Brexit: Where are we now? Part Two – The UK

IIEA7th February 20188min
In this second article in the IIEA’s 2018 Brexit Status Report series, John Palmer, Former Europe Editor at the Guardian, argues that the UK Government’s approach to Brexit is lacking clarity and direction.

In this second article in the IIEA’s 2018 Brexit Status Report series, John Palmer, Former Europe Editor at the Guardian, argues that the UK Government’s approach to Brexit is lacking clarity and direction.

 

Self Deception Or Wishful Thinking? The UK is Still In A Muddle Over Brexit

The confusions, internal divisions and lack of clarity which have plagued the UK government’s Brexit strategy still put a question mark over the stability of the government and the political future of Prime Minister, Theresa May. This was underlined just before Christmas, following an embarrassing government defeat in the House of Commons where MPs succeeded in winning the right to pass judgement on any proposed Brexit deal before it is finally signed.

The enhancement of MPs’ powers over ratification of any Brexit ‘deal’ could mean Mrs May being sent back to Brussels to try again, if the final outcome were to be deemed unacceptable. The eventual Parliamentary arithmetic leading to such a defeat cannot, as yet, be credibly predicted.

However the British government has been judged to have done enough for the European Council to agree that a start can now be made on the crucial second phase of Brexit negotiations. This came despite a last-minute intervention by the Democratic Unionist Party who were angered by language guaranteeing no ‘hard’ Irish border.

 

Subtleties of language

The adroit deployment of diplomatic language permitting this progress was hailed as a “breakthrough” by the government. Mrs May said it should be ‘celebrated’ by both sides in her bitterly divided Conservative Party. Both hard-line ‘Leave’ and resolute ‘Remain’ Tory MPs did cautiously welcome the prospect of the next, crucial, phase of talks getting under way.

But this merely inches forward a process which should, by now, be far more advanced. Moreover the government was initially unable to state confidently whether its commitments were truly legal binding – such as ‘no hard border’ in Ireland or promises to meet existing UK financial obligations to the EU.

Very different language to describe these commitments was initially used by different ministers. The Chancellor of the Exchequer, Phillip Hammond, said the obligations were absolute. Brexit minister, David Davis, said that it all depended on whether the final terms of the UK relationship with the EU after Brexit proved “acceptable” or not.

This discordance was not acceptable to the EU and Mrs May had to assure the EU that London would honour all its obligations. But the initial confusion further weakened an already fragile sense of trust felt by the rest of the EU about UK government intentions. That said, London has now met the two litmus tests: a formula for settling an eventual UK ‘divorce’ bill of around €40–45 billion and a legal agreement on citizens’ rights.

 

Strategic objectives

So what strategic objectives will London now set for the heavy lifting in the second phase of Brexit negotiations? The nearest to a hint of where the May government is heading was the declaration by the Brexit Secretary, David Davis, that Britain intends to negotiate a free trade agreement along the lines of a “Canada – Plus, Plus, Plus!”

This means that London has finally closed the door – formally or informally – on remaining part of the Single Market or the Customs Union. Moreover, a Canada type deal would exclude the vital financial services sector which accounts for a significant proportion of UK exportsand remains a rare globally competitive sector of the UK economy.

The “Plus, Plus, Plus” indicates a desire by London to have the freedom to make independent global trade deals, which is possible under the Canadian agreement, while at the same time, securing privileged access to the Single Market and the Customs Union for services, something that Canada does not have.

On the face of it this is “cherry picking” not just a tree but an entire orchard; something the Commission and many EU governments have already ruled out. If words are to be believed this remains a non-starter for the rest of the European Union.

Theresa May’s government also wants the benefits, outside the Union, of continued membership of many EU bodies such as Euratom, Europol, and participation in a wide range of EU scientific and education programmes. The EU may agree to the UK participating in joint programmes where there clearly is mutual benefit, provided the UK accepts to make additional payments to the EU budget. Similar arrangements would probably also be extended to other areas of European security, defence and intelligence cooperation.

