Absence may make the heart grow fonder, but distance also clarifies the mind. A fortnight’s visit to Japan put the impact of Brexit on Britain’s reputation around the world in a dazzling light.
On the face of it, Japan ought to be a far better model for post-Brexit Britain than the oft-cited city-states of Singapore and Hong Kong. A proudly independent island-nation of 125 million people off the coast of Asia, trading with the world and highly resistant to immigration, if Theresa May has ever been there she must surely have noticed that Japan ticks most of her boxes. Few, if any, Japanese think of themselves as “citizens of the world”.
Yet, at event after event, meeting businessmen, diplomats, bureaucrats, students and journalists, this correspondent heard an utterly consistent message: “We have always admired you British. So why have you now gone mad?”
If you travel in the United States you will hear plenty of people who side with the Brexiters. Some Americans, after all, helped finance and organise the Leave campaign. Others instinctively share Eurosceptic distrust of Brussels bureaucrats and see parallels in their own hatred of Washington.
Not in Japan. There, the questions came thick and fast about Brexit and what we British thought was the point of it. For example, I was asked, by a former senior diplomat: “Why do you want to make yourselves weaker and more vulnerable?”.
He went on to point out that “We Japanese also have a ‘special relationship’ with the United States over security, but we have long envied the fact that your EU membership has added to your leverage with the Americans: why are you giving that up?”
He and other said: “We’d like to have a closer relationship with other countries in Asia, on security as well as economics, but both China and our history stands in our way. How we wish we were like you, dealing with France and Germany instead. Now that President Macron has been elected, can’t you change your mind?”
Business figures acknowledged that their arguments that Britain should stay in the single market are a matter of self-interest and convenience for Japanese firms that have invested in our country, but they wondered, “doesn’t that make the single market and customs union matters of self-interest and convenience for you, too?”
“We keep hearing your ministers say that all countries have ‘access’ to the single market, often citing Japan, but don’t they realize that the single market and the EU’s common external tariff are precisely why we have built factories in the UK? ‘Access’ from outside the EU is much inferior to access from within the single market.
“Oh and by the way, why is your now tighter immigration policy also penalizing us Japanese?” A Japanese journalist now moving to London as a special correspondent for their newspaper reports having to pay £1,000 for the visa, plus a £500 deposit for use of the NHS, and reams of paperwork for bringing in their possessions – none of which applied the last time they resided in London in the 1990s. As this special correspondent has a European beat, they now wonder whether their successor might be better placed in Paris, Berlin or Brussels.
Most of all, the refrain was pained and somewhat despairing: “Emmott-san, we always used to think of the British as being deft diplomats and full of good common sense. Now you seem awkward, incompetent, chaotic and often nonsensical. Please tell us that you are going to come back to your senses soon”.
My answer was consistent too. “I really wish I could.”
Edited by Sam Ashworth-Hayes
One of the more bewildering things about Britain’s current politics is the spectre of a socially liberal, internationalist Labour Party apparently siding with the English, nationalist right wing of the Conservative Party over Brexit. The Labour leader, Jeremy Corbyn, says Brexit is a settled matter and refuses to condemn the Tories’ policy of taking Britain out of the EU’s single market. What is going on?
There are three ways of explaining how Labour can back a policy that promises to do such damage to the economic well-being of its voters. The first is that the party is ready to subordinate everything to the concerns of Labour MPs in marginal constituencies in the Midlands and the north of England. Many traditional Labour voters in these areas are rightly angry about stagnant wages and poor housing, and believe that immigration is at least partly to blame.
But it is dishonest for Labour MPs to claim they are sticking up for the interests of working class voters by backing Brexit. These regions stand to lose most from Britain leaving the EU as they are the most dependent on trade and investment with the rest of the EU.
The second explanation is that it is just strategic ‘triangulation’. With the government backing a hard Brexit, all Labour needs to do to retain the support of working class voters opposed to freedom of movement and pro-EU voters is to signal that it favours a softer Brexit than the Tories. According to this line of reasoning, Labour has little to gain electorally at this point from coming out against exiting the single market; it will only make sense to do so once Conservative Party unity on the issue has crumbled and popular opinion has turned against Brexit.
