Train Crash Brexit – No Thanks

Christmas –  New Year 2016-2017

The year 2016 is coming to an end.  The House of Commons will recess for the Christmas Break on Tuesday 20th December 2016 and the House of Lords  on the following day.  Both Houses return to their labours on 9th January 2017.  we have had the last Andrew Marr show and Sunday Politics of 2016 and over the Christmas-New Year holiday we can expect the usual punditry about events in 2016 and expectations for 2017.

This was the year of Brexit – See this in the Financial Times: “Year in a Word: Brexit – The shock result of the British vote becomes an international byword for rebellion“.

2016 – The Year of  Brexit – Cameron’s Misjudgment

CameronBrexitThere can be no doubt that the major event of 2016 was David Cameron’s attempt to see off UKIP and the Brexit lunatic faction within the Conservative Party  by the device of holding a referendum on the UK’s continued membership in the European Union.    Margaret Thatcher had in 1975 described  the holding of a referendum as  “a device of dictators and demagogues”, quoting Clement Attlee, the post-war Labour prime minister.

The Financial Times has this: “How David Cameron lost his battle for Britain – The key moments in the battle that cut the UK adrift from its European moorings” and it is worth noting this:-

Whatever he says now, Mr Cameron’s political epitaph is already written. Peter Mandelson, former British trade minister and European commissioner, said: “History will remember David Cameron simply as the prime minister who took us out of the EU. I don’t think there will be anything else. A man who took this tactical risk, which then turned into a strategic blunder.” His former colleagues in Britain and the EU are left to pick up the pieces. One British minister, reflecting on Mr Cameron’s legacy and the country after the vote to leave the EU, says: “Our starting position should be: ‘Oh shit’.

But there have been many European referenda which have not provided the result that the politicians were hoping for.  The Economist table below makes that clear:-

20151017_src765

As the Economist stated in its 2015 article about the above list:  “How referendums can go wrong – Herding cats – Referendum results are notoriously unpredictable”:-

Over the past 25 years, voters in different European countries have repeatedly given the “wrong” answer, even when all political parties have campaigned on the other sideAnd all too often they have voted not on the issue itself but to punish unpopular governments.

In May 2016, the Telegraph’s Europe Editor wrote this: “Why the evil genius of David Cameron’s EU referendum gambit may yet prove his undoing” which included the following pertinent observation:-

“If Mr Cameron had been serious about offering British voters a chance to leave, he would have spelled out and negotiated the options for a new relationship – the Norwegian umbilical cord, the Swiss-style free-trade deal or the completely free-range WTO option – stuck them on a ballot paper, and then let the people decide.

“But as everyone knows, Mr Cameron wasn’t serious. The EU referendum was never a popular demand of the British public – polls put the EU way down the list of voters’ concerns – but a narrow tactical move to prick the UKIP bubble and appease the Eurosceptic ideologues in his own party.

It is worth reading this lengthy article by Daniel Korski, the Deputy Director of the Cameron Policy Unit: “Why we lost the Brexit vote – Behind the scenes of the flawed campaign to keep the UK in the EU

The Cameron government had, at least, provided that the referendum be advisory rather than self executing, but he had prepared no plan for the event of a Vote Leave victory.

Shortly after 08:15 am on the morning after the result had been announced David Cameron told the country that he had informed the Queen of his decision to remain in place for the short term and to then hand over to a new prime minister by the time of the Conservative conference in October.  He said he would attempt to “steady the ship” over the coming weeks and months, but that it would be for the new prime minister to carry out negotiations with the EU and invoke Article 50 of the Lisbon Treaty, which would give the UK two years to negotiate its withdrawal.

Teresa May as Prime Minister

may99Rather than take the approach of many European leaders when a Referendum fails (see the Economist Table above) which is to hold a rerun after getting minor further concessions, Mrs May has adopted the inane slogan “Brexit Means Brexit” and she and her Ministers sought to give the Article 50 Notice of leaving the European Union using prerogative powers.  However, there were proceedings by way of judicial review and and a Divisional Court held that the triggering of Brexit by the giving of an Article 50 Notice required legislation by Parliament.   The Governments appealed to the Supreme Court and  after a hearing in December this year, the Court’s judgement is expected to be delivered in January 2017.

Nobody who covered the hearing in the Supreme Court is prepared to predict the outcome but there was a fairly clear consensus that that the Government’s lead Counsel (James Eadie QC)  was not as convincing as was  Lord Pannick QC for the Respondents.   My personal view is that the Government’s appeal may well fail.

State of the Parties

One can see the results of polling by ICM for the Guardian on this page: State of the Parties in the Opinion Polls.   If one takes samples of movement during 2016 one gets this:-

Month  Con Lab Lib-Dem  UKIP  Other
Jan 40% 35% 6% 10% 9%
Apr 38% 33% 7% 13% 9%
Jun 36% 32% 7% 15% 11%
Sep 41% 18% 9% 13% 10%
Dec 41% 27% 9% 14% 9%
Year +1% -8% +3% +4% 0%

The one party which seems to have done badly over the year is Labour who have gone down by 8 percentage points over the year. UKIP is up 4 points.  So thus far, the Conservative Party has weathered the storm, Labour is in disarray, UKIP is probably going to do well in local government by elections, particularly in the North, and the Lib-Dems are only slowly recovering from the disaster of the Coalition.

