate everyone who counseled moderation and compromise while indulging those who depicted the EU as an implacable enemy. But there is no prospect of a good deal without recognising that other governments have interests to be addressed. And there is no way to address those interests without upsetting the hardliners who believe Britain owes the rest of Europe nothing and could leap into a free-trading utopia in a single bound, no deal required. May has never challenged that view. She has nurtured it.

The EU (or the “new” big four) endorsed the idea of a multi-speed Europe (Politico 6 March 2017). There is already the Benelux, the Visegrád Group, the “Club Med” Group, the Nordic Council, the Baltic Assembly, and the NB8.  Now the idea is for greater cooperation and integration to the degree each country is ready for it, on issues such as defense, security, taxation and social policies.

The Daily Telegraph's Juliet Samuel (6 March 2017) said that the received wisdom for most Brexiteers was that the European Union was doomed. Threatened by a growing swell of popular anger, the whole rotten project can’t last, and all its bureaucrats can do is rearrange the deckchairs. A British analysis of the situation usually stops there. But let’s, instead, go further. The hyper-federalist model of the EU might be doomed, but something better might yet replace it. For the moment, the EU’s prospects appear to be looking up. Again we have the hate and anger. Where is this “British analysis”? Talk of the Titanic just places the lives of millions of people in Europe as nothing more than film extras for Britain to laugh at. The EU will survive and prosper, and it will do so more easily now that Britain is leaving.

The Independent (5 March 2017) reported that positive coverage in the UK of the EU fell from 25% to 10% over the last 40 years. Negative coverage almost doubled, from 24% to 45%. The Daily Mail tops the list with 85% negative coverage.

In an effort to alter the reputation of the European Commission, often seen as a group of all-powerful, unaccountable technocrats controlling millions of lives undemocratically, Brussels is now trying to hand decision-making back to national governments. The effort by the Commission’s president, Jean-Claude Juncker, aims to save the EU from being used as a scapegoat for unpopular political decisions across the region. The idea is to overhaul “comitology”, and force national governments to take responsibility for decisions made in Brussels. The nations have always agreed on the decisions made by the EU, but now the idea is that they must be seen to take responsibility for those decisions. We also have to remember that populist forces are really targetting their individual nation states, and the EU is just today’s convenient soft target.

What does that really mean? In Jan. 2017 Germany abstained on a vote over GM (genetically modified) crops. This forced the EU Commission to propose a final decision, and the Germans knew this. The way it works is that by abstaining, Germany forced the EU to make a decision through a committee of experts drawn from the Member States (including Germany) and the European Commission. It would then enable Germany to say that the decision was made by a bunch of faceless un-elected technocrats in Brussels. The move of Juncker would force the Council of Ministers (Nation State ministers and lawmakers) to be seen to take the final decision, and to take political responsibility for it. 

There are also signs that Europe’s economy is finally enjoying a sustained recovery after two crises in the past decade. Last year, the euro-area economy grew faster than the US, and unemployment fell back into the single digits. GDP for the US and the EU is about the same (€18.3 trillion to €18.9 trillion for 2015), but EU has the large population (507 million versus 319 million). Since the introduction of the € in 2001, average GDP growth has been the same for both, at 1.6% annually. But money is one thing, how wealth is distributed through the economy and across the population is another. Economic wellbeing touches on income, economic stability, employment, health, education, infrastructure, income equality, civil society, governance and the environment. For example, from 2006 to 2013 both Germany and the US had growth of 1.1% annually. Germany’s ability to convert growth into economic wellbeing was equivalent to economy growing at an average rate of 6.2%, while the U.S. managed an average rate of just 0.5%. This translated into thinks like improvements in health services, affordable education, and better public transport. Looking at growth in real average income for the period 1950-2013 (for the “bottom 90%”), real wage income grew some 70% in the U.S., whereas it was 150% in Italy and the United Kingdom and 250% in France and Germany. Naturally this was because the US saw more wealth being accumulated by the “top 10%”. The issue is that the EU has aimed at deploying wealth across a broader part of the population. It is all about focus “bottom 90%” versus “top 10%”. My worry is that with Brexit, the trend will be to follow the US model, and that will mean that the poor in the UK will get poorer, and the rich, richer. 

An interesting point was made in the Telegraph (7 Feb. 2017) that the Maastricht Treaty was signed in 1992 (25 years ago). It turned the European Economic Community (EEC) into a political system. It also opened the Conservative Party’s war with Europe.

The Independent's Hannah Fearn (2 Feb. 2017) said that democracy may be Britains greatest strength but it’s starting to reveal itself as the source of one of its biggest weaknesses too. In the heat of the Article 50 debate, Britain’s proud democracy is being abused by parliamentarians who seek to use it as a shield for their own failings in exercising public office. Too many British MP’s who believe that leaving the European Union is fundamentally the wrong thing for Britain, and for their own constituents, have openly chosen to vote in favour of it. And that’s what they did, in mass. A kind of collective cowardice, that I hope will haunt them for ever. But top marks to Ken Clarke who spoke out for not supporting the Brexit madness.

Barclays produced an analysis (25 Jan. 2017) of both the UK and EU economies. In the EU monetary policy has pushed funding costs to historic lows, and QE-driven growth has helped reduce public-debt-to-GDP rations (by between 0.9% and 1.3% annually). But this can not go of forever, and the EU must do more for growth. In the EU QE has discouraged reform and can not foster long-term productivity increases and growth. QE has bought time for the EU to reform, but have they used the time wisely? Real growth deduces debt-to-GDP and makes it easier to pay debts without taking on more debt. It provides new resources to the government, and puts more money in the pockets of people so they are less reliant on state spending. But in the EU productivity growth has been poor. According to Barclay’s the answer is to complete the Single Market with productivity improvements in the service sector, complete the Capital Markets and Banking Union to stop future financial crises, and to reform the labour markets and reduce structural unemployment.

What should Brexit really mean?

Under this particular title I am just collecting bits that point to what (I think) would be a sensible direction for the future. Immigration was really a symbol to define a society that was no longer working properly, i.e. job shortages, overcrowding, pressure on the state, welfare strains and housing shortages were the top problems. How can a government close the productivity gap, improve Britains low investment levels, heal the north-south divide, overcome the habit of inventing but not exploiting new ideas, and create an economy that “works for everyone”?

In a Telegraph article (10 April 2017) the author noted that the EU banned state aid but now the British government might have more options. The suggestion is to focus on areas such as robotics, life sciences and big data, and I presume use state aid to implant these new industries in the former industrial heartlands. The author said this was not picking winners, but it looks like just that to me.

In a pole in April 2017 both Remain and Leave put “negotiating Britain’s exit from the European Union on the right terms” as a top of the priority list for the country. However, when asked what mattered most to “you and your family”, the Brexit negotiations fell to third place behind “improving the NHS” and “tackling the cost of living”.

In The Guardian George Monbiot (5 April 2017) said that billionaires and the organisations they run demand freedom from something they call “red tape”, but what they mean is in fact freedom from public protection. Ripping down public protections means freedom for corporations from the constraints of democracy. This freedom is the freedom of the very rich to exploit the man in the street. A good warning

In The Guardian Keir Starmer (27 March 2017) believed Britain’s response to Brexit must be based on core progressive values: internationalism, cooperation, social justice and the rule of law. A commitment to protect human rights, workplace rights, the environment and to share power and prosperity across the UK.

A survey published on 21 March 2017 claimed that people (still) wanted Brexit to mean the end of freedom of movement. But they wanted to retain EU environmental regulations on the quality of the sea water at Britain’s beaches and on the use of pesticides, together with EU rules on the cost of mobile phone calls and on compensation for flight delays. People are also reluctant to lose their ability to secure urgent health treatment when visiting elsewhere in the EU. Above all, there is near unanimity about wishing to keep free trade with the EU (88% support this).

In The Times Jenni Russell (8 March 2017) thought that the real problems in British society are the under-education of the children on whom our future depends, the anguish and stress on the families who can’t get reliable care for the elderly, the dismantling of civilising public spaces like libraries and parks, the brutalisation of already angry people in our prisons. These services are what make Britain desirable, mannerly, safe. Are these going to be the priorities of a post-Brexit Britain? They were not priorities over the last 20 years, so I fear they will not be priorities in the future either. On top of that the government budget (2017) raised the national insurance contributions for self-employed (albeit by on 60p a week). So hitting the entrepreneur. It might be symbolic in nature but is this the right message is a post-Brexit Britain? The answer came quick enough, within a week the government deciding not to raise national insurance contributions after all! This certainly did not stop people saying that Britain should be investing more in its human capital, but the present tax system provides incentives for investing in plant and machinery (automation and artificial intelligence) not training and skills.

In an INFacts article (8 March 2017) it was noted that the Home Office wanted to remain with the European Arrest Warrant “arrangement”. Since 2004 8,671 people have been sent back to Europe for trial, and 1,273 brought back to the Britain to stand trial (formally called “surrendering suspects”). Britain will have to leave the “arrangement”, but can hope to have the same agreement as Iceland and Norway. It would appear that a Norway-style agreement would put UK courts and the European Court of Justice on an equal footing.

There is much discussion about “Empire 2.0”, a set of new trade deals with Commonwealth countries. I’ve put this in the positive column. But Empire 2.0 will not go down well with those countries who think they were plundered and exploited for 200 years. Some authors just think that such jingoism is nothing more than a way to avoid looking at the cold truths of Brexit in the face. I hope they are wrong, but I fear they are right.

Interestingly David Olusoga in the Guardian (20 March 2017) note that the formal empire and the trading empire were not the same thing. While the empire, especially India, undoubtedly helped make Britain rich, even at the height of Britain’s imperial power they traded more with Europe and the United States than with the colonies. And while much of Africa was painted imperial red on the maps, Britain did more trade with tiny Denmark than with Nigeria, one of her biggest west African colonies.

One of the main publicity stunts of the Leave campaign was a red bus saying that the £350 million that was sent to Brussels each week (a false figure) should better be spent on the British NHS. After Brexit the press is/was full of cuts and difficulties in funding the NHS, and how it is/was dependent upon EU workers to keep it going. Daniel Finkelstein in The Times (8 March 2017) wrote that it was time to reduce the scope of the services offered by the NHS, reform the service to increase productivity, and pay more for healthcare, rather than just one of other as in the past. Quite right, Brexit is an opportunity to reset the clock, and go for major reforms. In fact it is not an opportunity but an obligation. 

In The Daily Telegraph Theresa May (7 March 2017) said that as Britain leaves the EU and begins a journey to a brighter future, the mission of the government is not just to negotiate the right deal for Britain with Europe, but to deliver a better deal for ordinary working families at home. So at the heart of the Plan for Britain is a bold domestic agenda of genuine economic and social reform that will lay the foundations for a stronger, fairer and better Britain. If you believe that you believe anything. But the ideas are fair.

In The Times Iain Martin (2 March 2017) argued that May was right last year in her original diagnosis of what ailed a misfiring economy and a broken banking sector. At the root of the housing problem lies a failure of monetary policy: that is years of excessive cheap money that has driven up house prices in many parts of the country to unaffordable levels while gumming up the workings of the market economy, weakening the essential link between savings and the creation of a return that is then spent or reinvested in new ventures. Food for thought.