 

Schrodinger’s Brexit

But – a little like Schrodinger’s Cat – being somehow IN and OUT of the Single Market and Customs Union at the same time seems fanciful. During the planned “transitional” phase after March 2019 the UK will have to observe existing EU laws and standards – along with the role of the European Court of Justice in settling legal disputes which, when affecting citizens’ rights, could last for eight years.

On observance of EU standards, London makes vague references to possible future “alignment” of standards. But the UK government also insists on the right to negotiate its own trade deals on the basis of purely British social and environmental standards. Tory Brexiteers still insist on “the right to diverge” from EU standards and laws.

Given the late start to Phase Two talks, time is rapidly running out to agree the transitional regime. Some experts in both Brussels and London are privately sceptical that there will be enough time to finalise some broad objectives for a future long-term trade and cooperation agreement, post Brexit, before the start of the transition.

Although the UK can still revoke Article 50, extending the Article 50 period beyond March 2019 would be highly politically sensitive and legally uncertain. But there could conceivably be a well tried last resort of temporarily “stopping the clock” to buy a little more time.

On top of this more time (maybe much more time) may also have to be found to hammer out the multitude of detailed issues ranging from trade to common standards for a new long-term agreement. This is all meant to be completed during the two years’ transition due to end in December 2020.

 

Uncertainty ahead

Meanwhile there is a growing realisation in the UK that it may need a longer transition phase. There is talk from the Irish government among others of the need for a transition not of two years, but more like four or five years. The British state and business face some awesome challenges to adjust to the radical changes ahead. Without assurance of an adequate transitional period, uncertainty could accelerate with inevitable negative economic consequences.

There is worrying evidence of disinvestment in the UK by foreign companies and loss of jobs to other EU countries. The prospect of Brexit – possibly even a hard Brexit – is further weakening an already problem best British economy.

The UK Confederation of British Industry has talked about the need for a transition of four or five years – others think that, for certain sectors, it might have to be even longer. Might there be a “rolling” transition which – in some areas – lasts much longer than two years?

This raises the question: “Will the British people believe they have really left the EU before a new UK general election becomes constitutionally unavoidable in 2022?” The UK may indeed find itself outside the EU next year – with no voice or vote on decisions and being a law taker not a law maker. But it would still be bound by many, or most, of the legal obligations of EU membership. Tory Euro-sceptic charges of “treachery” can be expected at such an outcome.

 

The Labour Party position

There is also pressure on the Labour opposition to clarify its still evolving attitude to Brexit. The Labour leader, Jeremy Corbyn, has historically been critical of some EU economic and policies. But he has publicly championed free movement of people in the Union, defended the importance of EU social and environmental policies and has called for stronger workers’ rights and a new European economic strategy for growth and investment.

The Labour leadership now want to see full UK participation in (if not formal membership of) the Customs Union and the Single Market during the transitional period however long that turns out to be. But it is – for now – sceptical about suggestions of a second referendum to reverse Brexit.

Labour has sought to balance the strongly pro-Remain views of the great majority its members and voters with the minority of Labour voters who voted Leave in the referendum. Some in the party want Labour to offer an EU ‘Remain and Reform’ alternative to Brexit now and as part of its platform for the next general election whenever it comes.

 

The Outlook

The longer any future ‘transitional period’ lasts the greater the chance that it could coincide with a general election. Under the new five-year fixed term Parliament, an election must take place no later than March 2022. In the meantime, the Labour Party is emphasising its commitment to maintain all existing EU social, environmental, labour and equalities laws and standards.

The planned creation of a European Labour Authority may herald changes to the EU “Posted Workers” Directive to deal with the undermining of local wage rates and labour standards. Free movement of EU citizens remains a toxic issue but the departure of many EU workers, fearful for their future place in the UK after Brexit, is now leaving key public services such as the NHS and social care with a serious staffing crisis. The public mood towards Brexit may be changing – but how great will that change turn out to be?

As I write these words, the Brexit negotiations have reached a decisive moment which will determine Britain’s direction of travel. We should get a much clearer idea of what this really is in the weeks ahead.