Will Britain’s worsening economic situation turn public opinion against Brexit and enable Labour to do a U-turn? That is possible but it is a risky strategy. Because it has joined the government in backing exit from the single market, Labour is unable to hold the Conservatives to account for the damage Brexit is doing to the economy.
The third possible explanation is ideology. For most of the last 30 years Labour was strongly pro-EU, but the party has always included a hard left that sees the EU as a Trojan horse for neo-liberalism. And the party is now led by this wing, which opposes the free movement of goods, services and, especially, capital.
The Labour left resents what it sees as a constraint on its freedom to intervene in the economy – even though plenty of EU member states pursue successful industrial policies of the kind Labour says it wants to introduce.
The Labour Party cannot assume that Remain voters will continue to give it the benefit of the doubt over Brexit. Constructive ambiguity may have worked at June’s general election, but Labour will have to take a stand– and lay the basis for a parliamentary coalition against leaving the single market – if it is to avoid ending up as split over the issue as the Conservatives.
Labour needs voters to make the connection between the coming economic downturn and Brexit. That way it can offer a realistic alternative policy, leading back to growth via single market membership. This requires it to be open about the costs of leaving the single market and to demonstrate to voters that their concerns about freedom of movement can be addressed without Britain leaving the single market.
To this end, Labour needs to be far more radical about addressing the underlying reasons for hostility to free movement of labour: shortage of housing, strained public services and job insecurity. The party could commit to a massive house-building programme by allowing local councils and housing associations to borrow, and by taking aggressive steps to combat land hoarding by private developers. A big programme of infrastructure investment in the Midlands and North would do much to reassure people in these regions that they had not been forgotten.
Less progressive perhaps, but politically salient, would be a drive to tighten up Britain’s labour market regulation and enforce EU rules more rigorously. Britain could raise the level of qualifications workers need to do certain jobs, such as in construction, and beef up enforcement of the minimum wage. It could use existing flexibility with EU law to crack down on EU migrants who do not have jobs and cannot support themselves. The UK authorities could vigilantly enforce EU rules such as the agency workers’ directives and join French calls for reform of the posted workers’ directive, which allows foreign workers to avoid tax and social security contributions for limited periods of time.
Some combination of these measures could help to address the perceived unfairness of freedom of movement without inflicting huge damage on the economy. And by taking some of the steps at its disposal, Britain might well gain a more sympathetic hearing from the EU for its call for an emergency brake on immigration.
Labour’s current policy of constructive ambiguity on Brexit is not the win-win approach its advocates claim. The party leadership needs to make the case for single market membership and demonstrate what can be done to address the concerns about freedom of movement while remaining within the single market. If it does not, it will struggle to show that it has a better solution to the economic downturn caused by Brexit than the Tories have, and risks ending up as divided as its opponents.
by Simon Tilford | 07.07.2017
Simon Tilford is deputy director of the Centre for European Reform. The full version of this article can be found at www.cer.eu/
Edited by Alan Wheatley
Happy days: at last “Global Britain” and its leading advocate Liam Fox have a real benchmark against which to prove themselves. Brexiters have long been boasting of what great trade deals will be done once we leave the EU. Now, the organisation they have derided as useless, protectionist and slow-moving has struck an Economic Partnership Agreement (EPA) with the world’s third- largest economy, Japan, a country with which Britain has an especially close relationship. So it is time for the international trade secretary to step up to the plate.
Parliament should soon demand that Fox explain, in detail, how he expects to beat the EU’s deal with Japan. Saying that Britain will be able to match it will not be good enough: we could have done that simply by staying in the EU. In doing so, we would have saved ourselves the cost of recruiting hundreds of trade negotiators and spared the 1,000-plus Japanese companies that have invested in the UK all the uncertainty and increased transaction costs that will come if Britain leaves the single market and customs union.
- Eliminate the EU’s 10% tariff on car imports from Japan over a seven-year transition period while Japan removes barriers to car imports from Europe
- Scrap EU tariffs on electronic goods immediately the EPA comes into force and end the 14% tariff on imports of TVs after five years
- Abolish Japanese tariffs on some foodstuffs from the EU, including pasta and chocolate, over 10 years
- Create a low-tariff import quota for European mozzarella, Camembert and other soft cheeses, to be phased in
- Remove or reduce other industrial tariffs on both sides
- Open up Japan’s public procurement market to European firms
Not bad for an organisation that is supposedly crippled by having to serve the lowest common denominator among its 28, soon to be 27, members. The breakthrough with Japan follows the EU’s completion of a path-breaking trade and investment deal with Canada, another G7 economy, and one with South Korea.
