Wednesday, 19 October 2016

May Won't Commit #Article50 Suicide

The cost of the Brexit referendum decision has finally begun to erode household confidence, even though Brexit hasn't even actually happened and the worst is yet to come. So you can bet the Tories will be preparing themselves for yet another U-turn as the costs and related uncertainty increase. Even they must now realise that triggering Article 50 would be committing economic suicide, pure and simple, and I doubt that even Theresa May will be fool enough to pull that trigger come her phoney deadline of March 2017. By then all but the most ardent 'BeLeavers' will have come to their senses, and the polls and regional high streets will be fearing the worst. UKIP has already imploded not because it has achieved what it set out to, but because what it set out to achieve has been demonstrated to be a very bad idea.

We know now that the Leave campaign was built on a tissue of lies, from the 'gross' figure of £350m a week, to the promise of extra spending on the NHS, to the idea that the UK can thrive economically on net migration of 100,000 people a year or lose any of the 1.5m EU citizens working in Britain today who would have to leave under the rules applied to non-EU migrants (even plans to publish lists of foreign workers have fallen flat). Indeed, the UK faces having to pay the EU billions for Brexit (at a poor exchange rate), not only to 'true-up' the UK's current EU budget contributions, but also if it is to secure any preferential access to EU markets (although that is not just a question of money, but of free movement of people etc). 

We also know that in reality the EU has no control over the major areas of government expenditure - social welfare, health, education, defence, public order, housing, transport. These are policy areas that the UK continues to screw up all by itself. And it's dawned on the UK's poorest regions that they rely on EU grants that Whitehall will not be set up to maintain after the current EU budget expires in 2020.  

And all the 'silly rules' on bananas etc that the Leavers complained about are international trade rules, not attacks on British 'sovereignty'. The UK would still have to play by those rules if it wants to engage in international trade.

Finally, we know that the UK imports more than it exports and that investment in Britain's export opportunities have relied on trade deals that the EU has achieved over decades by offering a market of 500m people - the world's largest economy, the world's largest trading bloc, the world's largest trader of manufactured goods and services and the top trading partner for 80 countries. We've learned that it would take the UK over 2 years to drive its own deals, and it will have to take what's offered because it can only offer a market of 60m - the 21st on the list of the world's most populous countries and right next door to the world's biggest trade bloc. Yet the UK can't even sign any trade deals until it has left the EU, which is scheduled to take two years. So investors would be waiting nearly 5 years to see what returns they might get for investing in British export industries that would be facing their biggest ever test. They would surely invest elsewhere in that timeframe. That would mean insufficient investment for export targets to be met. The trade deficit would worsen as the UK imported more (and at a poor exchange rate). Prices would go up, but incomes would not. The government wouldn't be able to raise more in taxes and wouldn't be able to borrow at low rates anymore (that credit rating is only going one way), so many more difficult spending decisions and cuts would loom.

For Boris Johnson to continue to insist that the UK will achieve better trade deals on its own in these circumstances is the same kind of fraud we saw painted on his big red bus: serving up any old lie that people can use to justify their blind, ignorant, nationalistic fervour, rooted only in the dust of an Empire long gone and, ironically, a genetic hotch-potch that has more in common with the French, Germans, Danes and Belgians than anyone else. It is just vacuous, populist politics, and an exercise in narcissism - like making the decision whether or not to back Brexit by writing his own newspaper articles either way and then taking the course suggested by what he thought was his own better article.

But you can't eat nationalistic fervour. It doesn't make your fuel cheaper or cut the price of whatever else you buy with ingredients that have to be imported. And you won't be able to 'buy British' when the UK, like Switzerland, is forced to open its market for 15 years before bigger trading partners open theirs. Competing home industries will be crushed, along with the related jobs.

So, somehow, the Tories have to find a way to avoid triggering Article 50, and it's my bet they will.

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