Ministers in Mrs May’s Team

hammondThe Financial Times has this: “Brexit Briefing: the growing confidence of Philip Hammond – Chancellor ends year looking more self-assured than any other minister“.    Mr Hammond understands the need for a transitional arrangement and he also understands what the financial consequences of a “hard” Brexit might be.

3-blind-miceThe FT also had this: “Welcome sense from UK on the EU customs union – A step in the right direction but no help for crucial service exports” and this “David Davis wins trust at home as broker in search of Brexit deal – Unflashy approach gains praise from Leave camp while reassuring former Remainers“.

Boris3The one Cabinet Minister whose approach is most under question is, of course, Clown Boris.  See this in the Huffington Post: “Boris Johnson Tells Friends He Believes Number 10 ‘Is After Him’ – But does May have ‘too much invested’ in Johnson?“.

Last July, the Guardian had this: “The Boris Johnson question: how the UK’s foreign secretary is viewed abroad – Some international observers are amused, but others regard Britain’s top diplomat as a new and unnecessary problem“.   As the article puts it:-

Johnson is widely viewed as inherently untrustworthy. In Brussels, and in other EU capitals, he is seen as the man whose lies, opportunism and vaunting ego brought about Britain’s disastrous EU exit.  This anger is genuine. And unlikely to dissipate quickly. On Thursday France’s foreign minister, Jean-Marc Ayrault, summed up what most of unhappy continental Europe felt, declaring: “He [Johnson] lied a lot to the British. Now, he is the one with his back against the wall.”  The problem, in Ayrault’s damning view, was that France needed a UK partner who was “clear, credible and reliable” and “with whom I can negotiate”. This was not Johnson, he made clear. Much of the rest of the world agrees, with Johnson regarded as a new and unnecessary problem.

Boris is popular with many Tory voters.   It may also be true that every Prime Minister has to have a Court Jester, but Mrs May may need to take account of the anti-Boris feeling in Europe and keep him well away from the Brexit negotiations.

 Soft, Hard or Train Crash Brexit ?

The Financial Times has this:  “The chaotic route to train-crash Brexit – An orderly separation from the EU should not be taken for granted“.  See also this BBC Report: “Brexit trade deal could take 10 years, says UK’s ambassador“.

A major part of the problem is that the Brexit negotiations involve dealing with (a) the European Council (which in effect means the other member states), (b) the European Commission – which negotiates on behalf of the Council and (c) the European Parliament.  Each of the parties have various axes to grind.

The Commission would like to see Euroclearing and other EU financial services carried out within the EU rather than outside. For example, the French are looking to see whether they can get banks in London to relocate their EU trading to Paris. Germany would rather like to see Frankfurt become the primary EU stock exchange within the EU. Ireland is hoping to capture Lloyds and the London reinsurance market.

See this Financial Times report: “Fears EU Brexit delays will spur bank exodus to eurozone – Brussels negotiators insisting on divorce deal before any transition“.

Senior EU diplomats admit the timetable also reflects a cold calculation of interests: delaying agreement on a transition would spur companies to move some of their business to the EU to cope with the danger of a hard exit. British officials fear Brussels may hold out for a transitional deal so long that many banks will have already taken crucial decisions to leave the UK“.

Also this: “Japanese banks warn of leaving London without Brexit clarity – Financial groups suggest relocating functions within 6 months to mainland Europe

A senior executive at a large US bank said the Japanese are “not unique in wanting clarity” and that most firms are planning for the “worst case outcome . . . absent a clear view of the end-game”. The worst case outcome for banks would involve the UK losing access to Europe’s single market, so they and other financial services firms could no longer ‘passport’ from London to the European Economic Area’s 31 countries.”

Also this: “Lloyd’s of London to establish EU base in the new year – Insurance market is among first City businesses to firm up Brexit plans“.

Finally this: “Brexit dashes the euro’s reserve-currency hopes – John Dizard on the strange fallout from the loss of London-centric euro clearing

This week we heard the European Commission is preparing to go ahead with post-Brexit rules that will force euro-denominated transactions to be cleared on platforms physically located within the EU.

Finally this: “Swiss and Danish travails show way ahead for Brexit talks – Creative solutions are possible but EU refuses to compromise on legal principles“.

One tactic the May government might consider is deliberate delay:   The UK remains a full member of the EU.  The EU member states are saying that they will not negotiate until Article 50 is triggered.  A possible position might be to make it clear that the UK will not trigger article 50 until it is ready to do so and it will only be ready to do so when it has a deal on the post Brexit arrangements.

Meanwhile,  given the qualified majority voting rules, the UK will have continued very great influence on EU affairs.

 

 

 

 

 

 

 

 

 

 

 

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