Parliamentarians should demand that Fox not only specify where Britain stands to do better with Japan but also to provide a full list of the countries with which he expects it to leap ahead of its lumbering former EU partners.
The trade secretary could be asked where Britain actually stands in the queue to strike a deal with the US, and what his attitude will be when the US announces its widely expected tariffs on imports of steel, on national security grounds, in coming weeks. What will his view be of US proposals to export more chlorine-washed chicken and hormone-rich beef to our shores?
If he mentions India among his candidates for beneficial deals, Fox can be asked what approach the government intends to take towards Delhi’s demands for a greatly increased number of work visas and to its rather more restrictive approach to imports of whisky than the one Margaret Thatcher successfully negotiated with the Japanese in the 1980s, while Britain was of course an EU member.
Finally, if he dares to bring up the subject of China, Fox can be asked to explain why it is that Germany’s exports to that country are already far larger than the UK’s, despite the absence of an EU-China free trade agreement. Indeed, China has overtaken the US and France to become Germany’s largest trading partner.
Fox could try his old argument that this is because British business is too fat and lazy. That would be a sure-fire way to sour the sweeter relations that the government, chastened by the election, is seeking to establish with business.
Edited by Alan Wheatley
Margaret Thatcher was a great defender of Western ideas and values, so it is entirely appropriate that the Centre for Policy Studies should have named its major conference on security and the future of the West after her. It is also appropriate and welcome that the government’s senior representative at the June 27 conference, the defence secretary, should invoke her memory and words when declaring that Brexit Britain will remain a “proud defender of the West and its values and institutions”.
There is every reason to believe Michael Fallon when he asserts that under a Conservative government Britain will continue to support those values. But his claim to be a proud defender of Western institutions must be taken with a pinch of salt. After all, Brexit means by definition that the UK will be leaving one of the most important of those institutions, and thereby undermining it.
His words must also be placed in the political context in which this country now finds itself, thanks to Brexit: ahead in the opinion polls is a Labour leader who is proudly critical of many of the very values and institutions that Fallon associates with the West. Whether in government his party would actively seek to undermine them is open to doubt. But the fact is that Brexit Britain could be within months of having Jeremy Corbyn as its prime minister.
Furthermore, Fallon boasts proudly that Britain’s defence budget will rise by £1 billion this year to £36 billion, which will be 0.5% ahead of inflation, and a further £1 billion next year.
We now know that this means his government is thereby committed to spending 50% as much each year on retaining the 10 votes of the Democratic Unionist Party in its “confidence and supply” deal as it is on strengthening Britain’s defence contribution. (The DUP deal is for an extra £1 billion over the next two years.)
On BBC Radio 4’s Today programme, Fallon defended the deal as being “not a bung” but rather a necessary investment in Northern Ireland’s prosperity. Perhaps it is, though the scale of that investment does put his own defence budget into a new perspective.
Fallon also, correctly, outlines the commitment of British forces in the Middle East, Afghanistan and Africa, as well as their involvement in NATO’s deployment in Estonia.
What was missing from his Telegraph article, however, was any mention of the Royal Navy’s involvement in the EU’s Operation Sophia, the coordinated naval effort, under Italian command, in the Mediterranean to hunt for people smugglers while also rescuing migrants. The survey vessel HMS Echo is currently taking part in that operation.
Will Britain continue to support its European partners in this sort of combined operation after Brexit, or will it pull out of EU defence cooperation and limit itself to NATO? The latter course, far from marking a “stepping up” of Britain’s engagement, would dilute our commitment to common defence.
The defence secretary and his colleagues could benefit from drawing inspiration from the person for whom the CPS named its annual conference. In Margaret Thatcher’s famous 1988 speech to the College of Europe in Bruges, the Iron Lady said:
“Britain does not dream of some cosy, isolated existence on the fringes of the European Community. Our destiny is in Europe, as part of the Community.”
“We should develop the WEU [Western European Union], not as an alternative to NATO, but as a means of strengthening Europe’s contribution to the common defence of the West.
