Single Market Access Needed

Hard or Soft Brexit or Remain ?

On 31st July 2016, this blog reported that Bernard Jenkins MP, the Chairman of the  Public Administration and Constitutional Affairs Select Committee, had written  in The Financial Times: “There is no such thing as hard or soft Brexit – Britain should look to leave the EU as swiftly and simply as possible”.

It is reassuring to note that Dominic Grieve, QC,  the Conservative MP for Beaconsfield and HM  Attorney-General (2010 to 2014) thinks otherwise.  This is some of what the former law officer wrote in the Times Legal Brief on 17 June 2016.

Brexiteers are proposing an illegal EU exit

 Those supporting a vote to leave the EU tell us they envisage it as a process that will be carried out outside the rules laid down in article 50 of the Lisbon Treaty. Instead of invoking it, we should inform our European partners of our desire to negotiate a different relationship. In the meantime parliament would be made to legislate rapidly to amend those parts of the EU treaties applied through the European Communities Act, which the Brexiteers dislike. Examples given include aspects of freedom of movement, data protection, VAT and the jurisdiction of the European Court of Justice. Eventually, they claim, a relationship will emerge and the UK could move seamlessly forward outside of the EU having avoided the risks of a formalised negotiation process.

But this suggested route is unlawful in international law and likely to do our country great harm…..

Implementing this idea would be controversial domestically. At present, the government’s own code of conduct means that civil servants would properly refuse to help draft legislation in breach of international law.  No attorney-general could sanction it.   While parliament would feel bound to implement a referendum decision to leave, it is another thing entirely to ask it to violate international law. There may well be no majority to do it in either the Commons or the Lords.

What this issue most tellingly illustrates is the political mire into which the Brexiteers are driving themselves.  As advocates of profound change, the duty is on them to show the national interest in leaving.   That requires a rigorous cost-benefit analysis. But they cannot do this. Instead we are getting ever wilder blueprints that should be rejected for the folly and self-deception they are.

Thus far we have had nothing from the Brexiteers on the economic consequences of leaving the EU.  Lots of pie in the sky, lots of gas about possible trade deals with other countries.  Lots of fear mongering about the impact of migration on the UK.

Cost of Brexit

The London School of Economics – Centre for Economic Performance has published a short article which is worth a read: “The question is not whether Brexit will cost the UK in economic terms but how much”.  The article concludes that Brexit will reduce  household incomes.  On an optimistic basis the reduction will be £850 pa but on a pessimistic basis the reduction will be £1,700 pa.

The Guardian has an important article on the impact of Brexit for British Agriculture: “Brexit could herald end to British fruit and veg sales, producers warn”.

The report points out that “About 90% of British fruit, vegetables and salads are picked, graded and packed by 60,000 to 70,000 workers from overseas, mostly from eastern Europe. Many of these work in areas which voted very strongly to leave the EU: the largely agricultural borough of Boston in Lincolnshire had the highest vote for leaving the EU in the whole country, at 75%.”  The employers there say that if they cannot have the workers in – then production will have to move overseas.

 On 2nd August 2016 the Financial Times published this:  “BoE should throw kitchen sink at Brexit economy – BAML” in which the US Bank’s economists called for:-

a three pronged attack from bank governor Mark Carney: a 25 basis point interest rate cut, a £50bn resumption in quantitative easing (including corporate bonds), and further credit easing measures.”

On 3rd August 2016 the Guardian reported: “UK ‘has 50% chance of slipping into recession within 18 months”.  The Financial Times had this:   “UK services industry contracted sharply after Brexit vote“.

Unsurprisingly therefore,  the Bank of England Monetary Policy Committee met and its decisions were announced on  4th August 2016, to wit: “a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion, taking the total stock of these asset purchases to £435 billion.”   The last three elements were to be financed by the issuance of central bank reserves (i.e. by printing money electronically).  The Monetary Policy Committee Summary was published (PDF).

The Financial Times opined:-

The Bank of England has delivered – now for a fiscal response – Monetary stimulus can only cushion the adjustment to a new reality” which concludes with this opinion:-

“More to the point, while the BoE can offset a shock to confidence and smooth the UK’s adjustment to a “new reality”, as Mr Carney terms it, there is little it can do to alter that reality.  Brexit represents a huge supply-side shock that will suppress investment for years. The UK’s long-term prosperity will depend on the evolution of its trading relations and on its ability to improve on dismal productivity. So while the BoE’s burst of monetary stimulus may have bought politicians time, the onus is now on government to deliver a well-targeted fiscal boost, while it decides on the form that Brexit should take and begins negotiations.” 

So, in effect, it is now up to the Government to deliver.  An essential part of the solution will be proposals for continued access to the European single market for goods and services.

 

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