The results of the by-elections (23 Feb. 2017) show that UKIP is dead, and that Labour has no effective leadership. Perhaps the issues are no longer simply about a left-right fight. Perhaps it is about two different views of what Britain will be in the future. Trade deals with former imperial possessions versus a new type of open engagement with our European neighbours. The 20th C versus the 21st C.  

In The Times Matt Ridley (30 Jan. 2017) said post-Brexit environment policy should be one of gardening: managing for a diversity of outcomes in different places. Productive farms here, deep forests there, wild moorlands elsewhere, all with the aim to host as many habitats and species as the climate will support. Sounds sensible.

Barclays produced an analysis (25 Jan. 2017) of both the UK and EU economies. In the UK  cutting the bank rate to 0.25% was a good think following Brexit, and the weaker £ eased the risk of current account deterioration. But this can not go of forever, and the UK must do more for growth. In the UK underinvestment and a squeeze of real pay growth blocks growth (even of borrowing costs are lower). Leaving the Single Market and the Customs Union will not make things easier. Low interest rates can not foster long-term productivity increases and growth. Real growth deduces debt-to-GDP and makes it easier to pay debts without taking on more debt. It provides new resources to the government, and puts more money in the pockets of people so they are less reliant on state spending. But in the UK productivity growth has been poor. According to Barclay’s the answer is for new structural policies to incentivise saving over consumption and investment in innovation over investment in real estate. Public spending must also be redeployed to replace EU funded investments.

Cherry-picking and Punishment

In early May 2017 the Brexit divorce “bill” was said to risen to over €100 billion (€91 to €113 billion, representing €55 to €75 billion over the next decade). Of course, it is not a “bill”, but just the “settling of accounts”. Much of this appears to be about the idea that Britain should continue to pay (and be part of) through to end of current multi-year programs, i.e. honour existing financial obligations. Britain is also part of a loan system where it assumes collective responsibility for losses, but would also normally be paid back over time (this accounts for the different between the “non-bill” and the eventual final “non-bill” over the next decade). It would appear that it also includes the cost of moving the EU agencies out of Britain. 

Interestingly it was reported (23 March 2017) that in an House of Lords report it said that Britain would not need to pay anything if they left the EU without an agreement, i.e. what happens to outstanding financial obligations are not determined by consent between the two parties. Firstly, once outside the EU the European Court of Justice no longer has jurisdiction. Secondly, the EU will have other ways to force compliance, e.g. sanctions, trade war, dispute settlement under WTO, or even possible private commercial judgements against the Britain. The House of Lords can to this conclusion in opposition to the opinions of 2 of 3 expert witnesses who felt that the Vienna Convention would apply. A different opinion is that it is not clear if the Vienna Convention would apply, but that simple financial commitments and obligations would still apply, so Britain would need to pay the bill. 

Perhaps not quite a punishment, but Britain could be fined up to €2 billion because British customs turned a blind eye to Chinese footwear and textiles flooding onto the EU at a tiny fraction of their production cost. On top of the €60 billion, this is going to go down well.

The Daily Telegraph's Allister Heath (23 Feb. 2017) wrote; "Hand over a €60 billion ransom or we won’t even start to discuss a trade deal: that, if Jean-Claude Juncker is to be believed, will be the European Union’s opening gambit ahead of Brexit. Bring it on, I say: the best way to expose a very weak adversary who is pretending to be very strong is to call their bluff. Yet it may never even get to that. At this rate, what is left of the EU could soon be begging us for a trade deal, not the other way around. The reality is that the EU is edging ever-closer to the abyss: it is at its weakest, most vulnerable since its creation, and it is now touch and go whether it survives 2017 or whether it is swept away in a catastrophic populist revolt." What a load of rubbish! What did Britain expect, simply to walk away for commitments already made? Originally Britain appeared to have the opinion that the Art. 50 was a feature in the Treaty that allowed any partner to walk away at any time, free. I suppose the reality will not be €60 billion, but it will be €30-40 billion over 5-6 years. But what really surprises me is the hatred that you read in these type of comments. Where does that hatred come from?

In any case it was reported (17 Feb. 2017) that Britain had assessed the EU assets at €150 billion, and felt that in any divorce they should expect to get back some of those assets. Not sure what these assets are and what that means in reality? Perhaps they will give Britain an nice Italian island in the sun, Lampedusa!

INFacts (17 March 2017) listed why it all adds up to €60 billion. First, there are the commitments made in previous budgets, €29-36 billion. Second, there are commitments made outside the budgets, i.e. legal promises adding up to €17-22 billion. Third, there is the pension fund, €7-10 billion. Fourth, there are other legal obligations such as the Galileo and Copernicus satellite projects, €5-6 billion. Finally, there are the guarantees and loans made by the EU to Ireland and Portugal, i.e. shared burden in case of failure to repay. There is €9 billion in outstanding payments to be made to Britain. And why should Britain pay for a club membership, when it no longer a member? And Britain does have the equivalent of €10 billion in their share of the European Investment Bank.

The Guardian noted (22. Feb. 2017) that it could cost €57 billion (over 6 years) to quit the EU. This is the cost of projects and programs it has sign up for as well as pensions of all EU officials. Other problems are the rights of EU nationals living in Britain, and the border with Northern Ireland.

On the 22 Feb. 2017 the Dutch view on Brexit was that they would like to keep the flow of goods and ideas through a nice Brexit, but the EU is more important to the Dutch that Great Britain. It looks as if they will have to support the idea that Britain pays a “huge price”. The Dutch are loyal partners of Germany, but feel liked-minded with the Nordic States, the Baltic States, Ireland and Austria. The reality was that Britain had not been a reliable partner in the past. A former Dutch government official said that they trusted France and Germany more than the British!

The Guardian (21 Feb. 2017) noted that British medical researchers were being removed from applications for EU research grants. EU researchers are also pulling-out of job offers in the UK. 

“I will be pretty tough on it because we have to preserve the rest of the European Union,” Macron told Channel 4 News on Feb. 13. “It’s not to be punished but to be consistent with such a decision. You don’t get a passport and you don’t get access to the single market when you decide to leave.” Rival Francois Fillon is if anything harder. “You can’t have one foot in and one foot out,” Bruno Le Maire, the former minister who is handling foreign affairs for Fillon, said in an interview last week. “We need to organize the exit as quickly as possible to respect the interests of France and Europe.”

More generally (17 Feb, 2017) the position of the French appears to be that Britain should not be better off with respect to the EU after Brexit.

The Guardian (15 Feb. 2017) reported that MEP’s had drafted 7 provisions to be included in any “exit agreement”. I can not find out what these 7 provisions are, but one is to do with fishing rights. They want Britain (and the EU) to continue to respect the sustainable fishing objectives of the UN stocks agreement. That is to accept the continued application of the EU common fisheries policy. So much for the “we want our waters back”.

In addition the Guardian (31 Jan. 2017) noted that the European Parliament wanted Britain to continue to commit to EU air pollution ceilings. The idea is that Britain should not be allowed to damage the wider European environment by being able to reduce its commitment to environmental protection. And that the European Court of Justice should be the arbiter of any conflicts. My understanding is that the European Parliament wants to bind Britain to that legislation that has a transboundary nature. Understandable, and Britain has said it wants to quite the EU, not Europe. So respecting the rules of its friends appears a reasonable act of friendship!

The British government agreed (2 Feb. 2017) that it will not be able to “cherry pick”, i.e. stay partly within the EU’s customs union.

In The Guardian (19 Jan. 2017) Guy Verhofstadt wrote that the aim was to deliver a Brexit that was least harmful for all concerned, but British cherry-picking and a Europe à la carte were not possible. No one in Europe wants to “punish” either Britain or the British.

I like Vehofstadt, and he is right. I doubt that Britain will be able to break up the four freedoms of the EU (freedom of movement, capital, goods and services). However, I do think that some countries want to make it visibly painful for the British, and I think they are right to do so. Why should Britain retain free access to the EU market, and at the same time ignore the founding principles of that market? I guess that both parties will be happy with Britain that looks hurt, even if they are not. And the EU will want to be seen to have retained its principles, even if they might look a bit frayed around the edges.

Hard Brexit

In The Times Philip Collins (5 May 2017) thinks that leaving the European Union is a Schrödinger’s cat kind of problem. The outcome of the negotiation has to be simultaneously a great success and an abject failure. The British government, perfectly reasonably, will want to declare the deal a triumph. The same deal, though, has to count as a failure in the judgment of the European nations. If Britain’s deal is seen, in European capitals, as at least as good as EU membership, what is to stop them seeking the same?

It has been said that for centuries British foreign policy had a key goal: to avoid “Europe becoming a single bloc united against Britain”. Yet that’s exactly what’s now happened. At the weekend (4 May 2017), the EU 27 took just four minutes to approve their common stance against the UK.

In an InFacts article (12 April 2017) they talked about a report by MP’s on “Lessons learned from the Referendum”. One problem the committee highlighted was the asymmetry of the question. It was pretty clear what voting Remain meant, but not at all clear what voting Leave meant. The MPs rightly said: “Voters should have be presented with a choice, where the consequences of either outcome are clear”. They don’t say how that should have been done. One issue the committee did not tackle at all was whether anything could have been done to improve the accuracy of information made available to voters – despite this being one of the main topics that exercised organisations that gave evidence (e.g. Turkish scare stories and lie about sending £350m a week to Brussels). Another omission in the report was the failure to look at whether some sort of super-majority should have been required for big constitutional changes. The committee was right is saying that a referendum was not the way to close down unwelcome debate within the Tory party. They make a good case that, if a government does agree to hold a referendum, it should be neutral in the process, plan for either outcome and then be willing to implement the result. At the end-of-the-day governments should only call referenda and abandon traditions of representative democracy if there’s a very strong case for doing so.

A parliamentary report (InFacts, 4 April 2017) was “slammed” by pro-Brexit MP’s for being “gloomy”. It said that leaving the EU with no deal could put EU nationals living in the UK in an “uncertain position”. It warned that the economic impact of leaving the EU without a deal on tariff-free trade would be “extremely serious and damaging” on both sides of the Irish border. The report was positive about continued cooperation on foreign policy and defense. The report called the plans for a UK-EU customs arrangement “vague”. It noted that obtaining a comprehensive free trade agreement in two years is probably unrealistic. The report also said that the idea that “no deal is better than a bad deal” is “unsubstantiated”.

A report by the House of Lords (22 March 2017) said that non-financial services, which account for 39% of UK exports, will be “badly damaged” if Britain fails to strike a Free Trade Agreement (FTA). Professional business services, such as legal and accounting firms, would face “increased, and in some cases absolute, barriers to trading with the EU” and will likely “relocate to the EU”, it said. Non-financial services, including aviation, digital services, retail and broadcasting, will also be hit.  

The FT's Philip Stephens (17 March 2017) said that only yesterday the choice was framed as between “soft” or “hard” Brexit — a close affiliation with the EU akin to that of, say, Norway, or a decisive, though still equable, break. That was yesterday. The shape of Britain’s future relationship with the EU has fallen since into the hands of the Conservative party’s English nationalists. Their preference is for a “granite” Brexit. And they will be happy if Britain tumbles out of Europe without any deal. More fool them.