“Above all, at a time of change and uncertainty… we must preserve Europe’s unity and resolve so that whatever may happen, our defence is sure.”
Now, there was a true defender of the West’s values and institutions.
Edited by Alan Wheatley
In normal times, neither the British public nor even Westminster commentators need concern themselves much with constitutional matters. That is one of the virtues of having no written constitution. But in these far from normal times, we are all about to learn much more than we might like about the Salisbury Convention, the Sewel Convention, the Good Friday Agreement, and even “confidence and supply” arrangements.
These issues are already producing a lot of sound and fury, in Parliament, Holyrood, Stormont and the daily press. What that noise most probably signifies is that the public will be asked to vote again, sometime during the 18 months left of the Article 50 divorce process.
Boris Johnson, the foreign secretary, may be right when he says the public is “fed up to the back teeth” with voting, though the increased turnout on June 8 suggested otherwise. Nevertheless, more voting is the only way to deal with constitutional logjams in the British system.
“Salisbury” is the first convention to have raised its head. Talk that the House of Lords might consider blocking or amending the Repeal Bill or other Brexit legislation has prompted immediate reminders of the seven decades old agreement that the Lords would not block legislation required to implement the governing party’s manifesto promises.
Some argue that the Salisbury Convention does not apply in the case of a hung parliament, leaving peers free to act. However, Labour’s manifesto – although fudged – also promised a version of hard Brexit. That gives strength to the notion that blocking or pressing for softer-Brexit amendments would still be illegitimate.
Given the presence of newly confident and outspoken rebels on both sides of the Commons, the convention may nevertheless be insufficient to discourage anti-Brexit Lords from causing trouble for the government in this way. But to hold the moral high ground in any such argument, their most logical course will be to demand that the public be consulted, most probably in a general election, which would also have the virtue of forcing Labour to clarify its stance following public debate. Such a “constitutional crisis” is also a potential route to a second referendum.
Disputes over the “Sewel” Convention may well press in the same direction. This agreement states that the UK may not legislate on matters that are part of the devolved competences of the Scottish parliament, unless the Scots give their consent. Nicola Sturgeon, Scotland’s First Minister, will be anxious to find and exploit nationalist issues through which to strengthen her position following a disappointing election result.
Given the extent of devolution, the potential for disputes over this issue is huge, especially in the sensitive areas of farming and fishing. It promises to be virtually impossible to hold the line that all aspects of the replacement of European law with UK law fall outside the remit of devolution.
As for the Good Friday Agreement, that is less a constitutional matter than a political one. It promises to hand Sinn Fein a tool with which to pressure Westminster. Under the power-sharing agreement that followed the 1998 Good Friday deal, the UK government is supposed to be a neutral party brokering deals between the unionist and nationalist parties. Whatever arrangement the government strikes with the Democratic Unionist Party (DUP), if any, is bound to cause ructions in Ulster.
And then there is confidence and supply. In many ways this goes to the heart of the constitutional question of the government’s ability to stay in office. Confidence and supply is an arrangement under which another party, group of parties or individual MPs support the government on matters of confidence and budget votes. A minority Tory government, even with an agreement with the DUP, is vulnerable to losing a confidence or supply vote in the Commons, probably precipitating a general election in which Brexit would loom large.
Count the days: any constitutional crisis that may occur is really an electoral crisis. We will be voting again sooner than you think.
Edited by Michael Prest
There is a strong sense of a new beginning for the European Union, one that has nothing to do with Brexit but much to do with Emmanuel Macron and with an economic upswing. As the former Le Monde editor Natalie Nougayrede wrote in The Guardian, the change of mood in Europe is bringing talk of “new roadmaps” between President Macron and Chancellor Angela Merkel, of a chance not just to revive Franco-German cooperation but also to rebuild the European Union.
Some of this talk may be Schadenfreude, pleasure at the misfortunes of others, especially now that France’s youthful new president is sitting on exactly the sort of parliamentary dominance that Britain’s Conservatives were expecting barely two months ago. Some, certainly, is premature, with unemployment still high, the anti-euro Five Star Movement still leading Italian opinion polls, and with migrants still arriving, and dying, in large if diminished numbers from across the Mediterranean.
