keith richardson – march 2018

Britain is leaving. But nobody knows exactly where it goes. There are too many unknown factors. Perhaps we can make a rough guess. But first we need to be clear where Britain is starting from.

For me, the story begins with the war. When the siren made its terrifying scream, to announce the presence of German bombers, my mother would drag me all sleepy out of bed and we would hide under the solid dining-room table, in the hope that if the roof fell in we might yet survive. We were not bombed. Other people were, many of them. And it now seems to me that the whole of my childhood was spent in the shadow of the dreadful war and those difficult years of austerity and rationing that followed. So that, when I learned that the former belligerents on the Continent of Europe were putting their heads together to find a way of working in peace for their common benefit, this seemed to me to be excellent news, one of the most welcome developments of the twentieth century. And so I think today, and echo the words of that distinguished Irish politician, Peter Sutherland: “Building Europe is a noble venture”.

So what exactly has been built? From a distance the European Union may seem intimidating because of its size and complexity. But having followed it closely for many years and decades, I see in reality a voluntary association of sovereign, independent, democratic nations, that have jointly written a rule book through a series of commonly agreed treaties, a rule book that sets out precisely what they want to do together and how they want to do it. The rules lay down how decisions are taken, under the democratic control of ministers and a parliament, and how they are implemented by a team of officials charged with promoting the common welfare.

No doubt the system is flawed, like every other political system known to man, but it has shown a remarkable ability to evolve and reform itself in response to new challenges. And it is a system in which Britain had an equal voice, and in some ways a more than equal voice, thanks to the universal use of the English language and the vigorous attitude of British politicians. The two most important developments of the European Union in recent years – the enlargement into the former Soviet bloc and the establishment of a single market – were quite specifically driven from Westminster in pusuit of Britain’s own politial agenda.

And now Britain is leaving, for there seems little prospect of the referendum decision being reversed. Attempts to quantify the results in terms of jobs and prices are a waste of time, for there is so much we do not yet know: what the British government will ask for and what will finally be agreed, and how the business world will then respond. But the direction of travel is not all that obscure. The government has called for a “close relationship” with the European Union. But what exists, for Britain as a full member, is the closest possible relationship. So what the government is really calling for is a “less close relationship”, and from that everything else follows.

Trade with Europe today is as near to “frictionless” as the rules can make it. There will be more friction in future. Maybe tariffs, or problems with regulations, or tedious paperwork, or arguments about the extremely complicated rules of origin, or simply queues and hold-ups at the ports. We do not know which will be the worst. But exporting to Europe will be harder, perhaps much harder. Inevitably Britain will export less to Europe, less than we would have done otherwise, perhaps less than we export today, perhaps much less, depending on how these difficulties work out in practice.

Fewer exports mean fewer jobs and smaller profits for businesses. That means that the government will receive less money by way of income tax and corporation tax, and will therefore have less money to spend on social services. The National Health Service, already desperately strapped for cash, will be worse off, not better. The balance of payments will suffer, the pound sterling will fall further, and the cost of living will rise for everybody.

Ah! But it has been said again and again that the loss of business with Europe will not matter because of the golden opportunities in the rest of the world. This is nothing but pie in the sky. It needs to be said, again and again, that there will be no new opportunities. Britain already exports to China and India and to every other country on the planet. There are no new markets to be discovered. And the fact that exporting to Europe becomes harder does not make it easier to sell to China. China already buys more from Germany than it does from Britain. Why should that change?

Ah (again)! But, it is said, Britain will be free to negotiate its own trade agreements with other countries. True. But in the real world trade agreements are achieved by bargaining: my concessions against your concessions. And there is no government in the world which will offer better concessions to gain access to the middle-size British market than it will offer to the far bigger and richer European Union. American trade negotiators will certainly be ready to negotiate with Britain, but their negotiators are bigger and stronger and far more experienced than their British colleagues, and they will make very sure that the final result is firmly skewed in favour of American industrialists and American farmers.

Farming is indeed a special case. It is said that British consumers will be able to buy much cheaper food on world markets. But this needs thinking through. All countries protect their own farmers. The much derided Common Agricultural Policy of the European Union represents a very carefully negotiated compromise between the interests of consumers, farmers and taxpayers. It would be naïve to imagine that a new policy could be tilted in favour of consumers without any cost to the other groups. British farmers benefit from CAP subsidies. But if the country is flooded with cheap food from the rest of the world those subsidies will need to be doubled or trebled or the farmers will be out of business. But where will the money come from? And where is the protection for British consumers if that imported food turns out to be a good deal less cheap in a few years time than it is today?

The other special case is financial services, a bastion of the balance of payments and a goldmine for the tax-collectors. Of course the City of London will still be important, it will still do business with the rest of Europe. But how much business? On what terms? Nobody knows. Banks are already covering themselves by moving some of their operations to Frankfurt or Paris, or Dublin, or Amsterdam. They are already worrying about the difficulty of recruiting top class Europeans to work in a Britain which hardly seems to welcome them.

The special cases make the point. Everything about Brexit is wrapped in a fog of uncertainty. British voters were warned before the referendum that they would be poorer but they chose to ignore the rather implausible figures that were flung at them. There is no way of calculating the impact. All we know is that it will be bad, bad for jobs, bad for business, bad for public finance and social spending, bad for the health service, bad for the cost of living. Bad, perhaps very bad. But at least there is one compensating factor. British citizens, those who can still afford to travel abroad, will be able to have blue passports instead of red. Let us wait and see if that satisfies future generations.

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