The Guardian's Polly Toynbee (14 March 2017) noted that ahead lies the so-called great reform bill, re-homing EU laws, which must be done by Brexit-day in two years. The risk is that “fanatics” will try to water-down every regulation they can – on food, environment, work, banking, safe medicines, nuclear power, cyberfraud, everything that touches daily lives. All with the aim of no rules, no taxes and “freedoms”.

In a BBC article (16 March 2017) Pascal Lamy, former head of the WTO, said that by definition no deal (just going using WTO rules) would be worse than any kind of arrangement. A trade deal in goods could be simple if Britain simply adopted existing EU tariffs and quotas. Eliminating tariffs entirely, as some economists who back a Leave vote last year have suggested, is not politically realistic. This is because countries are economically competitive in some sectors and not in others, so removing all barriers would cause "social and political pain ... tariffs are a way to ease this pain". Another problem with removing all tariffs is it gives "zero incentive for others to provide you with better market access”. The divorce bill could be simple to resolve if a final figure can be agreed upon, but other areas, like competition law, business regulation and trade in services, could be very complex. "The tariff side is the simplest", said Mr Lamy. One option that has been floated is trade deals for certain sectors. But this is unlikely because of Article 24 of the WTO's General Agreement on Tariffs and Trade, said Mr Lamy. This clause says free trade agreements must cover "essentially all trade". In an INFacts article (13 March 2017) it was stated that Britain would copy WTO obligations directly from those already in place with the EU. This is in fact the process that Britain would need to go through before being able to “fall back” on WTO rules if needed. On the other hand, in a Guardian article (12 March 2017) they noted that that all G20 members had some form of trade agreement with the EU.  

INFacts (14 March 2017) list 10 reasons for not having a “Hard Brexit”. Firstly, it would poison British-EU relations. It would leave the 3 million EU citizens in Britain and the 1 million British living abroad in zombi land. Tariffs from 10% to 30-40% would be imposed on    British exports. Customs checks at the frontiers would be mess. Even if Britain adopts the everything from the 33 EU regulatory bodies that govern safety, there will be no way for the EU to know that Britain is actually following those rules, i.e. no basis for compliance. Scotland would suffer, and this would be stir up anger that would feed the independence debate.  Sinn Fein will win hands-down in Northern Ireland because custom controls will re-appear in the border. British tourists will not have the European Health Insurance Cards for free health treatment. There will be no legal basis for continued cooperation on terrorism, etc. Finally, how can Britain cooperate with EU countries in foreign policy issues, when they will be fighting those countries in court.

The Daily Telegraph's James Kirkup (8 March 2017) noted that Parliament should have a meaningful vote on Theresa May’s Brexit deal, according to the House of Lords. Theresa May said this would encourage EU leaders to offer Britain a bad deal in the hope that Parliament would reject that deal and maintain EU membership. Firstly, it is not clear that you can go back once the Art. 50 is triggered. Secondly, all the other Parliaments in Europe will have to vote on the deal, so why not the British Parliament? Thirdly, it would force the British government to put together and sell to the people (remember “the vote of the people”) a solid, positive case for the deal they have negotiated. What more motivation do they need?   

It would appear (Independent 7 March 2017) that Britons would prefer that the UK stay in the EU or try and secure a different deal. The public were ready for a hit on the economy over the next two years, but they did not agree to the idea to leave the EU without a future relationship in place (thus simply reverting to WTO rules). The poll was that only 25% said to leave the EU with no deal, 27% would want the government to try to renegotiate a deal, 14% said the UK should stay in the EU on new terms, and 15% said the UK should stay in the EU on the existing terms. Not sure why this only adds to 81%.

In The Times Melanie Phillips (7 March 2017) argued that Britain was a nation with the right to rule itself. The EU was an artificial construct, falsely claiming for itself the hollow appurtenances of a nation. But its constituent nations were are under no obligation to remain. By contrast, the United Kingdom is a nation which is governed in accordance with its name. Scotland has no right to rip it asunder if it wants to secede from the Union.

The FT's Jonathan Ford (6 March 2017) thinks the case for stumping up simply for access to the single market is flawed, as a continuing payment would be little more than a one-way tariff. Some logic in this, if you pay to be a member of a trading group it is a bit like an indirect tax on all the products and services sold into that market.

Hugo Dixon in InFacts (27 Feb. 2017) talked about three main scenarios: hard Brexit; very hard Brexit; and no Brexit at all. He put the chances at roughly 60%, 30% and 10% respectively. After the prime minister’s flimsy White Paper, there is no chance of soft Brexit. The scenario that would have cushioned the blow the most, membership of the single market and customs union are not on offer.

A hard Brexit would involve a deal to quit the EU, but not a good one. A very hard Brexit would involve crashing out without any deal at all.

Under the merely “hard” variety, EU citizens in Britain and Brits in the rest of the EU would have their rights guaranteed and there would be a rough outline of a new trade deal as well as a transitional arrangement in the two-year period allowed for under Article 50.

It would take perhaps another five years to nail down the final trade deal.  But that wouldn’t do much for the British services industries. Goods exports would still suffer problems at borders. Britain would also have to pay an exit fee running into tens of billions of pounds.

The British economy would become less dynamic because of the loss of skills and reduced access to international markets. Uncertainty would also be a drag for years. But the damage would not probably stop May winning the 2020 election, so weak is the official opposition.

Under a very hard Brexit, by contrast, Britain would refuse to pay what the EU says Britian owes. The EU would then pursue Britain through the international courts.

Britain would have to fall back on the World Trade Organisation (WTO) to govern trade with the EU. That would involve the imposition of tariffs and non-tariff barriers, which nowadays are a bigger block to commerce than tariffs for most industries. Britian might even struggle to fit smoothly into the WTO given that each of its members, including the EU, would have a veto.

The fate of EU citizens already Britain and Brits across the Channel might be up in air.  The economy would fall off a cliff, causing a recession. There would also be political turmoil. The Tories might lose the 2020 election, especially if Labour had by then chosen a better leader.

Hard Brexit is the more likely scenario because crashing out would be bad for both Britain and the rest of the EU. This is not just about economics. European’s live in an increasingly dangerous world, i.e. with terrorist threats, Vladimir Putin trying to undermine western democracy and Donald Trump in the White House.

But good sense may not prevail. The British prime minister has already said no deal is better than a bad one. The talks could easily become acrimonious, especially if Britain again threaten that they will become a Singapore-style tax haven if they don’t get their way. May’s decision to suck up to Trump could also poison the talks, as the US president is hostile to the EU. Britain could be seen as allied with an enemy.

What’s more, EU leaders worry that their club could fall apart. They cannot allow Britain to exit with such a good deal that others may follow suit. If Emmanuel Macron or Martin Schulz wins this year’s elections in France and Germany, it will be even harder to get a good deal. Both are staunch pro-Europeans who will put maintaining the integrity of the EU way above economic considerations.

Meanwhile, the European Commission doesn’t want to discuss a new trade deal until there’s progress on how much money Britain will pay, with the opening bid expected to be around €60 billion. If the EU sticks to this line, the Brexiters may go ballistic, making it tricky for May to stay at the negotiating table.

A further problem is that there isn’t long to nail down a deal and no realistic prospect of stopping the two-year clock if Britain runs out of time.

The prospect of crashing out of the EU, though, is also the scenario that could lead Britain to not leaving at all. The markets might go haywire if they thought the British prime minister was driving the economy over a cliff, particularly if, as seems likely, inflation was also rising. International investors could start cancelling projects and business (which is currently meek), and that could start sounding the alarm.

External factors could also start to impinge on voters’ minds. If there was a geopolitical shock, say as a result of more unhinged behaviour by Trump, it might seem foolish to abandon Britain’s European friends and tie their fortunes to the US president.

There is even a chance that the EU will change its attitude to free movement of people as a result of rising populism on the continent. If so, it might be able to offer Britain a concession to stay in the bloc.

In such a situation, people could start changing their minds about Brexit.

Of course, the British prime minister might then call a snap general election. But if she’d lost the support of parliament and the people, she might not be able to pull off such a gambit.

At the moment, many pro-Europeans are downcast and can not see any way forward. One hears phrases like the ship has left the port. But, if the weather is stormy, ships can turn around and head back to port.

Nothing new in this analysis but it provides a short summary of the situation. Also I might add that it does not provide a justification for the authors 60%-30%-10% estimate on hard Brexit, very hard Brexit, or no Brexit at all!

Tony Blair has been urging to resist an EU exit, but (on the 21 Feb. 2017) German Finance Minister Wolfgang Schäuble said it was “a bit too late”.  The FT's Janan Ganesh (21 Feb. 2017) thinks there is more chance of Britain leaving the EU and then rejoining in stages than there is of Britain never leaving in the first place. The movement that Tony Blair is willing into existence will not do its best work over the next two years but in the decade after that. It cannot stop exit, or even soften it. On the other hand the Daily Telegraph's Tim Stanley (21 Feb. 2017) says the Eurosceptics are not the silly little fringe that Tony Blair and the Establishment still see them as being. They have the “will of the people” as expressed in a referendum behind them.

The Guardian's Deborah Orr (14 Feb. 2017) believes the awful thing about what lies ahead for the unskilled and the low-paid skilled is that it’s going to be so painful. The repercussions of Brexiteering will be a bitter proof that many of the people who supported these so-called solutions most enthusiastically were always those who were destined to suffer from them most.

In The Times Iain Martin (2 Feb. 2017) said that Britain need not cower in front of the EU fearing an explosion of anger and no deal. On close examination, the glorious 27 look less like a diplomatic and economic behemoth, and more like a rickety empire starting to come apart, an experience to which the British can certainly relate. Again one can sense the hatred that the good old technocratic EU generates. I am more and more included to think that Britain leaving the EU is good for the EU. What is the point of living in the same “home”with people that hate you?

The British Supreme Court ruled that Parliament is required to give its approval before official talks on leaving the EU can begin, i.e. Parliament must decide to involve Article 50 of the Lisbon Treaty. The government decided (25 Jan. 2017) to publish a formal policy document, a White Paper, but May did not actually link the two events together. She wants Article 50 to be decided upon before end March 2017, whereas the White Paper will appear “in due course”. May confirmed that Britain would leave both the European single market and the EU custom union. At least things are moving in the right direction. Debating Article 50 is a good idea, but the vote on it is more or less a done-deal. However it will be useful to see questions such as trade, free movement, foreign policy and security discussed. May has said that parliament will also vote on the final deal, but if they vote it down, then Britain will leave the EU without any agreement. The EU (Michel Barnier) has said (7 Dec. 2016) that things need to be finished by Oct. 2018 to give the European Parliament and Britain time to ratify the deal. Some people have suggested that May will want to put to the UK a deal already ratified by the European Parliament, leaving no room for the British parliament to make changes (i.e. just a take-it or leave-it vote). But if a deal is ready by Oct. 2018 then there is still time for a full discussion on the terms (deadline end March 2019). Some say that if the deal looks bad for Britain then it would still be possible to have a new referendum before the 2-year period closes.

Interesting that one moment the Supreme Court was the enemy, and then later, with its positive ruling on a “financial barrier” to immigrants, they are the heroes and protectors of the people.

