‘Taking back control’? Britain after Brexit

A fortnight after the British referendum on EU membership, Britain is still in turmoil. Some of the negative lessons are all too clear: don’t try to solve party political problems by invoking existential issues; referendums are volatile and uncertain; if you must have one, get a crack team together first. But, as weary politicians are fond of saying, we are where we are.
So what is likely to happen now?
There are different views about what course of action the referendum requires; but there are also very different views about what it might mean to ‘take back control’, which was the core theme of the campaign.

Re-run the vote? The referendum was contested without clear policy options, so the implications of the ‘Leave’ result are opaque. There is some evidence of ‘Bregret’, but only enough to sharpen the knife-edge balance between the two sides without changing the outcome decisively. Over 4m people signed a petition to hold another referendum. But weighed against 17m for ‘Leave’ in a highly divisive campaign, we’re unlikely to see this ‘once in a generation’ referendum being re-run anytime soon.

Ignore the vote? Might it be possible to avoid having to do anything decisive about the result at all? After all, the result is not necessarily binding at law in Britain, with its doctrine of parliamentary sovereignty. One commentator even suggested doing what Tsipras did in Greece – once you realize how economically costly it would be to follow through on it, shelve the plebiscite and go with the safer option. This is not an improbable scenario. No-one is keen to start the two-year count-down toward the exit door. None of the leaders of either the Remain nor the Leave camp in the Conservative party is still on the scene, and a lengthy leadership contest is yet to play out (1); Labour can’t shape the debate while it’s tearing itself apart. The Treasury had no contingency plans for leaving the EU. Formal negotiations can’t start until someone invokes Article 50 of the Lisbon Treaty, but there will be much informal sounding-out going on before then (whatever Juncker may think).

One of the considerations that stopped Greece from acting on its 2015 referendum mandate to reject the proffered bailout terms was that the economic consequences were likely to be more damaging to Greece than to their European partners. The economic effects of the Brexit vote have indeed been negative – sterling is on the slide, the value of stocks and of property is falling, fewer jobs are advertised; uncertainty is widespread. But these are not the catastrophic effects conjured up by ‘Project Fear’. Stock markets in Germany, France, Spain, and Italy are more jittery, it seems, than Britain’s. There is no immediate incentive to back away from Brexit to save the economy.

Nevertheless, this can’t last indefinitely, not least because Leave voters want their vote to have some visible effects. What the market commentators too easily overlook is that for many of these voters, an economic hit of some sort was only to be expected – and was a price worth paying. Theirs was a campaign about ‘taking back control’ of their country. Never mind that Britain never was an ‘island nation’ – not since the union with Scotland in 1707, not during the expansion of Empire. Even until 1981, British citizenship extended to the populations of the UK and all of its former colonies alike.

But ‘control’ over what, located where, on what terms, to whose benefit? These will be the key questions. ‘Taking back control’ can mean many different things. Everyone acknowledges that immigration loomed large in the dissatisfaction that mobilized behind the Leave vote. Oddly enough, areas with low immigration seem to have voted more strongly for Brexit, and some of this reflects an instinctive insularity among the relatively comfortable middle classes in the shires.

What stood out more strikingly was the strength of the Leave vote in areas that had previously been Labour strongholds but that been leaning increasingly toward UKIP. These were generally areas that had suffered long-term decline in manufacturing, job losses and income insecurity, and under-investment in social services. Indeed, 37 percent of those who voted Labour in 2015 voted Leave in the referendum. But it isn’t just the level but the relative change in the share of migrants between 1991 and 2011 that seems to have been important here. These voters were not persuadable by arguments about economic costs of leaving the EU. As one Yorkshire woman told political scientist Anand Menon, ‘I don’t mind if we take an economic hit. Our lives have never been easy, after all. But it will be nice to see the rich folk down south suffer.’

This is rightly seen as a protest vote by people who feel the system of political representation has let them down. Right across Europe, social democracy made extensive accommodations with economic liberalization and globalization during the 1990s and 2000s, and this not only increased aggregate wealth but made the left more electable. But there was too little corresponding political commitment to redistributive social justice and social protection for those who were not going to benefit from the harsher and more exposed economic climate. Brexit voters are among ‘the world’s financial losers’.