Certainly, whatever problems Macron may encounter in achieving the reforms he promises, the contrast between the British and continental moods is a far cry from eurosceptic talk of how Britain’s EU membership meant it was shackled to a corpse, as Douglas Carswell so eloquently put it, echoing a First World War phrase about Germany’s alliance with the fading Austro-Hungarian empire. The scholarly Daniel Hannan MEP made the same claim in his also war-referencing video, Ici Londres.
So, while most of the British focus is on what difference our election result and consequent governmental fragility may make to the Brexit negotiations, it is worth asking the corresponding question about the other side of the Channel: what difference might an awakening “corpse” make?
There are likely to be three parts to this, beyond the simple question of how far the EU really does reawaken: an effect on the interests of the other 27 member states in the Brexit talks; an effect on the domestic politics of some of those member states; and an effect on British public opinion.
Let’s take those in turn. The effect on the interests of the other 27 member states is likely to be minimal or non-existent, just as the effect of Britain’s governmental fragility on our interests is also likely to be minimal. Absent any serious further threats of withdrawal or substantial fragmentation – which Marine Le Pen’s resounding defeat has removed, for now, though Italy’s Five Star could in theory pose such an issue, if they were to get close to power – the interest of the 27 in minimising the disruption of Brexit, in protecting the existing treaties and in maintaining a friendly relationship with Britain will remain the same.
Interests typically do not change with swings of mood or fortune, especially in such a deep, strategic relationship as this. But domestic politics can be affected by mood swings, and probably will be, to some extent. However a strong Macron, like a strong Merkel if that is what Germany has after that country’s elections in September, will feel little need to pander to nationalistic domestic opinion by being “tough” on Britain. His political success, combined with a warmer economic climate, can be expected to allow him to follow French and EU interests closely, rather than playing political games.
The real variable lies in the third part: British public opinion. Comparing the 1975 referendum with 2016, a key difference was plainly the sense a year ago that the EU was a dysfunctional, divided, perhaps even failing entity, whereas four decades earlier it had looked like a success story. During the 18 months of divorce negotiations, and even more so during the likely longer negotiations during a transitional period, that sense could change.
If the talk of new roadmaps proves to be genuine, we can expect major initiatives in at least three main areas: defence, infrastructure and the euro. Of those, progress or otherwise on the euro is unlikely to concern Britain. That would not, however, be true of the other two.
If Macron and Merkel were to agree upon an ambitious programme of public investment, for example, outside the EU’s fiscal pact and focused most likely on infrastructure and an electricity supergrid, this could produce some jealous glances from Britain. This would not necessarily change minds about membership as such, but it could alter thinking and interests about the terms of our future relationship.
The same is true of defence. Longstanding British objections to any threat of sidelining NATO has held back EU defence cooperation, so Brexit will make that easier. But Britain will still be affected, and perhaps tempted, both by moves to co-ordinate defence procurement (for which cost and US-dependency is as big a problem for Britain as it is for France), and by further development of joint operations, as are already being conducted (with British participation) in the Mediterranean. Again, EU progress could alter British thinking about what sort of future relationship could be in our interest.
The European awakening could bring surprises and progress in all sorts of fields, including trade relations with Asian, African and Latin American countries. If the “corpse” really starts to become an athlete again, the country that chose to be a spectator, Britain, cannot fail to be affected.
Edited by Luke Lythgoe
It is rare to be able to say this, but an article in the anti-EU Daily Telegraph by the always stimulating Roger Bootle has put the issues surrounding “soft” versus “hard” Brexit, as well as the outcome of the general election, in a particularly clear light. Without meaning to, Bootle shows clearly why it is such a mistake for Britain to be leaving the European Union.
A well-known and respected City economist, Bootle is chairman of Capital Economics but also, most relevantly, one of the driving forces of the group now calling itself “Economists for Free Trade”, originally “Economists for Brexit”.
The point of his article, as indeed of his lobby group, is to argue that a compromise arrangement, one that might match Norway’s membership of the EU single market or Turkey’s of the EU’s customs union, would forgo the main benefit of Brexit: the opportunity to eliminate the EU’s remaining tariffs on goods imports (which average 4% but are more than double that on cars and far steeper still on food imports) and to engage in substantial deregulation right across the board.