It was interesting to see the reaction to the Supreme Court decision, and the role played by Gina Miller (25 Jan. 2017). The Telegraph, Independent and Guardian praised her, the Telegraph said now all steam ahead to Brexit, and both the Independent and Guardian stressed parliamentary control as a check against executive power. The Daily Mail just called her a very pushy Posh Mum.

The Daily Telegraph's Ambrose Evans-Pritchard (23 Jan. 2017) thought the Brexit drama had taken an unexpected twist. Britain's strategy of full withdrawal from the single market and from the EU institutions had been remarkably well-received. Contrary to fears in some quarters in Britain, the pursuit of a 'clean and hard' Brexit had if anything helped to clear the air, was was greeted with a degree of relief by political and business leaders in Europe. What has changed the mood - apart from the passage of time - is the parallel pledge by Britain's leaders to stand beside Europe as a close strategic and military ally, playing its full part in upholding a rules-based global architecture. Is this just some positive spin on an otherwise bad idea? “Remarkably well-received” is a bit over the top! Surely did not voters actually vote for Britain not be “a close strategic and military ally” of Europe, and not to be a “part in upholding a rules-based global architecture”. None of this smacks of the “Little Britain” wanted by many Leave voters.

Simon Jenkins (19 Jan. 2017) thought that in setting out the terms of engagement, Theresa May had no option but to hang tough. That is what her EU opposite numbers have been doing for six months of virtual denial of Brexit. Much of Brussels still dis not believe it would happen, while Europe’s elected politicians at least sense that anti-EU sentiment is growing in their backyards. There are stirrings of a peasants’ revolt, with votes for pitchforks. The last thing they want is a crowing, preening British leader seeking “to have my cake and eat it”. Hence their cursory treatment of May in her few EU encounters so far. To them, she is toxic. I expected that both sides would take an early hard negotiation stance, but I think that “Brussels” knows very well that Britain is leaving. This “peasants’ revolt”, is that what those who voted to Leave are? In any case Le Pen appears to want to play on the same themes as Trump, and it may be seen as a peasants’ revolt, but it certainly has nothing to do with agriculture and pitchforks. In my opinion Brexit was really an anti-London vote, and Trump was elected on an anti-Washington, anti-establishment vote. Elections in the EU are going to be dominated by anti-Paris, anti-Berlin, anti-establishment, anti-fat-cat politics. And to be honest, who can complain about that? The man-in-the-street has been ignored for too long. The treatment of May by EU leaders is far from cursory, but she is clearly toxic and to be avoided at all costs. 

It was interesting to see that many British newspapers wrote that the £ soared (or rallied) after May’s Brexit speech (the Telegraph, Guardian, Express, Independent, Metro, BBC). But the reality was that the £ hit a 3-month low on the Monday before her speech, and the £ had lost about 20% of its value since June 2016. So the £ did rise significantly after her speech, but that must be set against the fact that it had already lost nearly 20% of its value, and many experts consider that it was now undervalued anyway.

It must be said that some key indicators remain steady, i.e. unemployment remains low at 4.8%, inflations looks to be under control, and the economy may have expanded by 2.4% in 2016. It is true that real disposable income for 2016 actually fell by 0.6%, the savings rate dropped from 6.1% to 5.6%, and household borrowing grew by 11%. The trade deficit is expected to widen in 2017, inflation is predicted to rise, and public borrowing is also on the rise (with the NHS and social care systems also need additional funding).

George Magnus (former Chief Economist of UBS and Associate at Oxford University’s China Centre) rightly (in my humble opinion) suggested that the British government could mitigate the consequences of Brexit by implementing a strategy to boost investment, improve the corporate governance system, secure finance for the scaling up of small businesses, strengthen skills and create more sustainable health systems for an aging society. But none of this is on the table.

In May’s speech she said that if Britain could not cut a fair deal with the EU, then Britain would change its “economic model” and create a low-tax competitor off Europe’s coast. Wolfgang Schäuble, Germany’s finance minister, has said that this would break a G20 agreement made in 2015 and would not be taken seriously. 

The FT's Philip Stephens (19 Jan. 2017) argued that Britain will cease to be a platform for foreign businesses — manufacturing and services — that want to sell unimpeded into the world’s largest market. Companies will face new barriers to trade with an EU 27 accounting for more than two-fifths of British exports. Dozens of third-country trade deals will be upended. As economic ties weaken, political relationships will wither. British prime ministers will be absent from the councils of their own continent. All true, and despite this those who voted Leave persist in thinking that Britain will be better off outside the EU.

Bexiters think that the UK will be better off

One of the undying Brexit myths (InFacts 24 April 2017) is that it was a people’s revolt, a spontaneous anti-elite rebellion against a pro-European establishment. Yet we now learn that up to two-thirds of the cash that paid for Brexit came from just five extremely wealthy anti-European fanatics. Between them, Arron Banks, Peter Hargreaves, James Hosking, Robert Edmiston and Crispin Odey channelled £14.9 million to different pro-Brexit groups.

One of the really difficult questions is how a Stay became a Leave, based upon a lot of false information and a shift in what people considered an “acceptable” decision. What appeared to be acceptable in terms of political thought changed. Voting to leave the EU, for some people, was initially unthinkable (at least in 2000), but became acceptable once it was stated, argued for, and framed as a thinkable option. Voting to leave moved from the extreme edge of the political spectrum to the fringe, thanks to a press that advocated “leave” as a credible option. Once on the fringe, it was easy for it to take on the under-dog role, and later still become the anti-establishment, anti-London, anti-EU, anti-immigration, anti-everything party. The Leave understood better that Deep England did not think like London. Leave talked (and lied) about issues such as employment, education, healthcare, access to power, and even life expectancy. Stay looked at the low unemployment figures, but Leave saw unsatisfying, insecure, low-paid jobs. The key was ‘precarious’, someone (an immigrant) can/will take your job. Leave said that Britain was dominated by out of touch politicians and the banks in London, whereas in fact it is still the 8th biggest manufacturing economy in the world (and the world’s second biggest aerospace industry). The more London talked about the liberal, open, internationalised high-tech, high-skills economy, the more the white working class felt both threatened and abandoned. To Deep England all political parties talked all the time about the economy, but the reality is that people are interested in finding a job, paying the rent, avoiding debt,... There was a major recession, and no one was able to explain why it happened, why the working classes suffered more than the others, and why no one listened to them or cared about them. Was anyone convinced by important politicians or mega organisations (IMF, OECE, ECB) saying that Leave would be bad for the economy? The more they talked, the more “take back control” sounded good. It was Stay who gave that emotional idea flesh and bones.

Anti-immigration was the key. For many people immigrants were coming to take their jobs, houses, money. Why do many immigrants succeed, when Deep England is poor, ignored and abandoned. EU immigrants claim less benefits than native British. They are usually younger, better educated and healthier. On top of all that half of EU “immigrants” are in fact students. Stay were abysmal, but explaining that immigrants were young, healthy, hard-working people might not have convinced those who see themselves as being left behind.

Stay did not make Leave pay for their lies. Stay did not fight hard enough about immigration, it did not defend immigration, and it did nothing to understand that immigration has strained both the social fabric and the everyday public services in some regions (successive governments have ignored this issue). Bit of a rant, but I feel better.

This article looks at why the extreme right is growing in rich economies. The problem is that a lot of data suggests that countries with more robust welfare states tend to have stronger far-right movements. Providing white voters with higher levels of economic security does not tamp down their anxieties about race and immigration. For some, it frees them to worry less about what it’s in their wallet and more about who may be moving into their neighborhoods or competing with them for jobs.

Since World War II, Western European politics has been structured by the ideals of social democracy, with every nation adopted some version of the basic social democratic vision — a mixed-market economy defined by both private property and deep government involvement, with high levels of taxation and sometimes stifling government regulation of the private sector, in exchange for a generous social welfare system that offers things like universal health care and free or heavily subsidized education.

The social democratic project, by the numbers, has worked pretty well. The 10 countries with the lowest poverty rates in the world are all in Europe (the US ranks 34 out of 35 total countries in the OECD, an organization of wealthy countries). Researchers have also found clear correlations between the size of a country’s welfare state and social mobility, indicating that countries that provide citizens with extensive benefits, like Norway and Denmark, can help them better provide for themselves down the road. Indeed, the countries that score highest on surveys of national happiness aren’t the richest or the ones with the nicest weather — they’re ones located in frigid Scandinavia, a region defined principally by its exceedingly generous welfare states.

This isn’t to say that there aren’t drawbacks to European welfare states. There’s real evidence that excessive regulation can stymie innovation and make it harder to start new firms, and that some welfare state labour protections can make doing business more difficult.

By most measures, though, Europe’s social and economic programs provide their citizens with better standards of living than can be found in the US. That, however, hasn’t kept the parties that advocate and defend those policies most vigorously from steadily losing votes.

So why did voters who by and large benefit from social democracy turn against the parties that most strongly support it? It’s a hard question to answer if you believe people cast their ballots principally on the basis of their perceived economic interests. European social democrats have been proposing ideas that more objectively speak to the material interests of voters, particularly in the working class, for decades. In virtually every country in Western Europe, however, it hasn’t been enough to help the parties maintain their historic levels of public support. Ironically, that could be because the European left is the victim of its own success. Ronald Inglehart, an eminent political scientist at the University of Michigan, argues that the combination of rapid economic growth and a robust welfare state have provided voters with enough economic security that they could start prioritizing issues beyond the distribution of wealth — issues like abortion, same-sex marriage, and, most crucially, immigration. So it’s not that European social democrats failed to sell their economic message, or that economic redistribution became unpopular. It’s that economic issues receded in importance at the same time as Europe was experiencing a massive, unprecedented wave of nonwhite, non-Christian immigration. That, in turn, brought some of the most politically potent nonmaterial issues — race, identity, and nationalism — to the forefront of Western voters’ mind.

Kai Arzheimer, a professor at Germany’s University of Mainz, studied data on working-class voters, the traditional base of social democratic parties, between 1980 and 2002. He found that the stronger the welfare state, the bigger the gains for far-right parties among the working class. The top third of countries — that is, the ones with the largest welfare states — saw roughly four times the rate of far-right support among the working class as the countries in the bottom third did. You see a similar sort of pattern inside countries. Right-wing populists typically have gotten their best results in wealthier areas of countries — that is, with voters who experience the least amounts of economic insecurity. It’s important to bear in mind that the rise of the far right isn’t solely, or even mostly, the result of social democratic decline. The far right has pulled in some working-class voters, but most of its supporters are petty bourgeoisie (like shopkeepers) or low-educated, fairly high-income people (like successful plumbers). Swaying these voters through economic proposals will be difficult.