The global financial crisis may have added a cruel ratchet to economic decline in many areas of Britain, but the austerity that was imposed from 2010 onward – its extent, severity, duration, and especially its social distribution – was wholly home-grown and in the circumstances, in the view of most macroeconomic commentators, it was wholly unnecessary. Britain decided all by itself to allow East Europeans full access to its labour market after 2004 (one of only three EU member states not to impose some restrictions, along with Ireland and Sweden, all similarly keen to avail of ready supplies of cheap skilled labour). The evidence shows that the people who moved were net contributors to the British economy – overwhelmingly young, of working age, in reasonably good health, often single, they paid more into the welfare system than they drew out of it. It was primarily the political failure to invest adequately in education, health services, and housing supply, that made people feel that immigrants were unfairly soaking up scarce resources. But the tabloid press and the political right offered an age-old and easy scapegoat for welfare state failures in the form of the newly-arrived East European foreigners, and the ‘foreign’ rules of the Single Market that made it possible for them to come.

So what next? It won’t be easy to build consent across the divide that opened up in the course of the referendum debates, let alone to create the conditions for a new phase of prosperity and security.

There are very different views involved about what it means to ‘take back control’ of their own fate into British hands. The early stages of the Conservative leadership contest represent two very different potential directions for the party. Theresa May is the ‘stability’ candidate, not a convinced ‘Leaver’. But she has form on immigration, and she has promised to prioritize border control over British prosperity in EU negotiations. Andrea Leadsom is a probably a more hardline Brexiteer, with stronger free-trade preferences. She characterized the outcome of the referendum as a victory for ‘freedom’ akin to the fall of the Berlin Wall, complete with references to ‘stifling Brussels bureaucracy’ and other bogies of convinced Eurosceptic right.

Future negotiations with the EU will therefore centre on some kind of trade-off between immigration controls and Single Market access. But this will be difficult. A Norwegian-type EEA arrangement will not count as ‘taking back control’ on immigration. Besides, the other EU27 will not be keen to compromise on freedom of movement. Too many of them are worried about the ferment of populist sentiment of both right and left within their own borders (les extrèmes se touchent). The Italian stock exchange, for example, took a hard knock in the wake of the British vote, and their banks looked increasingly vulnerable, just as the 5-Star Movement won the mayoral contests in both Rome and Turin. If there is no room for EEA-minus, neither do the prospects of a Canadian-type free trade deal, proposals for which are causing huge problems across the EU, look at all promising.

More fundamentally perhaps, the problem still remains within British politics as to what it might mean to ‘take back control’. Pro-globalization liberals in the Conservative party, including perhaps Leadsom, want more deregulation and full integration into the low-tariff trading world. The party members seem more likely to favour May and a more pragmatic, less ideologically rigid settlement, though Leadsom has the backing of the biggest UKIP funder, Aaron Banks. What neither of these candidates is proposing – to date at any rate – is a more fundamental review of Britain’s institutional and constitutional arrangements that might help to bridge the enormous divisions in the country. And apart from anything else, Britain’s co-responsibility for the peace process in Northern Ireland hasn’t gone away, you know.

Scotland is not at all happy about the prospect of being ejected from the EU over its head, and this has raised a whole other set of issues about what it means to ‘take back control’. Nicola Sturgeon has already been in Brussels to explore how its ‘Remain’ majority might play there. This time there would be not be any question but that EU membership would require adoption of the Euro, and existing UK opt-outs would surely not be available. If a referendum were required (and it’s hard to imagine that it would not be), and in the context of weakening sterling, the risks of economic uncertainty may well weigh less heavily with the Scottish electorate this time. A possible break-up of the UK is back on the cards.

‘Taking back control’ over the priorities that govern everyday life is also highly problematic. Those who voted in protest at the unresponsiveness of the political system to the costs of globalization, and disgust with the distributive consequences of unfettered financialization, are unlikely to find any champion of their interests amongst the Conservatives, notwithstanding some symbolic gestures to curb top executives’ pay and so on. (And no-one should have been deceived by Gove’s proclaimed interest in helping ‘the dispossessed’, any more than by Iain Duncan-Smith’s resignation in protest at the damage to the disabled caused by the disability cuts he introduced). In any case, the shrinking economy after Brexit means the government not only won’t have a fiscal dividend to share out (even if it wanted to), but will face a new funding shortfall, perhaps up to £40bn, justifying a continued squeeze on spending just to stand still.

The Labour Party has proved itself quite incapable of capturing the demand for a new kind of politics that was reflected in grassroots support for Corbyn, and harnessing it to a strategy that would prioritize investment in productive and social infrastructure, greatly improved social supports, and a strategy for ensuring shared access to the benefits of growth. Some but not all of these measures are made more difficult by EU rules on state aid, fiscal disciplines and so on. It would certainly help if, as Aidan Regan pointed out, the EU were to recognize the need for stronger state activism and more robust policies of social compensation to complement the Single Market.