To put this another way: Bootle is saying, with admirable candour, that if post-Brexit governments do not engage in unilateral free trade (or at least, much freer trade than the EU does) and in widespread deregulation, we might as well stay in. As he writes:
“Brexit is neither the road to perdition nor the road to riches. It presents a series of challenges and opportunities. To make the most of them we need to embark on a path of lower corporate and personal taxes, and deregulation. Philip Hammond, the Chancellor, has dubbed this strategy “Singapore on steroids”. If Labour were in government, however, it would accompany Brexit with increases in corporate and personal taxes, and increased regulation. That would be Venezuela on steroids.”
So there is the choice: Singapore on steroids (but by the way, even without steroids, to match Singapore would require Britain to halve the share of the state in GDP, as The Economist’s Banyan column recently explained) or Venezuela on steroids.
That’s a legitimate debate. With Jeremy Corbyn’s Labour Party now ahead of the Conservatives in opinion polls and a new general election widely expected within the next 12 months, it is a debate the country may be about to have.
So far, in fact, neither party has seriously proposed either of Bootle’s steroid-enhanced options: the Tories, no doubt conscious of the landowners in their own ranks as well as the views of many rural Leave voters, have promised to maintain farm protection after Brexit and have avoided pledging radical deregulation of environmental controls, for example; Labour’s manifesto was deliberately a great deal more moderate than Venezuela’s late President Hugo Chavez would have liked.
This is for two reasons: first, both parties assume that the consensus among the British public is closer to the centre than either of Bootle’s steroid options; second, for the time being Britain remains subject to the EU agreements it has signed on issues such as state aid and competition policy, and thus subsidisation programmes would be illegal, as would be nationalisations that distorted competition.
When Britain leaves the EU, that will change. We cannot know what a future government led by Corbyn or one of his Momentum followers would try to do. It would, of course, be constrained by international financial markets as well as by more moderate colleagues such as Keir Starmer. But it would not be constrained by membership of the EU.
That is what Roger Bootle and his fellows at the “Economists for Free Trade” group would have achieved, after Brexit. Their well-intentioned arguments depend on Britain being run by people like them: “experts”, as Michael Gove called them. The whole point of a democracy is that governments in fact alternate, reflecting changes in public opinion. Part of the point of EU membership, for all members, has been the constraints it puts on the wild, often damaging swings of opinion and policy.
Vote Brexit, get Venezuela: thank you for that insight, Roger Bootle.
Edited by Luke Lythgoe
Theresa May is desperate for the 10 votes of Northern Ireland’s Democratic Unionist Party to give her a majority at Westminster after her election disaster. The DUP will no doubt be delighted to oblige – at a price. Yet the deal could prove a very mixed blessing both for Brexit negotiations and the Northern Irish peace process.
Holding the balance of power in a hung UK parliament gives the hard-line Ulster loyalists a fantastic opportunity to hold the UK government to ransom. Most commentators expect they will demand a substantial boost in subsidies from the UK government, running at an annual £10bn from the Barnett formula alone. But that is the easy part.
As far as Brexit is concerned, the attitude of the DUP has long been ambiguous. The party was a strong supporter of Brexit, and indeed was responsible for laundering an unexplained £425,000 donation through its accounts to the Brexit campaign in Britain. The closest allies of the DUP MPs at Westminster are all hard-line Brexiters on the right-wing of the Tory party, who favour a hard Brexit, or no deal at all.
That is not the official position of the DUP. Arlene Foster, the party leader in Belfast, is adamant that she does not want to see a “hard” border reintroduced between Northern Ireland and the Republic. She knows that would be the inevitable result of “no deal” with the European Union. It would wreak havoc with cross-border trade relations, with a direct effect on the livelihood of many DUP supporters.
On the other hand, the DUP is committed to the principle of having some form of border, to ensure that the sovereignty of Northern Ireland is never called into question. One of the assurances the party will seek from May for their support at Westminster is that she will block any plan to hold a “border poll’ – a referendum on Irish reunification allowed for under the 1998 Good Friday agreement and favoured by Irish nationalists. Another demand will be to veto any proposal to give Northern Ireland a “special status”, a sort of halfway house between Britain and Ireland. A third is that there should be no reinforcement of border controls between the islands of Britain and Ireland, which might interfere with free movement within the UK.