Are things different in the United States? The American welfare state has always been weaker than its counterparts around the West. Correspondingly, you see the highest rates of inequality in the developed world, with 3 million American children living on less than $2 a day and a health care system that ranks dead last in the respected Commonwealth Fund’s measures of performance among 11 developed countries. It’s a level of material suffering that, you might think, should be to be fertile ground for left-wing populism. Take a look at results from several pivotal Senate races. In two Midwestern states, Wisconsin and Ohio, Democrats ran Sanders-esque populists, abd both lost by a wider margin than Hillary Clinton did in their state. By contrast, the Democratic candidates who most outperformed Clinton’s statewide results ran as economic centrists. In 2001, three scholars at Harvard and Dartmouth found that the higher the percentage of black residents in a state, the less its government spent on welfare payments. Still today poverty, in the minds of many white Americans, is associated with blackness. Redistribution is seen through a racial lens as a result. The debate over welfare and taxes isn’t just about money, for these voters, but rather whether white money should be spent on nonwhites. So hostility between races limits support for welfare. Another study conclude that voter racism pushed both parties in the United States significantly to the right on economic issues. The uncomfortable truth is that America’s lack of a European-style welfare state hurts a lot of white Americans. But a large number of white voters believe that social spending programs mostly benefit nonwhites. As such, they oppose them with far more fervor than any similar voting bloc in Europe. I suppose the conclusion is that you can not just fight this with economics, you need to blunt the appeal of right-wing parties.

In this blog (7 March 2017) the author asks the question about “populist” party’s, are they just those that the others don’t want to accept? He argues that “populist” is like a technology, once developed it spreads. Generally governments are either conservative (defending “old” institutions) or liberal (the state as a neutral referee), but populism rejects this “method”. Both see their method as good in that the state endures to “serve the public good”. But populists insist that government takes side, one part of the population against another part. One group feels victimised, and wants the state to take their side. The EU is one good example of a depoliticised state, and as such one that does not take sides. Populism is a system of exceptions and special treatments (for themselves), and for that to work they need sovereignty. Keeping the customer-voter on your side has nothing to do with facts. Populists reject all constraints in trying to keep that customer-voter on their side. Interestingly populists reject those sectors of the economy that hand out money to keep the customer-voter in their pockets, i.e. energy, environment, transport, science,... The classical customer-voter targetted by populists is in their 50’s, well-off but not well educated, not a consumer of main-stream media, and is often driven in everyday life by “finding the deal”. The key is “bullshit”, i.e. creative freedom to say anything, and no need to have any relationship with fact. It’s fun and it gets the target audience on their side. The more the populist is side-lined, the more his audience thinks that there is a “special offer” on the table, i.e. something for them and not the “others”.

Not sure if this is truly a “better off” situation or just damage limitation, but INFacts (8 March 2017) mentioned the idea that Britain could re-join EFTA (Switzerland, Norway, Iceland and Liechtenstein). This would give them access to existing trade deals with 38 other countries (counting for 19% of British exports). But the US, Australia and New Zealand do not have trade deals with EFTA. 

The BBC (6 Feb. 2017) has obtained a more localised breakdown of votes from nearly half of the local authorities which counted EU referendum ballots last June.

This information provides much greater depth and detail in explaining the pattern of how the Britain voted. The key findings were:

  1. 1The data confirmed previous indications that local results were strongly associated with the educational attainment of voters - populations with lower qualifications were significantly more likely to vote Leave

  2. 2The level of education had a higher correlation with the voting pattern than any other major demographic measure from the census

  3. 3The age of voters was also important, with older electorates more likely to choose Leave

  4. 4Ethnicity was crucial in some places, with ethnic minority areas generally more likely to back Remain. However this varied, and in parts of London some Asian populations were more likely to support Leave

  5. 5The combination of education, age and ethnicity accounts for the large majority of the variation in votes between different places

  6. 6Across the country and in many council districts they pointed out stark contrasts between localities which most favoured Leave or Remain

  7. 7There was a broad pattern in several urban areas of deprived, predominantly white, housing estates towards the urban periphery voting Leave, while inner cities with high numbers of ethnic minorities and/or students voted Remain

  8. 8Around 270 locations can be identified where the local outcome was in the opposite direction to the broader official counting area, including parts of Scotland which backed Leave and a Cornwall constituency which voted Remain

  9. 9Postal voters appear narrowly more likely to have backed Remain than those who voted in a polling station.

On the same day it was announced that a majority of Britons approve of the British government's approach to leaving the European Union (now 53%, verses 38% in Dec. 2016).

In The Times Matt Ridley (30 Jan. 2017) said that post-Brexit environment policy should be one of gardening: managing for a diversity of outcomes in different places. Productive farms here, deep forests there, wild moorlands elsewhere. Freed from the one-size-fits-all shackles of the EU, we should localise our policies, and host as many habitats and species as the climate will support. Even Ridley repeats the “one-size-fits-all shackles of the EU”. The rules are/were agreed by the European Parliament and the European Council (i.e. by the Member States). Both the EU environment policy and the “shackles” were accepted by Britain. The real question is about what Britain will do one freed. Will it end up adopting the same policies and “shackles” that it had in the past, will it do nothing, will it do worse, or will it do even better. I hope it will do better, but I fear it will do worse.

Simon Jenkins writing for Guardian Opinion (23 Jan. 2017) commented that now the initial reaction to Brexit had calmed down, it has becoming clearer that Project Fear may have been true after all. HSBC and UBS have followed through on their threats to move 2,500 banking jobs from London into Europe. Farmers have said that without a deal on immigration and trade in food, they may lose half their income and many trade-reliant companies are worrying about likely loss of profit. There has been a slowdown in job creation and a rise in inflation already and it is clear that in order for Britain to make new deals, it is going to have to come up with a lot of money. Project Fear seems to have had the right idea as to what the result of Brexit would be; it was just out on the timing. Theresa May has sacrificed the economy for politics with her decision to go for a ‘hard’ Brexit, but it remains to be seen if she can keep to that course when the cries of those with most to lose from a hard Brexit, universities and commodity importers as much as bankers, become ever louder. Just the tip of the iceberg. But if it is just universities, commodity importers and bankers, I can not see her moving much on a hard Brexit. I remember reading that London can expect to see 45,000 to 60,000 jobs move to European capitals, out of about 450,000 people working in London’s financial sector. However the jobs that move are those that generate the smallest margins. I suspect that all this has already been factored-in to the government decision for a “hard Brexit”. 

In The Times Matt Ridley (23 Jan. 2017) said Theresa May’s “modern industrial strategy”, launched today, must avoid the ignominious fate of its predecessors. One by one they failed. Diagnosis of Britain’s problems is not difficult; treatment is harder. How can a government close the productivity gap, improve our low investment levels, heal the north-south divide, overcome our habitual pattern of inventing but not exploiting new ideas, and create an economy that “works for everyone”? As he so rightly notes, diagnosing the problems is easy.

The Daily Mail's Stephen Glover (19 Jan. 2017) said Remoaners were obviously entitled to their views. But they were pushing their luck when they represented those who voted for Britain to leave the EU as a bunch of simple-minded, inebriated, near-lunatic extremists determined to wreck this country. Why can’t they admit that many of us have principles, that we are not all selfish brutes, and that we may have voted as we did because we care about the future of our country, and genuinely believe it will be better off outside the EU? There is no doubt that many who voted Leave do genuinely think that Britain will be better off outside the EU, but it is also true that many who voted Remain thought that the UK would be better off in the EU. However, the slogan of the Leave was £350 million a week for the NHS, and this was an evident lie. The debate Remain-Leave was a disaster, it was just Project Fear versus immigrates stealing jobs and a bit of “we want our money back” thrown in for good measure. So it is not surprising that the “winners” are considered gullible at best and xenophobic at worst.  

The EU is a mindless dinosaur

INFacts (17 March 2017) reminded us why Britain is leaving. Turkey was to join the EU by 2020 and flood (80 million people) the UK schools, hospitals and housing system. The EU is rushing to become a one-size-fits-all super-state. The EU is in economic decline, and can only beat Antarctica in terms of expected future economic growth. Finally, British cancer patients can not get new treatments because of “EU red tape”. All false then, and even more so now. And the cancer drug has been accepted, and trials show that it is not a “wonder drug”. Plus leaving Euratom means Britain will have problems obtaining medical isotopes. Britain will no long participate in cross-border EU trials on pediatric cancer care. And the European Medicines Agency will have to leave London, and a new British drug approval agency will need to be created.

Let us make the foolish presumption for a moment, that the EU is not a mindless dinosaur. One questions is then, why do so many people think it is? Can we turn to the Trump presidency for an insight? An article in The New Yorker (27 March 2017) claimed that Robert Mercer (Guardian profile) exploited America’s populist insurgency, and was one of Trump’s biggest financial packers (he is one of the most effective hedge-fund manager in the US and recluse). Mercer despises the Republican establishment as much as he despises Democrats. The article also mentioned Patrick Caddell, a former Democratic pollster, who “pushed” Trump to call the news media “the enemy of the American people”. This message was promoted also by Breitbart News, a pro-Trump alt-right platform (with an anti-Semitic and white-supremacist bias), previously run by Stephen Bannon, Trumps top strategist (Mercer is a stakeholder in Brietbart). Since 2010 the US Supreme Court essentially removed almost all limits on how much money corporations and non-profit groups can spend on federal elections, and how much individuals can give to political-action committees. Today, in the US the power is in the hands of a small group of rich mega-donors. Mercer is known to have given $22.5 million to Republican candidates (others gave as much to the Democrats). Mercer was (still is) a specialist in computational linguistics, a valuable skill concerning the ways to extract patterns fro huge data sets.  

It would appear that Mercer thinks that the US should have kept the oil in Iraq, that the atomic bombs dropped on Japan has made them healthier, that the problem of racism in the US is exaggerated, and that concerns over climate change were overblown. Sounds familiar. Mercer has contempt for any form of social security net, and wants the US government to be shrunk to the size of a pinhead. Mercer appears to support the Objectivism ideas of Ayn Rand. You are valuable if you make money, if yon don’t then you have negative value. A cat will then have more value because it give pleasure to people. If you earn more than someone else, then you are more valuable. Governments should not take money from people, because it makes them weaker. Mercer appears to have no stake in society. In one way Mercer wants the US government to fail, and maybe also Trump.

Mercer spent money on the campaign, and on long-term ideology through Brietbart News. His family foundation propagated attacks on Hillary Clinton and gave $24.5 million in 2015 to ultra-conservative organisations. Mercer helped fund Brietbart News in tracking of negative stories about Clinton. Mercer also invested in Cambridge Analytica, a firm that mines online data to reach and influence potential voters (they also worked on Brexit). Mercer has been funding Steve Bannon in one way or another since 2012. In fact, Mercer has been funding the Government Accountability Institute, founded by Bannon. This institute digs up dirt on politicians, and this is now been called “weaponising” information. It attacked Clinton, undermined Jeb Bush, and detected the mounting anger towards wealthy élites (who corrupt government) that was exploited by Trump. Initially Mercer supported Ted Cruz, but then turned to Trump (the “not a deep-dive thinker”). Later the Trump campaign would be controlled by three people funded by Mercer, Bannon, Conwa, and Bissie (the so-called “kooky right”). Like it or not, this is the future of politics. You can see it in Brexit, and it will arrive in Europe as well. As they say, never underestimate the stupidity of voters.

