Since Theresa May released her Brexit withdrawal agreement, it has been met with derision from pretty much everyone. Unsurprisingly, then, it's looking incredibly unlikely that her Brexit plan will pass a vote in the House of Commons on the 11th December; cue even more chaos.
What could happen next? A Children of Men-like no-deal Brexit with medicine shortages and tanks rolling up Oxford Circus? A second referendum? Maybe even a general election? As Theresa May prepares for a historic, five-day debate in Parliament this afternoon, we spoke to director of left-leaning think tank IPPR, and Brexit know-it-all, Tom Kibasi.
VICE: What would Britain’s economy look like if MPs were to vote through May's Brexit plan before the 29th of March, the date we're supposed to be leaving the EU?
Tom Kibasi: First thing to remember is there’s no certainty about the trading relationship. So there's no agreement for a future relationship. We’ll have the backstop, which puts the UK into a thin customs union, so there’ll still be regulatory checks, but we won't be in the single market. So it leaves Britain in a state of complete uncertainty that will continue to suppress business investment, because business will not invest if they don't know the status of a country’s major trading relationship.
So the first consequence is sustained uncertainty and sustained depression of business investment. Then we’ll be in the transition period, where things will be more of the same than they are different, with investment continuing to be down and that continuing to have an impact on our growth rate. So I think we'll have sluggish growth, the pound will stay weak, which means import prices will be high, meaning that real wages will continue to suffer. So what we’re in for with May’s deal is continuing low economic growth and poor wage growth and probably higher inflation.
And then, if you get the outcome of the political declaration, I think the Treasury and Bank of England modelling is probably right. It’ll impact our trading relationships until, over time, our rate of growth will continue to slow and we’ll progressively fall behind other countries in terms of our living standards.
The National Institute of Social and Economic Research say that, in the medium term, it leaves us 4 percent of GDP less well off. Four percent of GDP in today’s money is around £100 billion of the country’s money – that’s not far off what we spend on the NHS each year. So it isn't particularly smart for me.
Who's happy with the deal?
It depends on what your definition of success is. If the goal was to deliver as hard a Brexit as possible, then you should be [happy]. But the question is, is that something that’s in our interest? What's striking from what's happened since the withdrawal agreement is published is that there clearly isn’t a way to satisfy the hard Brexiteers. For the extremists, there is no Brexit that can be hard enough. You slightly wonder whether they want to start shelling the continent before they’re happy.
So what is striking is that having negotiated a very hard Brexit, she still hasn't satisfied the Brexit ultras. So for everyone else, and those that understand economics in particular, it’s pretty obvious the harder the Brexit, the more damage to the economy. So if your yardstick is how we respect the result of the referendum while doing the least damage to the UK’s economy, then her deal is a failure. If your definition is "as soft a Brexit as possible" then it’s a failure; if your definition of Brexit is as hard a Brexit as is pragmatically attainable then it’s a success; but if your definition of success is an ultra-hard Brexit because you have an allergy to all things European then it’s also a failure, because we continue to have a relationship with our European neighbours.
They haven’t got what they wanted, but as you say, Rees-Mogg and the like hate Europe so much they’d never be happy. But did their pressure force a hard Brexit?
There’s a weird lack of agency attributed to May. While it’s true the hard Brexiteers have held her to ransom, the reality is that most of the problems were created by herself. So, the Lancaster House speech was one of the most shocking speeches ever to have been delivered by a prime minister. She set out a direction of hard Brexit – so out of the single market, out of the customs union, out of any shared institution – and pretty much said, "We don't want any part in anything that is in our national interest." So she really made a bed for herself to lie in, which was impossibly difficult. Having said that, she finally educated herself on the actual issues at hand, and in 2018 she was reborn as a soft Brexiteer, trying to stay in the single market and de facto stay in the customs union. The problem was that by that point she had squandered so much political capital that she wasn't able to deliver a soft Brexit. The Europeans said no for her plans to be half in and half out of the single market, and in the end she’s ended up delivering a very hard Brexit. Not as hard as the ultras would have wanted, but certainly not a soft Brexit.
How would a deal look different under Labour?
Labour would have negotiated very different deals, as far as I can tell. There are several features in that difference. Labour would have entered into a permanent customs union with the European Union. It’s worth remembering that, around the world, the EU is one of only 12 customs unions that exists. So more than 100 countries are currently members of customs unions. So this is not a unique feature of the EU, it’s actually something that’s very common. There’s a reason for that: scale trumps agility in trade negotiations. Usually the bigger party succeeds and the smaller, weaker party comes off less well in trade negotiations. So there are obvious benefits to remaining inside of one.
The second is Labour would aim to stay in alignment on the rules and regulations of the single market, so de facto in the single market.
The third, and an important differentiating factor, precisely because its objectives would have been to have a close economic relationship with the EU, it would have focused negotiating efforts and its political capital on securing a say for Britain in both the customs union and the evolution of single market regulation. And having some ability for the UK to diverge if there was something that was antithetical to the UK’s interests and from known and proportionate consequences. So when people say, "Well, there is no difference," you have to remember the starting point for the negotiations would be radically different. The Tories have started by saying, "How can we have as distant an economic relationship as possible?" and Labour has said, "How can we have as close an economic relationship as possible?"
Is Brexit even going to happen?
At this point it would be unwise to say it definitely will. May’s failure to negotiate the deal isn't acceptable to anyone. She’s effectively landed herself in between two stools: not soft enough for the Remainers, not hard enough for the Brexiteers, and therefore finding herself without support from anyone. As a result of that, it opens up the possibility for a general election and Labour negotiating a different kind of Brexit, or the possibility of a second referendum, if there’s a deadlock in Parliament and there’s no deal that can be passed. It may be if Parliament can’t come to an agreement then it’ll end up being referred back to the people. My guess is that the chance of a second referendum is 30 percent: it’s more likely it won’t happen than it will, but there’s still a significant chance.
And what about a general election? Could that break the deadlock?
A second referendum happening is contingent upon lots of things changing. If Parliament rules out no-deal, Parliament rules out May’s deal, the Europeans say you can’t renegotiate, that leaves very few options. You don’t get to a second referendum because all of a sudden people think, 'Oh, this is an excellent idea, let’s have another referendum,' but it is possible that you arrive at one as a matter of last resort. The Labour Party in my view is not going to advocate for a second referendum as a first resort. If it ever gets to supporting a second referendum, it’ll be as a last resort if there’s no other way through the impasse.
It would make more sense for there to be a general election. I think, from a constitutional perspective, it seems to me that if the government can’t get Parliament’s support for its main measure of the day, and it doesn't really have very much in terms of the rest of its programme going on, I personally don’t understand how there is confidence in that government. So it seems to me the logical response to not being able to pass a major legislative measure must surely be for there to be a general election. That would be a way for the parties then to decide democratically what their stance is: are they going to offer to try and renegotiate, are they going to offer a second referendum, are they going to offer to renegotiate and then have a second referendum, are they going to stand on a platform of no-deal? There’s a whole range of options that parties can stand on.
If there was a second referendum – either post-general election or before – and Remain was the outcome, what would it look like?
In terms of the impact, you would see investment being unlocked because it would give business certainty. But I do think there would be a high social price. There would be a lot of discontent in society; it would be very difficult to bring society back together and to heal it. It’s possible, but wouldn't be easy. I think every path is going to be difficult for the UK. Certainly the least economically costly part would be to remain the in EU. But that would also be a very painful path because of the level of social division that that would cause. I don't think there is any positive scenario looking forward.
Great. Thanks, Tom!