The victorious Conservative candidate may well call an early election; on present indications, Labour is likely do very badly and could find itself excluded from power for the foreseeable future. ‘Taking back control’, it turns out, is a far from simple matter.

  1. 11 July – I’ve just read that Leadsom has withdrawn from the competition for the Conservative leadership. A slightly updated version of this post is at UCD DEI’s EuropeDebate.

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19 thoughts on “‘Taking back control’? Britain after Brexit”

  1. Leadsom is gone so no leadership struggle. What a moron with those motherhood comments.

    Brexit makes the current account deficit worse. Productivity is atrocious. FT was going on at the weekend about options for Carney . Neg rates or QE. Both useless. In the same issue they were laughing at Iranian hardliners for dissing heavy metal. Neoliberals are as bad as religious police.

    Very hard to see where the UK goes from here. Brexit and Trump seem to be linked. Failing institutions. RBS shares anyone ?

    Tariq Ali from 2011

    https://www.theguardian.com/world/2011/nov/15/global-protests-2011-change-the-world

    “The most striking feature of these uprisings,” he goes on, “is that nobody has yet demanded a totally alternative social and economic programme – apart from Greece, but even they are in a confused state: they say no to austerity, but there isn’t even a charter of six or eight demands. And if they carry on thinking like that, they will be defeated. Without any doubt. It’s a huge weakness.”
    What he says points up the clash between what you might think of as the Old New Left, and the generation that has recently taken centre-stage. Others might rhapsodise about autonomous communes and the glories of non-hierarchical organisation: by contrast, though their politics are light years apart, Ali echoes Fukuyama’s argument that without a coherent programme and convincing mass support, you’re toast. So is there reason for even the most qualified optimism?
    “Yes. Because I think these are the first signs – not of a unified movement, but of different movements in different countries that are searching for something. And that process of searching is extremely important. We’re in a period of transition.”
    And when might things start to cohere? “I would have thought it depends a great deal on how the economic system functions over the next 20 years. I think the next two decades will be quite decisive.”

  2. As per Open Europe.

    “German Chancellor Angela Merkel told ZDF yesterday, “The decision [to leave the EU] has been made. The next step is that Britain – and they want to do this only when they have a new Prime Minister – files an application for Article 50. I expect that to happen…I deal with reality and I firmly expect that this application will be made.” She added, “We have spoken to Britain and made it clear that there will be no negotiations until they have made their [Article 50] application – and also no cherry-picking.”

    The EU, under the treaties, has solely a coordination role in relation to the nature of the fundamental economic and social policies of member countries. The “choices of society” are for the societies – organised at the level of nations states – themselves, The internal problems of the UK are the responsibility of its own politicians. Indeed, the February deal negotiated by Cameron, and now off the table, went a very considerable distance in defining where the boundaries lay.

    The reality is that the extremes of both the left and the right across Europe are selling a false prospectus of what EU membership entails. Both have to be isolated. The election of May sees the process beginning with regard to the right in the UK. Without it also happening with regard to the extremes on the left, however, the future prospects for the UK are bleak.

    There is every evidence, nevertheless, that the political class of the broad centre has grasped this essential need and are working flat out to bring it about. If and when it happens, the UK political landscape will be transformed. And the context in which the decision on Article 50 might be taken. Not to mention the economic one.

  3. ‘Taking Back Control’ was and is a very powerful slogan. That slogan, which as you say means many things to many different people, has now enter the consciousness of the electorate. The scramble of the conservatives to re-position themselves as ‘one-nation tories’ flies in the face of their decades old free market (and anti-worker) policy positions, while the remnants of Blairite Labour seem more likely to take on the workers and unemployed of Northern England than to support them.

    A few questions.
    Why should stock markets falls cause sleepless nights to people who never benefitted from stock market rises?
    Why should people without work, or in the precariat, not want, or aspire to, a return to the steady work that their forefathers enjoyed, and fought and died for, in a country awash with money?
    Why should the modern ‘Single Free Market God’ stands in the way of such aspirations?
    To whose benefit has the ‘Single Free-Market’ worked?
    Why did those for whom the Single market provided lavish bonanzas abrogate their responsibility to their fellow citizens?
    If freedom of movement is now such a powerful sina qua non for the EU, what happened that sine qua non in the case of Eastern European nations who joined in 2004, when only three countries accepted freedom of movement?
    Will better social infrastructure and supports in the disadvantaged areas really alleviate away the disadvantage of disappeared employment?
    Why should citizens of Britain, or any other country, who never had deposit account or money in banks, have paid a price to ‘save’ those banks?

