Issue 177: 2018 11 08: Brexit: Avoiding the Issue

8 November 2018

Brexit: Avoiding the issue

A Bluffer’s Guide.

By Frank O’Nomics

Are we nearly there?  We seem to get a fresh story of a Brexit deal every week, only to see the bubble burst over the next few days.  This week, the ink on a “leaked” memo regarding plans to sell an agreed deal to the public had barely dried before we had denials and repudiation.  All this raises the question: how much has been wasted in pointless debate surrounding Brexit?  Beyond the time and expense of legions of civil servants assessing the impact of every conceivable outcome of negotiations, most of which work will be irrelevant, we have all spent a great deal of our own work and leisure time discussing what will constitute a good or a bad result.

The government this week announced 5 new business councils to give advice and recommendations on creating the best business conditions post-Brexit, involving the heads of Tesco, BAE, ITV and GSK.  This will absorb time that would arguably be much better spent running their businesses.  The rest of us have spent much of the last 2 years in circular Brexit debates, when we could have been discussing whether Arsenal should play a 4-4-2 or 4-3-3 formation, the concept of a female Doctor Who, the potential winner of Strictly, or even doing some work.  It was not unreasonable to assume that, once the EU referendum result had been announced, little of sense regarding the terms of our departure would emerge before the last possible moment.  Given the high levels of misinformation going into the referendum, it seemed highly unlikely that much would change while the negotiating parties were maintaining the strongest possible stance. The right approach was to bury one’s head in the sand, put in earplugs and sing “la-la-la” until the debaters went away, or to leave Europe until April 2019.

For those who have no choice but to engage, we need a way of deflating all arguments, until politicians finally see sense and come up with a workable solution. Here then are a few ways in which to nip Brexit discussions in the bud, thereby saving time and energy, and boosting productivity:

1) A Hard Brexit. Beyond being merely a negotiating stance, many see the benefits of a clean break.  It is hard to argue that there won’t be a bill to pay due to ongoing commitments, but adjusted for inflation, between 1973 and 2016 we paid £183 billion more into the EU that we got out, so there is money to be saved.  The trade benefits currently derived can be compensaated by the potentially lower import costs resulting from negotiating better deals with those outside the EU.

These arguments might help close down debate from those who insist on a deal, but how do you counter the hard Brexiteers? Tell them that most WTO tariffs are low enough already to ensure little additional benefit can be negotiated and that we are a service-based economy.  Lower import costs will not have a proportionate impact on retail prices given the domestically generated additional costs of selling the produce.  It is estimated that abolishing all tariffs would merely reduce consumer prices by around 1%.  Of much greater importance will be the costs resulting from the disruption of leaving the customs union.  The EU accounts for over half of our trade in goods and anything that inhibits this is likely to be bad for UK economic growth.

2) A second referendum. Those who argue for this are invariably “remainers” who think that, given a second chance, people would vote to stay.  There is little hard evidence to suggest that this would be the case, with a danger in lengthening a process that has already produced an economic stasis.  For those who argue against a second referendum, take the line that the nature of our departure makes a critical difference to whether we would want to leave or not – so we should have a vote on the final deal, although this might be easier to argue if a general election was likely to be between parties that had a notably different stance on whether we stay or go.

3) Let’s become Turkey, Norway, Switzerland or Canada.  Nice people but hardly economic powerhouses. The main issue with these solutions is that, while they might solve the issue of a customs union by allowing the free trade of goods, they do not allow the free movement of services, capital or people – unless (in the case of Norway) you pay up.  If forced to argue for these proposals,  emphasise the benefits of not having border controls and the ability to negotiate other deals. Inevitably the issue of a hard border for Northern Ireland will arise, which will mean getting drawn into a circular “backstop” discussion.  Point out that, on a cricket field, a backstop (or very fine leg) is usually an admission that you don’t have a safe pair of hands behind the stumps, and hope that this is sufficiently confusing to end the discussion.

This is all very well you may argue, but ultimately surely one has to have a view.  Well actually you don’t.  Brexit negotiations are a game of “chicken” where the final agreement will not emerge until the eleventh hour. The key to all of the ripostes above is that, whatever is decided, people will find ways of making a living and doing business.  What is really needed is an end to the uncertainty. Each of the possible avenues has different positive and negative short-term implications; there is a risk of a short-term recession under some scenarios (although the Bank of England and the IMF may be over-stating this).  However, whether trade with Europe continues at the same level or we find other outlets, may not be the relevant point.  The fact is that the UK has a stable political system, a business environment that encourages trade and entrepreneurship and a vast amount of potential.  The current low levels of productivity (partly occasioned by Brexit inertia) leave obvious scope for progress, and pent-up business investment, waiting in the wings for any kind of solution to emerge, could give a boost to our economy to surprise us all.  In the meantime – what was that you said?  Brexit? La-la-la-la….



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