The British Question

Brexit and Nationality: a case study

Yesterday, I was a Briton who was married to a German and living in the Hamburg area.

Yesterday, I felt AngloDeutsch: part British, part German (plus a few other bits thrown into the mix).

Today, I am truly AngloDeutsch.

I have been eligible for dual citizenship for many years. Initially, by virtue of having a German partner and latterly in my own right, for having lived in the country and paid taxes there for much longer than the qualifying period for citizenship.

Just like my partner, who had the right to British citizenship but never took it up, I never feel the need to become German.

Why would I; I have never felt like a second citizen here. Why would anyone choose to take-up a new nationality or give up one when there was absolutely no need for it under the European Union’s (EU) rules on freedom on people, goods, services and capital? I had exactly the same work, health, pension, tax etc. rights as any other German.

That is how many others in my position felt too, but the UK´s referendum in favour of Brexit changed everything.

My partner regrets not applying for British citizenship when the chance was there. I chose not to make the same mistake. As long as the UK remains part of the EU (currently until the end of March 2019), I was eligible to dual citizenship, so I decided to apply for it.

The decision to for dual citizenship was simple but not easy.

It was simple because I had a choice: either to allow all my rights as an EU citizen to be reduced to two countries, UK and Germany, by retaining my British citizen; or to retain all my rights as an EU citizen by becoming German while also remaining British. What to choose: keep the benefit of all 28 countries or see it reduced to 2 countries?

The choice was simple and in my shoes, you would probably have chosen the same. Like the British government policy stance, I went for the “have cake and eat it” strategy. The difference is that this is was a real option for me, whereas the British government continues to be deluded in thinking that it is be feasible to leave the EU and yet retain all the benefits of being a member of the EU, minus the “inconvenient” bits, such the EU membership fee and EU immigration (not to mention all the other things that the UK has opted out of in the past, such as Schengen, Euro, etc.). Today´s leaks once again show the British government´s inept stance on EU immigration.

The German application process was relatively simple. I had to fill in a 6-page residency form, which was detailed but not a monstrosity of 85 pages and 18 pages of guidance notes, as in the equivalent UK one. There was no unreasonable stuff, such as requiring a list all the international trips I made, as in the UK, or a sense of unreasonable potential obstacles being placed before me, such as proof of comprehensive sickness insurance for self-sufficient persons and students, as in the UK.

It was still a demanding form to complete and required various proofs, such as birth certificates and recent tax returns. Furthermore, it took a good six months to process which is a reflection of the demand for German citizenship, including a spike of Britons applying. The last estimate I read for the UK equivalent was several decades to process the current applications. The German procedure also included a thorough language test (whole day event), as well as a citizenship test (33 questions about national and regional history, culture, society, constitution, etc.), both of which are reasonable if you expect new citizens to integrate. Language is the basis for everything and a bit of knowledge of the country and its laws does no harm.

Those were the “easy”, procedural bits. The harder ones were about the implications for self-identity, as a result of choosing another nationality.

Naturally, this process would have been very different, if I had had to choose between British and Germany citizenship. To have given-up my British identity would have been a chastening exercise. There would have been a lot of emotional aspects connected with considering such a step, though I know Brits who have done so without apparent regrets. I have every reason to be happy and proud to be British, so I am not sure if I would have taken such a step.

I make no bones about the fact that I completely disagree with the way Britain has been changing prior to the EU referendum and rapidly post the Brexit decision. I fear for Britain, its economy and thus the future of my fellow Britons, my parents, brother and friends, both those that voted Leave and those that did not. I have friends and family on both sides of this yawning chasm which already defines Britain today and will continue to do so for at least a generation.

Brexit in itself would probably not have caused me to give up my British nationality. But I am fortunate; it was not a case of either one or the other since Germany allows dual citizenship for members of the EU.

I am fortunate to in this respect. German citizenship is an additive option, not a subtractive one. More is sometime more.

Some of the 1.2 million Britons living in other EU countries are not as lucky, even if they stay in those countries long enough to gain citizenship. Not many countries allow dual citizenship so the decision would be a lot tougher for them.

The Britons already living in an EU country that do not have the option of dual citizenship and choose not to give up their British citizenship will have their opportunities reduced to living and working in 2 countries instead of 28: the one they are living in and the UK. Less is most certainly significantly less in this case.

Everyone else, who is British and residing in Britain or a non-EU country, will have their options reduced from 28 to 1. Less is dramatically less for these Brits. The 52% of the voting electorate that voted Leave will get their just deserts. I feel deeply for all the others that voted Remain or did not or could not vote (myself included, due to the arbitrary 15-year rule).

Less is also a little bit less for EU citizens: their options will be reduced from 28 to 27 (except for the 3.5 million EU citizens living in the UK), though a lot is still to play for during the Brexit negotiations.

This massive asymmetry, involving Britons losing a hell of a lot more options than the EU citizens, has been largely kept from citizens by the politicians, both Labour and Conservative.

Almost criminally misleading claim have been made, such as that GBP 350 million per week will be spent on the NHS instead of the EU, that Britain can have its cake and eat it at the same time by leaving the EU and retaining all the benefits without EU migration and paying into the EU budget in the future, that there will be no “divorce bill”, that new trade deals will be easy for the UK to sign, that the EU has a lot more to lose than the UK from a lack of trade deal, that “Global Britain” can go it alone (surely an oxymoron) once unshackled from a sclerotic EU, that all the current social, health, safety, labour market, etc. rights will be retained by the British government post-Brexit, that net migration can be kept to under 100,000, that… well, you get the general idea. People can be and often are gullible, but not for ever and certainly not when reality starts to bite, which it is certainly doing, despite all the overtime being put into pouring oil on the stormy waters of Brexit by the Europhobic wing of the UK press.