  4. “The victorious Conservative candidate may well call an early election; on present indications, Labour is likely do very badly and could find itself excluded from power for the foreseeable future.”

    I don’t agree the first is likely. The second is a toss-up, but you might at some point a highly competent and electorally favoured party led by someone like Hilary Benn could emerge from the mess that is Labour under Corbyn and the activists. They are oversold currently and I would be a modest buyer at these giveaway prices. They are too easy a sell.

    1. I agree. Without growth everything is wobbly. The people are capricious. Tory competence is an illusion. Just look as Ozzy and the deficit. Or RBS. Labour could fashion something decent out of chaos.

  5. “Those who voted in protest at the unresponsiveness of the political system to the costs of globalization, and disgust with the distributive consequences of unfettered financialization, are unlikely to find any champion of their interests amongst the Conservatives, notwithstanding some symbolic gestures to curb top executives’ pay and so on. ”

    Nor are they likely to find any champion amongst the EU elites, where revolving doors seems to operate between EU administrative bodies and the top banks.

    ECB top austerity hawk Bini-Smaghi now chairman of Societé-Generale (a not too healthy bank).
    Former EC Chief Barroso now off to Goldman Sachs, recruited for his ‘knowledge of Europe’, and perhaps a little appreciation of thanks, for holding the banking line during his tenure.
    The ‘No bondholder gets burned’ dogma ruled supreme during the tenures of both gentlemen. It clearly pays to be on the side of the banks.

    So we should disavow ourselves of any notion that EU institutions, any more than the conservative party, are on the side of the little guy rather than on the side of the big banks and big business.

    1. The big banks despite all the political love are on a very shaky scraw. Deutsche Bank is toxic as is RBS. Goldman can barely generate 10% RoE. Debt worship has brought deflation and stagnation.
      The next crash will be a Gotterdammerung.

  6. I very much agree with the focus on the desire or objective, however ill-defined it might be, of “taking back control”. It was probably the factor, in addition to a wide of discontents, that tipped the result. This factor has an impact to varying extents in all of the advanced economies, but I would contend that it probably has a much greater impact in Britain – and, in particular, in England. There is perhaps an element of an “English exceptionalism” about it which is reflected in a deeply ingrained and stubborn adherence to democratic governance. This, of course, is not unique to the English, but, rightly or wrongly, many English voters took the view, and were encouraged by much of the media to take the view, of those running the EU’s institutions that “We didn’t vote them in; and we can’t vote ’em out”. And they wanted out of this. Add to this the perception, particularly of older voters, that the EU originally was not something that Britain had a role in creating; it was something it joined on a transactional basis. And top this off with a lingering but resonant memory of England standing alone against Nazism in Europe between May 1940 and December 1941.

    Whatever about the other parts of the now rapidly fraying union, England will be much more at ease with itself outside of the EU. And the EU will probably benefit in terms of the efficiency and effectiveness of its decision-making process – irrespective of the quality of the decisions – once the most difficult member has departed.

    The palpable sense of release and freedom to chart major new policy departures is evident in a speech Theresa May gave in Bermingham yesterday morning before she knew she was about to become the PM-elect:
    http://www.theresa2016.co.uk/we_can_make_britain_a_country_that_works_for_everyone

    I would commend this speech to the house. The extent to which she has stolen so much of Labour’s clothes is almost embarrassing – and she may be already regretting her boldness, but she has set out specific policies that tackle directly many of the public discontents that fuelled the Brexit vote. It would behove our own politicians, policy-makers and the other influential “shakers and movers” to take note of what she is proposing because the discontents she is addressing are bubbing below the surface in Ireland as well – and occasionally erupt (vide water charges).

    However there is evidence that the response is to see “England’s difficulty is Ireland’s opportunity” – and to seek to exploit it ruthlessly.

    1. The problem with her speech is that membership of the EU does not prevent any of the admirable objectives she sets out being achieved as they constitute a list that remain national prerogatives. But exiting the EU may well add to the difficulty of doing so; and drag us along in the process.

      With regard to Brexit, the devil is in the detail. She is, apparently, a master of it. The real test is the extent that she delays activating Article 50, The longer she delays, the more evidence will be emerging, to mix metaphors, that the UK may actually end up pulling the devil by the tail; and the UK electorate continues to wake up, as it is currently doing, to the fact.

