The Brexit Balance

23 February 2022

The Brexit Balance

Put the chardonnay away.

By Robert Kilconner

We are indeed a nation of shopkeepers. The publication of the Government paper “The Benefits of Brexit” has opened a debate in which the financial benefits and losses currently resulting from Brexit are put by commentators in some sort of balance, the implication being that that balance – extended forward over time – has cost us growth. Conclusion? “Yes, it has.” Cue for smug patting of own backs by the Remainers and description of everyone else as deluded idiots. Pass the chardonnay, please.

The trouble with reaching a conclusion in that way is that it only deals with one aspect of a complex issue. For another, switch your eyes eastward to the litigation between the EU and Hungary and Poland.

The background to the litigation is that the behaviour of these two states has fallen below the standards adopted by the EU. In particular Poland has retained a disciplinary system for judges which undermines judicial independence. Hungary has curbed the rights of minorities. Both are therefore in breach of article 2 of the EU Treaty which contains provisions protecting governance, human rights, etc. The Treaty contains sanctions for a failure to live up to those provisions, including  the loss of EU rights, but those sanctions can only be applied where onerous procedural safeguards are surmounted – article 7 providing that to establish a breach requires unanimity by the Council (excluding the country being sanctioned), not easy to achieve where a number of countries band together. So what to do to get the offenders into line? Faced with that conundrum the Commission turned to regulations designed to protect the EU budget which allowed financial assistance to be withheld when faced with “situations or conduct of authorities that are relevant to the sound financial management of the Union budget or the protection of the financial interests of the Union.” Hahaha, withhold their money; that should bring the ungodly to their senses!

“Hold hard” said the Poles and the Hungarians (or at least they no doubt said the equivalent in their own languages), the issues we are arguing over have no relation to the budget and if a true reading of the regulations means they do those regulations are invalid. They lost their case and Ms van der Leyen will have to decide whether to withhold EU funds to force them to change their wicked ways.

The judgement is long and rather formally presented but the upshot is that the Court used a principle called “horizontal conditionality” to bring what were essentially broader political issues within a provision protecting financial interests. No doubt that is impeccable EU law – courts after all have to create doctrine to fill gaps – but it is also a reminder. The European Court of Justice, rather like the Supreme Court of the United States, is a treaty court, responsible the interpretation of federal legislation and in the case of the ECJ the tendency is to concentrate power in European institutions, in this case in the Commission. How else, after all, would the Union be deepened and strengthened?

This is all no doubt very satisfactory if you are sitting at a desk in Brussels but it results in surprises for member states and their citizens. When the Poles and Hungarians signed up they doubtless thought that the sanctions for bad governance was the cumbersome regime in article 7 of the EU Treaty. Now they find out that they were wrong. The centralising tendencies of the Court have surprised others as well; the needless destruction by the ECJ of the UK’s imputation system of corporation tax which resulted in huge repayments going to multinationals at a time of financial crisis must have been a source of despair for the UK Treasury. Membership of the EU is like sitting on a train that gradually gathers pace without new democratic decisions being taken.

Perhaps it has to be like that if a new viable superstate is to be created, but it does mean that in assessing the pros and cons of membership one has to look at a future where the EU will interfere much more heavily in national culture and daily life. Perhaps that is a good thing and when in 1973 the UK, Ireland and Denmark joined an economic community comprising France, West Germany, Belgium, Luxembourg, Netherlands, and Italy, any surrender of sovereignty would have been to a like-minded bunch of nations. Now, how much sovereignty would you delegate to the Eastern countries? Hmmm.

That isn’t to say that the economic benefits aren’t worth it. I voted remain in the referendum and do not regret it. Still, it does mean that we have to look at the balance a little differently. The question is not whether leaving the EU has damaged our prosperity, at least in the short term, but rather whether any damage suffered is a fair price for jumping off the train while we still can. We will not know that for a bit. Perhaps that chardonnay had better go back to the cellar.

tile photo: by Elena Mozhvilo on Unsplash

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