Tim Harford is an article “The Problem with Facts” (17 March 2017) looked at cancer and smoking. Despite tobacco being addictive and deadly the industry had avoided regulation. Their tactics are copied by others. They produced ignorance. They disputed facts. They questioned unquestionable sources. Facts do not win arguments, opinions win arguments. Trump and Brexit are products of the golden age of ignorance. In Brexit the Leave used a transparent untruth (£350 million per week to the EU), Trump did even better. “Post-truth” appeared in the dictionaries. Full Fact and PolitiFact, along with a crackdown of “fake news”, can not stop questionable headlines appearing. The reality is that the tobacco industry as fought and won against facts. Key elements. Don’t engage, but promise to study the situation using the “best” people. Then complicate the question and sow doubt. Then undermine serious research and expertise. Just say its all in the statistics and real-life studies are irrelevant. Finally just say everything is old news. One tobacco manufacturer said that “doubt is our product”. Doubt is the best tool to fight facts. Controversy keeps the topic alive, and facts can’t beat doubt. You can not fight lies with facts. Simple untruths are better than complicated facts. Untruths are accepted as explanations, when no alternative is available. Even telling people something is untrue reinforces their belief in the untruth. False claims can be more effective than true claims (£350 million was more effective than £240 million). The reality was that the false claim was more convincing than the truth.

Also facts are boring, even tedious. Only about 5% of the population read the facts, the other 95% don’t bother. Make the facts boring, and you win. Study and talk about other things that are more interesting. The more you do this, the more the original topic (tobacco, £350 million, Trump’s tax returns) becomes boring. Trivialise the topic and it will disappear from the news.

Facts can be threatening, and people don’t like that. In some cases people accept the facts, but do not act according to them. Turks will invade Britain, when in fact Turkish entry in to the EU was not likely in the foreseeable future. People accepted this, but shifted their attention to immigration, loss of control, Syria, terrorism, etc. The lie was disproved, but lingered on in a different form.

People do not reason, they engage in “motivated reasoning”. Smoking addicts wanted to believe that it was a benign habit. People selectively read what they want to read, they selectively amplify what they want to hear, and reinterpret whenever they can. More facts helps in that it gives more scope for “motivational reasoning”. As they say “a learned fool is more foolish than an ignorant one”. Climate chance facts have actually led to increased polarisation between different groups.

What is the answer? Motivational reasoning beats scientific knowledge and facts, but can be negated by curiosity. Getting people to be curious makes them study issues for themselves, and brings them together. Fostering curiosity is about surprise, understanding, and selling insight. Facts can’t sell themselves, they need people who can champion them, and make them fascinating for a wide audience. Lots of common sense, but we can see that common sense is often missing in todays major societal debates.

The Daily Telegraph's Allister Haeth (19 Jan. 2017) said that while the tectonic plates were shifting, the EU had nothing useful to say. It cannot think, it cannot act and it cannot change. It is suffering from a debilitating form of cognitive dissonance; it is fixated on the need for unity and is, as ever, keen to press on with a few more integrationist measures. It is as though the dinosaurs saw the meteorites coming but simply plodded on, munching away as if all was fine. The EU is not a mindless dinosaur, but I really would like them to be seen to start to change. I think the problem is to understand where it should go now. Move more to a federalist model, turn back (for the moment) to a tighter trading union, reinforce the political power of the EU and outsource the technocratic “details”, strengthen the European Parliament or strengthen the power of the Council, return some powers to the Member States, or perhaps focus on a new challenge (common enemy) such the threat of Russia and the failings of NATO. The real problem is financial (and there is also the immigration problem as well). Massive amounts of money have being spent in “saving” the EU economy and the € (and the fat-cat banks), but the average man-in-the-street did not see any improvement in his daily life. They will increasingly vote for change, any change. That is the problem.


It would appear that EU citizens can (maybe, should) apply for documents to provide their residency in Britain. The form is a user-friendly 85 pages long (plus 18 pages of guidance notes)! Plus adding the £65 (plus additional fees) to send in with the application. Many of the rules appear not to fully explained in the associated documentation.

In a report (11 May 2017) it was stated that overseas technology workers accepting jobs in Britain has dropped by 50% since June 2016. Offers sent to non-British candidates also dropped by 25% over the same period. Companies hesitate, and candidates hesitate. Problems are also occurring in the hospitality, agriculture, construction and car industries. In hospitality only 1 in 50 candidates are British nationals, yet there are few candidatures from Europe.

The Guardian reported (10 May 2017) that a study showed that 79 of 99 front page stores were published by leave-supporting outlets (e.g. Mail, Sun and Express), and almost all were on the negative consequences of migration. Articles on the economy were the most frequent, followed by immigration and health care. 

News.Sky reported (20 April 2017) that May confirmed that she will (wants) to cut net migration to 10,000’s. However it looks like she will have to accept to take foreign students out of immigration totals, by fudging the figures.

In an InFacts article (13 April 2017) it was noted that Brexiters were happy to play on fears that most EU workers were unskilled and that many were a drain on the welfare system. New labour market statistics from the Office for National Statistics figures reveal EU workers made up 7% of the 30 million British workforce in 2016, a total of 2.2 million EU workers. Separate statistics show that EU citizens make up roughly 5% of the total population. EU workers are particularly predominant in some industries (manufacturing, construction, services, transport). In sheer numerical terms, the retail, hotel and restaurant sector employs by far the most: over half a million. Which countries people come from also affects where they work. Finance and business has the highest proportion of nationals from “old” EU countries (EU14). Nationals from the Eastern European states which joined the EU in 2004 (EU8) represent approximately 8% of workers in manufacturing. Meanwhile, the highest proportion of Romanians and Bulgarians (EU2) work in construction.

Although the proportion of Eastern European workers in low-skilled work is high – and their hourly wage is a quarter less than the national average – no group of EU workers is found predominantly in what the ONS classes as low skilled work. Most are in middle-skilled jobs, which includes everything from managers and electricians to admin staff and hairdressers. Many from the EU14 countries are in high-skilled jobs, such as chief executives, teachers or engineers. Much depends upon the definition of “low skilled”, and UKIP set the bar at anyone earning less than £35,000 – yet only about a quarter of UK workers earn more than this.

The ONS data also disproves the idea that lots of EU workers don’t work and instead drain the UK welfare system. Over half of Eastern European workers work over 40 hours a week, compared to a third of UK nationals. What’s more, a higher proportion of working-age EU nationals are in employment than UK citizens.

The difference is not that there is a higher proportion of unemployed UK citizens, but that more UK workers are inactive for other reasons – for example studying, retirement, illness, disability or looking after family. Separate statistics show that UK citizens are also almost four times more likely to be aged 65 or over.

What’s more, the age demographics of UK-born versus EU workers suggests it will actually be Brits who are putting pressure on services such as the NHS and social care in the years to come. Of the UK-born workforce, 17% are between 55 and 64 years old, compared to 6% of EU workers in the UK. On the other end of the scale, 65% of EU workers are of the “millennial” generation between 20 and 39, compared to only 42% of British workers. It will be the taxes of these younger workers paying for the pensions and care of the older generation as they retire in the next decade or so. Always the same, useful information appears after the event.

The Daily Telegraph's Philip Johnston (12 April 2017) asked whether we are prepared to see a lot of the things on which we have come to rely over the past 20 years – from decent coffee and plentiful fruit pickers to cheap carpenters and care home nurses – scaled back substantially? If the Government adopts a demand-led approach, employers will ask for permission to bring in just as many workers from overseas as they do now.

In and InFacts article (10 April 2017) there was a suggestion that May will have to accept free movement as part of a transitional agreement, or “implementation phase” as she calls it. And that might even mean accepting full free movement. It is not even sure if international students will be counted in these figures.

The FT's Michael Skapinker (15 March 2017) said that with Brexit negotiations expected to start soon, Theresa May will strive to achieve what she believes most Leave voters want: a significant reduction in immigration. It will be difficult. Incomers from outside the EU are already subject to strict entry criteria, yet the most recent statistics show that a net 164,000 non-EU immigrants came to the UK in the year to September 2016 — nearly as many as the 165,000 that came from the EU. If border checks have left non-EU immigration at this level, why would imposing post-Brexit controls on EU citizens bring their numbers down? Good question? The answer looks to be linked to the fact that Britain has consistently failed in the past to reduce immigration.

On the 28 Feb. 2017 the Sun newspaper did it again. It loves to mix up EU citizens coming to Britain to work with stores about the European migrant crisis. It added a photo of hooded migrants walking towards the EuroTunnel (a stock photo of the Calais migrant crisis) to a story on EU national with the jobs in the UK and the new 5-year work permit. The Sun refused to issue a correction.

In The Times Oliver Kamm (23 Feb. 2017) noted that David Davis, the Brexit secretary, admitted this week that British workers would not be able to fill the jobs done by EU migrants for “years and years”, and hence that Britain would continue to admit low-skilled migrant workers in hospitality, agriculture and social care. Voluble Brexiteers like Arron Banks, the UKIP donor, were irate. And indeed Mr Davis and his colleagues deserved much blame — not for reneging on the pure vision of taking back control of Britain’s borders but for touting such destructive nonsense in the first place.

On the 23 Feb. 2017 we heard that net migration “fell” to 273,000 in 2016. Some would argue that this points to fewer people coming to Britain, and more EU citizens quitting Britain. This will impact negatively on the economy and on vital public services such as the NHS and elderly care (e.g. 12,000 EU-trained doctors are likely to leave the NHS). The Brexit government has confirmed that the immigration of low-skilled Eastern European workers would continue for a long time yet. David Davis said it would take a long time before “we” get British citizens to do those jobs. So the idea must be to get more UK citizens to be low-skilled! Hard Brexiters did not like this. Some just want to replace agricultural workers with robots. Naturally the NHS said that they “valued immensely EU-trained doctors (even if they also want to give domestically trained doctors preference), but who believes that?

It was also reported (22 Feb. 2017) that only 101 EU nurses and midwives registered to work in Britain in Dec. 2016, compared to 1,300 in July 2016.

This article appeared from Stewart Fleming (21 Feb. 2017).  One of the mysteries of the Brexit debate ahead of the referendum was why David Cameron and the then home secretary Theresa May failed to point out that the British government has, under EU law, been in a position to “take control” of EU immigration in the same way as other member states have done. A recent analysis by the Centre for European Reform points out: “No EU citizen has a fundamental, unlimited right to move freely across the EU. To be lawfully resident in another (EU) member state, EU citizens need to be working, studying or able to prove they are self-sufficient. Otherwise they can be kicked out.”

The CER also points out that “the European Court of Justice has confirmed the right of member-states to refuse supplementary pensions, unemployment benefits and child credits to non-working EU migrants.” As a result “the EU is moving towards less, not more, access to benefits for EU migrants, precisely at the time Britain is leaving.”

The author rightly noted that in moving to Brussels they had to show documentation to prove that they had an adequate income and so to demonstrate that they would not start trying to claim on the Belgian social security system. They had to get Belgian identity cards. They also had to register with the local commune. A week after renting an apartment they had a visit from the local police who were checking that we were actually living there. Before being allowed to make use of the (excellent) Belgian health service, they also had to register with the state-sponsored health insurance scheme. When they used it they were required to pay, up front, a significant, income-based fee which was refunded in full only to those deemed too poor to pay. In order to get treatment they had to carry and present at the doctor’s, or at a hospital, a social security card, not just a national identity card. The card had a computer chip which showed what contributions they had made and therefore what payments they had to make.

The UK left itself open to unmonitored immigration, legal and illegal, from all over the world, not just the EU. As the Observer reported last Sunday, the government has not collected the information, nor put in place the systems, which will be needed to decide which EU citizens now living in the UK will have the right to remain as part of any agreement reached in the Brexit negotiations.