The DUP will be in a much stronger position to insist on such red lines if it is May’s essential partner in power. The effect of May’s deal on the peace process could be even more dangerous. The Good Friday agreement requires that in the event of any conflict between the unionists and nationalists sharing power in Belfast, the UK and Irish governments must act as impartial arbitrators. That is precisely the current situation in Belfast, where power-sharing between the DUP and Sinn Fein has been suspended. But with her government depending for its survival on the 10 DUP MPs at Westminster, May cannot pretend to be impartial.
This matters in Dublin – Irish prime minister Enda Kenny tweeted on Sunday:
When the referendum campaign was fought last year, the idea that Brexit might disrupt the peace process was airily dismissed by Brexiters as “ridiculous scare-mongering”. Indeed, the effect of Brexit on both Northern Ireland and the Republic was barely discussed by either side in the campaign.
Now, as a result of the election and May’s lost majority, the Irish question will be forced onto the agenda – and the DUP will have an effective veto on any compromise. That could prove disastrous for a Brexit deal and disastrous for the peace process, too.
Edited by Geert Linnebank
No one can know how the British economy will perform in coming years, since we do not know what the international environment will be, nor what impact government policies will have. As the respected, non-partisan Institute for Fiscal Studies (IFS) said today, both major parties’ manifestoes leave voters in a fog about likely levels of taxes and public spending. But the economy itself is providing some clear indications about the circumstances during which Brexit will be implemented. They are not good.
Growth figures covering just three months are notoriously unreliable. Initial estimates are often revised later, in either direction. Nevertheless, those from the Office for National Statistics (ONS) for 2017’s first quarter, released yesterday, did confirm some trends that should surprise no one:
- Rising inflation (an annual rate of 2.7% in the latest month) is eroding real incomes and thus consumers’ spending power. The pound’s post-referendum devaluation has returned UK inflation to a higher level than elsewhere in Europe.
- Growth in GDP per head, the best indication of overall living standards, is flat – and GDP growth itself is a measly 0.2%, thanks to Britain’s combination of population growth and weak productivity.
- The business investment that would be required to raise productivity remains weak, probably thanks to the uncertainty about regulatory and economic conditions created by Brexit. Inflation-adjusted business investment did return to growth in the quarter for the first time in a year, but only modestly.
As far as Theresa May is concerned, this week did bring one positive feature: net immigrationdropped by 84,000 to 248,000 last year. But that is still nearly two-and-a-half times as high as the maximum the Tories are promising in their manifesto.
What’s more, the IFS points out that lower migration will reduce a Conservative government’s tax revenues. As the IFS’s Carl Emmerson says, the Office for Budget Responsibility “has already downgraded its forecasts for receipts by £6 billion in 2020–21…due to lower expected net immigration. Meeting the Conservatives’ commitment to reduce immigration to the tens of thousands would hit tax revenues by a similar amount again.” On that basis, the Conservatives will be about £12 billion short – if they hit their immigration target, that is.
With a new YouGov opinion poll showing Labour narrowing the gap with the Conservatives to only five percentage points, the pound has again been sliding. May could well say that this just goes to show what a danger Jeremy Corbyn would pose as prime minister. A more balanced assessment would be that more falls will keep pushing inflation up.
Moreover Brexit, especially given Corbyn’s ambiguous attitude to it, is itself responsible for making a Labour victory worrying for investors: removed from the constraints of EU treaties, post-Brexit Labour would be able to reintroduce state aids to pet industries, especially nationalised ones, and pursue protectionist trade policies.
None of that is in Labour’s manifesto, of course. But then neither party’s manifesto looks a reliable guide to what it would actually do.
Edited by Hugo Dixon
Theresa May says everybody should rally round her so she has a strong hand to negotiate Brexit. What she’s actually asking for is a landslide so she can ram through Brexit at any cost – even if it means driving the economy over a cliff. She’s picking a fight with Europe, because she thinks that’ll win her votes and we’ll all join her in sticking two fingers up to Brussels.
Such aggressive talk alienates our partners and makes it more likely we’ll crash out of Europe with no deal.
That would be bonkers. Don’t give Theresa May a blank cheque to wreck our future. Vote for the most pro-European candidate in your constituency on June 8.