  7. There is little evidence that the vote was some sort of protest against austerity or that, if only more ‘tax-and-spend’ policies had been pursued in recent years, the vote would have been different. It is a myth that the south and north of England voted in totally different directions. The difference was marginal. Apart from London, all English regions voted for Brexit. Last night BBC had two reports: one from a south coast town, the other from Essex. Both were strongly Tory. Neither were poor or experiencing unemployment. But, both voted 2:1 for Brexit. Neither is there any evidence of a great appetite among the electorate for the ‘new kind of politics represented by Jeremy Corbyn’.

    The driving force behind the vote was British nationalism. Other nationalisms, like Irish nationalism, Scottish nationalism exist just as fervently as British nationalism, but, with the key difference that the latter (except for a few fanatics) see no conflict between their nationalisms and the European project (indeed they welcome it as a means of escaping the dominance of British nationalism), but British nationalism is incompatible with the European project as its not a culture-based nationalism but an imperialist nationalism that seeks to dominate. Most of the pro-Brexit voters only hold British nationalist views to a mild degree and would probably be perfectly friendly to you or I, but for raw British nationalism of the type that drove Brexit one only had to look at Belfast last night where, in addition to the usual burning of the Irish flag and effigies of the Pope, the EU flag and effigies of Merkel got torched by the Brexiteers. The idea that the persons doing this were making some sort of socio-economic protest is daft.

    As for Ireland, it should stop worrying about the fact that British nationalism has just shot itself in both feet and, as well as inflicting significant economic damage on itself, is almost certain to lose Scotland to the Union (with obvious repercussions for N. Ireland after that). Instead, the Irish government should focus on the opportunities (as David McWilliams suggests). As a start, it should announce that Ireland will match any cuts in business taxes the U. Kingdom may announce. Given that Ireland has a budget deficit of almost 0% (and falling) v 4% (and rising post-Brexit) in the U. Kingdom, and has a balance-of-payments surplus of 4% v a deficit of 7% in the U. Kingdom, this is easily affordable.

    1. I find it hugely ironic that just when the UK government is landed with a Brexit policy but has virtually no implementation plan, the Chilcot report on Iraq produced such trenchant criticism of a big policy decision where there seems to have been scandalous lack of attention to detailed planning and implementation issues.

  8. you feel hopeless like nothing can save you
    and when its over you wish you could have the EU bad stuff back so you could have the economic good
    but you voted Leave

    The UK is in a hopeless place with those deficit stats and a tanking currency and no trade negotiators in an era of global deflation

  9. The Brexit negotiations agenda as viewed by the Secretary of State in charge of them.

    http://www.conservativehome.com/platform/2016/07/david-davis-trade-deals-tax-cuts-and-taking-time-before-triggering-article-50-a-brexit-economic-strategy-for-britain.html?ftcamp=crm/email//nbe/BrusselsBrief/product

    “So be under no doubt: we can do deals with our trading partners, and we can do them quickly. I would expect the new Prime Minister on September 9th to immediately trigger a large round of global trade deals with all our most favoured trade partners. I would expect that the negotiation phase of most of them to be concluded within between 12 and 24 months.

    So within two years, before the negotiation with the EU is likely to be complete, and therefore before anything material has changed, we can negotiate a free trade area massively larger than the EU.”

    Really!

    1. The new UK PM is a canny and shrewd politician. In her first speech as PM she regurgitated key elements of major shifts in economic (and social) policy she set in a speech on Monday. She didn’t have to, but she did. The new Chancellor of the Exchequer and Home Secretary are her trusted deliverers of these policies. Appointing three leading Brexiteers (Johnson, Gove and Fox) to Brexit and external matters is a win-win. If they do a good job they will have to explain the inevitable compromises to Brexit supporters (think Dev sending Collins to London). If they fail, they’ll be toast, Brexit supporters will have to swallow a large dose of reality and the PM will be able to appoint more competent and pargmatic players. In addition, don’t underestimate her ability to establish good working relationships with the leading centre-right governing politicians in the EU. Furthermore, the EU will have to revise its border and migration policies so the free movement compromises might not be that great.

      Finally she’s doing a thorough reshuffling of the cabinet at the moment and there is no effective parliamentary opposition. Things are looking up for Britain.

      1. She scrapped the 2020 deficit target. She will do nothing about deflation. Her new chancellor is a deflationista aka austerity hawk. The UK needs pay rises and will not get them.

        1. I wouldn’t trust this reconstituted Tory high command as far as I could throw them, but it might make sense to wait and see what transpires.

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