Brexit Thoughts

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“Some men see things as they are, and ask why. I dream of things that never were, and ask why not.”
Robert Kennedy

“There are arguments for remaining in the EU and there are arguments for leaving the EU. But there is no case whatever for giving up the benefits of remaining without obtaining the benefits of leaving.”
Lord King

Things are hotting up in the Brexit drama. There is a lot of noise out there (stirred up by those unhappy by the June 2016 result and willing to overturn it – media/big business/Remain MPs). However Brexit is a political issue which many seem to forget.

For the voter, Brexit was simple – taking back control of borders, money and laws – and it won with a 1m majority. They will be unforgiving if this is not the case. It is simply unacceptable to be told the UK can’t leave without a deal – or effectively be told they can’t leave by the EU.

May will lose her deal [the delayed vote and assurances sought will not satisfy Parliament and the EU have refused to budge and will play to the wire - see below]. This was evident from the moment it was published with an open ended Backstop (post 2020), no mechanism for the UK to unilaterally withdraw and NI to be treated differently. The once ‘transition period’ (end of 2020) to allow adjustment post-Brexit (11pm GMT, 29 March 2019) to new rules quietly became an extended negotiation period.

May will then/has been forced to go back to the EU for better terms. They will refuse based on their positions to date or lose credibility. They still believe they can stop Brexit as they are told this by Remain Tories and MPs – making life hard increases the chance of No Deal (which they believe MPs would block) and increases the chance of a Second Referendum. This has now received the added support of the ECJ decision which states the UK can unilaterally end Article 50 (irrelevant given the politics).

May would then likely face a leadership challenge internally and would lose – what else can she negotiate? An enhanced selection process would take place with MPs shortlisting two candidates of which at least one would need to be a Leave supporter or risk outrage. The grassroots membership would choose a Leave supporter (and would prefer Boris). Labour meanwhile would likely seek a No Confidence vote in the Government which they would lose as it would force the Conservatives from power (any kamikaze Remain Tories would reap the whirlwind as with a cancelled Brexit) – and they have no majority to govern.

The outside chance of May surviving would be to pivot hard and fast to a No Deal Brexit, blaming EU intransigence. She would be PM as the UK Leaves the EU and then would quit or be replaced to allow a Leave PM to lead future negotiations and prepare for the next General Election.

Technically, the deadline for getting the Withdrawal Agreement to a ‘meaningful vote’ is 21 January 2019. If there is no agreement on the substance of the withdrawal arrangements the government must publish a statement setting out how the government proposes to proceed, and must arrange for debate about that in Parliament within days. This is where No Deal could be blocked.

There would be calls for a Second Referendum to decide on No Deal or Remain or May’s Deal or No Deal (as seen in the House recently from Grieve, Soubry, Lucas, SNP). Even the PM has categorically ruled this out for the obvious reason that it revokes the Referendum result and Article 50 and would pit MPs against the public. The idea has been given airtime by a Remain media with constant polling and discussion, but the public won’t be fooled and many would boycott it. Where is the majority in Parliament for it? What would the question be on the ballot? Why should Leavers accept the result if they lost?

Parliament will blink at stopping Brexit or No Deal when faced with it and reversing their previous positions in support of a Referendum and Article 50. If they pulled the plug on Brexit, they would unleash uncertainty and anger way beyond any negative consequences predicted by a No Deal:

“I am absolutely clear a referendum is a referendum, it’s a once in a generation, once in a lifetime opportunity and the result determines the outcome … You can’t have neverendums, you have referendums.” Prime Minister, David Cameron

“I will forgive no-one who does not respect the sovereign voice of the British people once it has spoken. Whether it is a majority of 1% or 20%, when the British people have spoken, you do what they command.” Paddy Ashdown

It would take time to be felt at the grassroots but will have poisoned the public with future implications.

A Norway Plus deal is a red herring being proposed by Remainers as a rear guard action (led by Nick Boles, supported by Amber Rudd) pretending to deliver Brexit – it wont.

There would be no immediate General Election thanks to the Fixed Term Parliament Act – created by Remain Liberals – to the benefit of Leavers. A two thirds majority in the House of Commons is required to call an election which is improbable.

Under a new Tory Leave MP or a new ‘No Deal May’, No Deal preparations would be accelerated – they may even ask for an extension. No Deal was always an option once Article 50 was voted on and it became law the UK is Leaving the EU on 29 March 2019. While disruptive in the short term, it would actually be the cleanest exit in many ways.

The European Union (Withdrawal) Act 2018 will immediately embed EU law into UK law, providing consistency to business. Trade would shift to WTO terms but with full freedom to negotiate deals with whoever, whenever. Taxes could (and should) be cut at will. Some of the £39bn can be spent on emergency action. Planes will still fly as per non-EU nations and people will still be allowed to travel as per non-EU residents.

WTO terms are ‘far from being a fate worse than death’ but ‘the normal basis on which countries trade’ said Peter Lilly, Conservative peer and former trade secretary who negotiated the Uruguay Round Trade Treaty which created the WTO. The EU is the destination for 44% of UK exports (down from 55% in 2006) but makes up 53% of imports.

In 2017 under the WTO, the total bill on imports would have cost the UK an estimated £10.6bn making imports, on average, an estimated 4.2% more expensive (v an FX boost of 15% for exporters since the Referendum). Some argue that tariff-free access to the EU market was worth paying for, however Britain’s £10bn net contribution is 7% of the value of exports. Paying 7% to avoid 4% was not a good deal. Autos are at the high end with a 10% WTO tariff and food c.14%.

The EU will only give way, if at all, once they realise there will be no Second Referendum and that No Deal is a course of action the UK is willing to take.

If they concede on an open ended backstop and NI the Leave PM would be willing and able to negotiate a deal before the end of 2020. Canada Plus would be the aim.

If they do not concede on an open ended backstop and NI, the UK leaves on No Deal and negotiates the future with no ‘transition period’ but from WTO terms and embedded EU law.

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