The British themselves, governments of both parties, long ago decided not to “take control” of UK borders as EU law allowed them to. They did so in part because they did not want to face up to the political challenge of securing support for the introduction of a national identity card system or to spend the money setting up monitoring systems. So, in effect, the Brexit campaigners want to take us out of the EU in order to accomplish an objective much of which we could have achieved within it.

The Guardian noted (10 Feb. 2017) that predictions are than immigration will fall by less than 15%, e.g. it might have fallen from 335,000 for the year ending June 2016, to 285,000. In fact all free trade agreements include liberalisation of migration rules (preferred access) between the two countries. Presently 22% of EU migrants are professions, 22% skilled, and 56% unskilled. The British government wants to keep the professionals, and has promised to keep open 80,000 places for seasonal workers. So, at best, immigration is likely to drop by about 50,000 annually. And it was this drop in immigration that will oblige Britain to go for a “hard” Brexit.

In this article from Politico (29 Jan. 2017) the author notes that more than a third of the 10,300 non-British European doctors work in surgery and anesthetics, and in some areas, the NHS is dependent on a small number of European specialists, including for the diagnosis of brain disease, allergies and nervous disorders such as epilepsy. In London around 10% of all NHS doctors are non-British EU nationals, but in the north if England it is between 1.7% and 3.2%. In Central and East London 11% of NHS staff, including doctors, nurses, ambulance workers and technicians, are non-British. On top of that EU doctors working in England’s NHS tend to be more experienced specialists. Pediatric cardiology (16%), pediatric and perinatal diagnostics, cardio-thoracic surgery (25%) and neurosurgery (18%) would lose between 18% and 33% of their doctors if all non-British doctors were forced to leave the UK. But the problem is in fact even bigger, since there are nearly 60,000 European NHS workers in England (out of 1.2 million total), as well as the 160,000 working in social care (out of 1.6 million).

In a Guardian article (23 Jan. 2017) it was stated that immigration was the least important issue (out of 22) for voters aged 18 to 34. Their main concerns were jobs, human rights, and well-funded public services.

In The Times Jenni Russell (19 Jan. 2017) noted that it was the seductive promise to control immigration that spun us out of the single market. The referendum would never have been won if Leavers had campaigned solely on vague concepts of sovereignty or the role of the European Court of Justice. Now Theresa May has confirmed that we are about to rip up our relationship with the EU, but in return we’ll achieve what Britain voted for: we’ll get back control on immigration. Well, marvellous. It’s what the voters wanted and what they’re going to get. Except that the evidence suggests the opposite. Not sure what this evidence is, but what is true is that immigrants are an essential part of the British economy, and a vital part of many public services. I think that considering immigrants in Britain, and British citizens living in the EU, as bargaining chips is morally repulsive.

The EU has ruled that people can reside freely in another country for up to 3 months, but after that they must register and demonstrate that they can support themselves financially and that they have adequate healthcare coverage (Art. 21 of the Treaty on the Functioning of the EU). Oddly enough Britain opted out of these requirements.

To some observers the only message in May’s speech was that “immigration controls will be imposed at any cost” (Economist 21 Jan. 2017). The elusive goal is still less than 100,000 net immigration annually (it was 335,000 in 2016). And that goal alone is sufficient to pull Britain out of the European single market and the customs union. However only about 10-15% of the UK population are truly opposed to any form of immigration, whereas 84% of the population favoured allowing European residents to stay after Brexit. Immigration was really a symbol to define a society that was no longer working properly, i.e. job shortages, overcrowding, pressure on the state, welfare strains and housing shortages were the top problems. Britons guessed that 31% of the population are foreign born, when the true figure is 13%. So cutting immigration will reduce tax receipts, putting government funded services under increased strain, and it will not solve any of the perceived problems. The article in the Economist said exactly what I think, and they went on to suggest politicians ditch the constipated talk of “concerns about immigration” and make the honest case for the current, controlled levels. In addition they needed to widely distribute accurate facts about the numbers of immigrants, and they needed to channel government resources to places experiencing fast population change. They needed to accelerate housebuilding, have a proper debate about health-care funding, make the welfare system more contributory, put more police officers on the beat, and make a period of national service compulsory for youngsters. The Economist argued that these were “low-hanging fruit”. I agree.

Leavers must be held responsible

The Guardian (21 Feb. 2017) clearly shows that a life outside the European Union will neither be painless nor without cost for Britain. This country is giving up friction-free access to the world’s largest market and the free flow of its goods across European borders. It will sacrifice ready access to large-scale inflows of foreign direct investment and gone will be free movement of skilled and unskilled foreign labour. The timidity of MP’s is to be regretted. They are not delegates but representatives who could and should have made a better effort to hold ministers to account. The legislation sailed through the Commons partly because of a toxic populist tendency to level hysterical accusations of betrayal and treason against anyone who dissents from a wish to ram through Brexit in an opaque and unaccountable manner. The “people” voted to leave the EU and the government has a view of what that means today: emphasising control of immigration over free trade.

The Independent's Andrew Grice (19 Jan. 2017) said those who called for a soft Brexit were denounced as “Bitter Remoaners” who wanted to obstruct the “will of the people” as expressed in the referendum. May joined in by attacking people who wanted to “subvert democracy”. At Prime Minister’s Questions on Wednesday, she made clear that Parliamentary scrutiny of her Brexit strategy will be strictly limited. There will be no White Paper, and clarity will be provided “at appropriate times” – in other words, whenever she chooses to. So much for Brexit restoring the sovereignty of the British Parliament. We see here the “classical” stance of the Leavers. However the majority did vote to Leave, and I think that those who voted Leave must be held to account (and in particular their leaders). If it turns out that Britain is better off outside the EU, then they should be applauded, if not they should suffer the consequences of their actions. Hopefully in the next general elections we will see a shift in politics and move to a less elitist parliament (but hopefully not populist). However I think it may already be too late to rethink the position of Britain in the EU. I think there are an increasing number of people working in the European Institutions that will be happy to see the back of Britain.

The Supreme Court decision changed everything, and now a White Paper is promised, and even a parliamentary vote on the final Britain-EU deal. A second referendum is even possible. My impression, for what it is worth, is that the “hate-press” has shifted its target a bit, now talking down the EU and suggesting that (in the words of Trump) it is just a tool for German domination and it will not be around for much longer.

The Economy

In an interesting report (11 May 3017) on the EU Common Fisheries Policy it is seen as a “resource grabber” and an ideal target for “take back control”. But much of the waters are in fact Scottish! However the fact is that the British fleets actually fish more than is needed for their domestic fish consumption (20.8 kg/person/year as compared to an EU average of 22.5 kg/person/year). But in the future they will not have access to the EU market to sell any excess. Or will the British government deal trade access to British waters for EU vessels in exchange for access to the worlds largest fish and seafood market?

Politico (10 May 2017) reported on the British Football after Brexit. Will Brexit mean the end of the international player market for Britain? Already the drop in the value of sterling means players cost more. Will players be exempt from post-Brexit labour restrictions? Not likely! Same things goes for coaching as for playing. In 2017 there were 647 players in the Premier League, more than half are non-British. The 208 players from the EU would need work permits. But there is a problem. According to the Football Association non-EU foreign players must have recently played for their national teams (30% of the time for top-10 national teams, and 75% of the time for second-tier national teams). Most EU players in the Premier League would not qualify.

On the up side this would stop the “Carlos Kickaballs” from coming to Britain and would mean that young British players would get more of a chance to play, but it has also put a premium on their heads. 

The FT's Sarah O'Connor (3 May 2017) cam out with one statistic: the average worker in Britain will earn no more in 2021 than he or she did in 2008. The workforce is living through the worst period for pay in more than 70 years and forecasts say the end is barely in sight. Pay fell almost 10% in real terms after the financial crisis, but over the past few years it had started to recover. But now that sterling has dropped post-referendum, inflation has returned and real wage growth has been crushed. The vote for Brexit was not the cause of Britain’s pay problem, it was the consequence.

Two tweets (14 April 2017) from the Department for Exiting the European Union (DExEU) seem designed to showed how bright our trading future will be outside EU. They actually show how bright it is inside the EU. The first said: “We have a long and successful history as a trading nation. We’ve seen steady growth in trade as a percentage of GDP in the post-war period”. The snag is that the share of trade barely rose until 1973, when Britain joined the European Economic Community (now the EU). After that, as DExEU’s chart shows, trade really motored ahead. In other words, the EU has made the UK a more open economy. The second tweet says: “The EU remains an important trading partner for the UK, but the importance of emerging markets has also been increasing over time”. However, of the 20 fastest growing export destinations, five (Luxembourg, Croatia, Estonia, Malta and Bulgaria) are EU member states. One (Liechtenstein) is in the single market. Serbia and Montenegro does not exist anymore, but its successors have signed association agreements with the EU. So has Albania. Chile, Morocco, South Korea, Mexico, Switzerland and Colombia all have trade agreements with the EU. Talks with Thailand were at an advanced stage, but will not continue until it elects a democratic government. Of the remaining five, Brazil and Uruguay are part of a South American free trade bloc which is arranging a free trade area with the EU; talks between the EU and China on liberalising investment are underway; and negotiations with India are ongoing. That leaves Russia, which is on the West’s collective naughty steppes. Unless DExEU is suggesting we woo Vladimir Putin, its tweets show that the EU has done remarkably well in favouring British trade interests.

The Independent ran an article (22 April 2017) on the “Economists for Brexit” group, and  their that if Britain left the EU without a trade deal and unilaterally dropped all tariff barriers on imports the country’s GDP could be boosted by 4 per cent relative to otherwise. This contradicted everyone else that said that Britain would be worse off due to leaving the EU.

However the Director of the UK Trade Policy Observatory pointed out that the modelling assumptions that produced the Economists for Brexit headline figure were suspect. The small print of the modelling reveals the assumption that "general international pressure" over the next decade will compel the EU to reduce its own effective tariffs on imports from 20% to 10% - and that the authors ignore the impact of differences in EU safety and quality standards for goods on producer prices. The model also assumes the EU will waive its standards on goods imports from the UK post-Brexit, which implies a deep trade deal,  whereas Economists for Brexit have argued that Britain does not need such a deal. It was even suggested now that trying to gaining 4% [of GDP] requires more integration with Europe than the UK has at present!

The analysis now states "unless the UK and EU sign an FTA [Free Trade Agreement] that explicitly removes all EU non-tariff barriers to exports from the UK, WTO rules prevent the EU from eliminating barriers on the UK alone. If achieved, eliminating all tariffs and non-tariff barriers between the UK and the EU would imply deeper integration than the EU Customs Union and Single Market currently deliver, but coupled with a race to the bottom on standards!"

The assumptions of the Economists for Brexit group – now rebranded as Economists for Free Trade - were previously criticised as grossly unrealistic on other grounds, including ignoring the fact that countries tend to do more trade with countries that are geographically closer. Pre-referendum work by the LSE suggested that if the UK crashed out of the EU without a trade deal GDP could be 9.5% lower by 2030. Oxford Economics, the National Institute of Economic and Social Research and PwC estimated relative losses of 2.7%, 3.2% and 3.5% respectively.

The independent journalist Owen Jones (13 April 2017) asked: "Is it any wonder that Britain bubbles away with frustration? Not since Napoleon ruled France has the country suffered such a protracted squeeze in wages. Of the 35 major industrialised OECD countries, only Greece has endured such a steep fall. British workers are still, on average, poorer than they were when the banks plunged the global economy into chaos, and the respite of the last two years is juddering to an end. In February 2017 real wages fell once again. And no, this crisis didn’t start under the Tories: in the last half of New Labour’s reign, wages began to stagnate or fall for the bottom half of Britain’s underpaid workforce. Over a decade of decline has left Britain simmering with anger".

In a recent news report (12 April 2017) it was noted that Cambridge University received more EU grants than any other university in Europe. What happens next?

NewsSky (12 April 2017) ran a good story about Britains textile trade. Textiles still represents about 3% of manufacturing, and generates £4.5 billion in exports annually. It is a sector that uses up to 35% of EU migrants, from Portugal, Italy and Romania, where the skills can still be found. Those skills are no longer found in the British technical education system. 

The FT's Martin Wolf (7 April 2017) noted that the UK’s recent productivity performance has been calamitous, even if the productivity slowdown has been a widespread phenomenon among high-income countries. But Britain’s slowdown is remarkably bad even by these standards. If recent performance continued, the British economy would no longer generate rising real incomes per head.

Reuters (15 March 2017) noted that Britain’s construction industry could lose nearly 200,000 workers from the EU countries.

In the Independent (14 March 2017) they noted that post-Brexit (after 24 June 2016), British companies were targets of inbound M&A’s totaling $111 billion. But British companies bid, outbound M&A’s, for $121.5 billion (even if this includes British American Tobacco buying Reynolds American for $60.2 billion and Reckitt Benckiser buying Mead Johnson for $17.8 billion). The £ might make British companies cheaper, but British companies are buying abroad as a security against uncertainty in Britain. With the weak £ it might cost more to buy abroad, but it is a fast way to create oversees earnings. Sounds sensible, and I wonder when we will start to hear about companies moving their headquarters out of the Britain?

The economists that called themselves “Economists for Brexit” have re-named themselves “Economists for Free Trade”, which I suppose is the real issue now. What they want is “zero barrier” trade in both goods and services, that Britain leaves the EU single market, and that Britain “carefully controls” unskilled immigration. Does this mean that they are against negotiating with countries that are protectionist, i.e. China, India, Brazil, ...? And is not the EU single market a free trade market? One subset of this argument is that Britain will not be subject to EU regulations, but must will depend upon what the new regulatory regime will look like. Will they actually turn out to be more costly than the EU ones? The control on unskilled immigration smacks of an interventionist labour market policy, is that what people want?

There is always a silver lining, this time it is for the different EU financial capitals (Reuters 8 March 2017). AIG will put its European hub in Luxembourg. Lloyds is looking to reinforce its branch in Berlin. M&G, of the Prudential, is setting up a company in Luxembourg. Hiscox is looking a Luxembourg or Malta. Lloyd’s of London is looking a Dublin or Luxembourg. 

Rob Merrick in the Independent (25 Feb. 2017) wrote that London is struggling to attract the world’s best chefs because of Brexit. Ufi Ibrahim, Chief executive of the British Hospitality Association (BHA) blamed the “uncertainty” surrounding the future rights of EU citizens in the UK, as well as a belief that people from the rest of Europe are now “unwelcome and unwanted”.

In addition, Britain’s national tourism agency has raised the alarm over a separate threat posed by Brexit, highlighting tougher visa rules and the possible loss of the “open skies” scheme. Since 1994, the scheme has allowed any EU airline to fly between any two points in Europe, spurring the rise of budget airlines and slashing airfares.

Daniel Boffrey in the Guardian (25 Feb. 2017) wrote that Britain’s £6.6 billion financial technology (fin-tech) sector (e-lending, money transfers and banking services) is looking to move to Europe. The problem is the uncertainty about whether UK-based companies would still be able to trade in the rest of the EU under current “passport” rules which are granted to all EU Member States. One CEO of a small fin-tech company was quoted as saying “Ministers are in complete denial about the scale of the exodus. Independent estimates say a hard Brexit will cost the UK up to £200 billion over the next 15 years. Germany has overtaken us as the fastest growing economy in Europe, and the EU is now out-performing the US. Yet Theresa May wants to surgically remove us from the European Single Market. And to think that the Conservatives used to be the party of business”.

The Independent's Mark Steel (24 Feb. 2017) revealed that two decades ago it took the average family three years to save enough for a deposit for a house; now it takes 20 years. So it’s now possible that during the time it takes to save up, someone in the family will be born, grow up and then move out before they’ve even moved in. Each year this gets worse, so we’ll soon be at the point where the family that lives in the house is an entirely different family from the one that started saving for it.

It must be said that since Brexit, British investors still appear confident, employment has hit a new high (16 Feb. 2017 with unemployment at 4.8%), and the FTSE is still adding value to Britain’s largest businesses (up 26% since June 2016).  

Whilst Britain thinks it can cut a Britain-Indian trade deal, the Indian tariff on scotch whisky (India is the world’s largest market) and the Bristish limit on visas, might block things. Britain is only the 18th trading partner with India (and with a € 2.6 billion trade deficit), whilst Germany is 6th (with a trade surplus), so a trade deal EU-India looks a better bet. Stuff Britain!

Food prices are rising, and/or prices stay the same and sizes shrink. Both are blamed on the EU. But the reality is that the pound is devalued, and imports cost more, and retailers are masking those increased to avoid losing customers to budget rivals. The reality is that supply and demand is the same, but imports cost more, so prices are rising. Simple. Some are even blaming the metric system for shrinking sizes and keeping prices high! The reality was that food prices fell consistently over the last 4 years, but started to rise after Brexit.

In fact it was reported (19 Feb. 2017) that prices had risen by more than 5% across essential food categories in all British leading supermarkets. On the same day Microsoft increased its prices in Britain by 15% (Apple had already done this with an increase of 20%). They said it was because Brexit had caused a 14% drop in the value of the £.

A recent report (21 Feb. 2017) of The House of Commons’ Environmental Audit Committee (EAC) has recognised that the regulation of chemicals will be problematical if the UK leaves the EU and has started an inquiry. The evidence already submitted by industry has thrown up major concerns. If Britain was staying in the single market it could, like Norway, continue as  part of the existing EU regulatory regime established by an EU regulation called REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals). This is designed to protect human health and the environment by identifying those chemicals that are dangerous, while also ensuring the integrity of the single market. Only chemical substances, whether on their own, in preparations or in articles, that are registered with the European Chemicals Agency (ECHA) in Helsinki can be sold in the EU, sometimes subject to conditions and restrictions set by ECHA.

The chemicals industry is Britain’s second largest manufacturing exporter to the EU, only narrowly exceeded by motor vehicles (see Chart 8.3 of the Brexit White Paper). If pharmaceuticals are included it is by far the biggest.

Whereas pharmaceuticals have long been regulated by national authorities before the creation of the European Medicines Agency, the regulation of chemicals was developed at EU level before any Member State had established a regime of its own. EU chemicals  legislation  from the 1970s onwards assumed EU-wide collaboration so that member states did not have to establish their own institutions. REACH and ECHA, while not perfect, are widely regarded as the benchmark worldwide for regulating chemicals, and the regime is being copied by many other countries.

In its Brexit White Paper the Government has proposed a Free Trade Agreement with the EU which could take in elements of current single market arrangements, but does not explicitly mention chemicals. Speaking before the White Paper Theresa May said she wanted special arrangements for the motor industry and financial services but has not put the chemical industry in the same category.

REACH will continue to loom large since British manufacturers exporting to the EU will still have to have their chemicals registered with ECHA. If Britain cannot remain part of REACH it will have to create a new regime of its own. It is out of the question to have no new chemicals legislation since the UK would then become the dumping ground for chemicals banned in the EU.

There are two broad possibilities, though doubtless variants can be devised. The first would be easier and cheaper. Power could be given to some smallish body to create a British register and to replicate all ECHA’s decisions as Switzerland does. Standards in Britan and the EU would not then diverge, but “taking back control of our own laws” would go out of the window.

The second possibility would be to create a completely new British Chemicals Agency with a sufficient number of qualified staff to evaluate chemicals registered in the UK in the same way as is done by ECHA. EU exporters to Britain would have to go through two registration processes as would British exporters to the EU.

ECHA has a staff of nearly 600 and has assembled a database about the effects of chemicals to which the UK would not necessarily have access. The task is thus daunting, and could result in differing standards in the EU and Britain. Given that the supply chains throughout Europe are so closely intertwined there could be real problems ahead.

The Commons EAC has only begun taking oral evidence, but the bulk of the written evidence from industry points to a preference for staying part of REACH, in other words, moving from being one of the rule-makers to becoming a rule-taker.

A more recent report underlined the fact that REACH is a EU single market mechanism that protected human health and the environment from dangerous chemicals. The question is about abandoning REACH and the need to create an alternative registration and monitoring system. This represents £26 billion in total exports, and 20% of the 126 UK chemical companies are looking to move out of the UK. To access the EU market chemicals must be registered with the European Chemicals Agency (ECHA), and only EU manufacturers or importers can register those chemicals. If the UK asks to stay in REACH, is this not an example of “cherry-picking”. On top if that by May 2018 low-tonnage chemicals must also be registered in REACH, so UK companies will still need to do that, only then to quit the system in 2019. 

The Guardian (20 Feb. 2017) noted that without a EU-Britain trade deal the British could be paying £ 6 billion a year is extra costs (i.e. in the “no-deal is better than a bad deal model”). This would be according to WTO rules on the $240 billion of British good going to the EU each year. The Guardian also mentioned the custom checks that would need to be re-introduced at places like Dover (on the 2.6 million trucks that pass through the port every year).

The FT's Martin Wolf (10 Feb. 2017) said Britain, it is clear, confronts huge challenges. Not only is productivity stagnant, it must also navigate Brexit. This is all bad enough. But the government has also decided to give greater priority to the old than to the young, to pensioners than families with children and to the better off than to the relatively worse off. It is hard to believe these are wise choices for a country that wishes to secure a better future for its people. It is still harder to believe these are moral choices for a country forced to share out losses imposed by a massive financial crisis and weak subsequent growth.

The Independent's Ben Chu (8 Feb. 2017) said that by the end of the Parliament the budgets of departments such as justice, business, culture and the environment will be an astonishing 40% lower than they were in 2010, when the program of cuts began. And even then the pain will not be over. If the budget is to be finally brought into balance during the next Parliament the IFS estimates this will require another £34 billion of austerity. Needless to say, none of this is good news. The welfare cuts will pummel the incomes of some of the most financially vulnerable households in the country, and almost certainly push up inequality in the process.

The Guardian (1 Feb. 2017) said that the European Commission’s Brexit negotiators must strike a “workable” deal with Theresa May’s government to protect the City of London or the economies of the remaining member states will be damaged. The European Parliament’s committee on economic and monetary affairs (Econ), warns that British-based financial services account for 40% of Europe’s assets under management and 60% of its capital markets business. And British-based banks provide more than £1.1trillion of loans to the other EU member states. So a badly designed final deal would damage both Britain and the other 27 EU Member States.