After one year of the British government saying little more than “Brexit Means Brexit” and a lack of clear strategy for Brexit ( “constructive ambiguity” is the best that Mr David Davies can come up with as a fig leaf for the chaos and contradiction that he tries to pass-off as the “flexible and imaginative” British negotiating strategy). Britain clearly lacks the individuals (politicians and civil servants) and institutions with the skills and capacities to deliver a “frictionless Brexit”. Even if this were feasible, which everyone else but the UK government doubts, all the evidence so far is that negotiations with the EU are not going well for the UK and thus also for the EU. But the potential negative consequences for the UK are disproportionate compared with the likely effects on the EU-27.

The messy current and future reality of Brexit has become all too clear to British businesses and is rapidly becoming apparent to British citizens too. The politicians “in charge” (the hapless PM and her merry band of Brexiteers, Nigel Farage included) cannot postpone the inevitable.

The British economy has done extremely well in recent decades and this has been, to a significant extent, due to three critical champions that generate disproportionate wealth, employment, innovation and tax revenue such as the financial sector, the automotive industry and the university/research and development sector among others.  All three are currently in serious trouble. The first 12 months post-Brexit were a period of relative calm but since Article 50 was triggered by the UK, the implications rapidly began to dawn on the business managers in all three sectors, as well as most other parts of the economy.

There is trouble ahead, there are extra costs ahead, there are extra risks ahead, there is extra bureaucracy ahead, etc. The reduced or shelved investment plans are Britain´s loss. That applies to the investors that are already in Britain. New investors will not even seriously consider the UK in the future. The great majority of such investment will flow to the EU-27 countries instead, unless there is something very specific about the UK that will attracts such investment, despite the extra costs and bureaucracy outside the EU´s Customs Union.

Less investment = fewer jobs, lower incomes, lower tax revenue and thus lower public expenditure.

I lived through the late 1970s and early 1980s in the UK. I am not nostalgic about high levels of unemployment and a palpable sense of decline at all levels of the economy and society. It was not a pretty sight then and it would be equally disastrous in the future. The difference is that while economic misfortune was mostly not self-imposed then (Thatcherism most certainly accelerated the process), it would be now.

My joy at becoming German is tempered by my concern, as a Briton, for the future of the UK.

There is nothing inevitable about the current Brexit trajectory and the negative consequences that have already started to flow from it.

The current Brexit path is the result of inept political leadership, Europhobic ideology and Tory in-fighting. No more, no less.

But there is still time to adjust the Brexit choices being made.


Brexit: 4.7+ million lives at stake

Brexit will directly or indirectly influence 65 million people in the UK, but it will fundamentally affect the lives of 4.7 million people: the 3.5 million European Union (EU) citizens in the UK and the 1.2 million Britons in the 27 EU countries. This is more than the population of 9 of the 28 countries in the EU, namely Malta, Luxemburg, Cyprus, Estonia, Latvia, Slovenia, Lithuania, Croatia and Ireland. There are a lot of lives a stake. In fact, the numbers involved are much larger. For example, I am a Briton in Germany but my family are German, so do not count among the 4.7 million. There will be many cases of mixed nationalities, so the true number of lives affected is higher.

4.7+ million is a statistic. People´s families, hopes and futures are not. Brexit puts lives at stake.

The epitome of personal freedom: gone with the wind

These people migrated to the UK/EU in good faith. There are four fundamental rights at the heart of the EU. Of those, the freedom of movement of people to work, travel, study, retire, etc. anywhere within the 28 countries of the EU is fundamentally important. 4.7+ million EU/UK citizens migrated in good faith, created new lives for themselves and put down roots. In doing so, they automatically acquiring the same rights as their fellow citizens in the countries that they are living in.

It is the epitome of personal freedom across 28 nations. 508 million people currently have this right and nothing of the sort exists anywhere in the world. But a year ago, 52% of eligible British voters voted to unilaterally turn their back on this and the other fundamental freedoms of the EU (i.e. freedom of moment of goods, services and capital).  To be fair, only 37% of eligible voters voted Leave, which means that 63% of eligible voters did not vote to leave the EU. It is a pity that the government chose a simple majority, rather than setting a higher threshold for a decision with enormous implications. I was not one of the voters and many other adult Brits living in other EU countries were similarly denied a vote because of the so-called “15-year rule”. As I have previously written, “Britain has taken away my right to vote (and I want it back).”

Is it fair and reasonable to simply cut-off 4.7+ million from all the rights and benefits that they are currently entitled to because of a margin of 2% of the eligible British voters decided that they “wanted their country back” and were willing to play fast and loose with the rights that the EU confers? Can we reasonably expect people to simply pack-up and “go home”? What about the uncertainty, stress and distress involved for them, some of whom have been informed by the Home Office to prepare to go home at the same time as it makes it as difficult and complicated as possible to apply for UK citizenship?

We are talking about ordinary people who legally took-up their rights and who are now uncertain about their homes, jobs, education, pensions, health provision, families and indeed their futures.

Brexit before People

Small wonder then, that the EU has prioritised sorting out the future of these 4.7+ million people who are caught in the cross-fire of Britain´s decision to leave the EU supposedly in order to control their own border, laws and destiny.

Only, it is not just its own destiny that is affected by Brexit.

It is also the destiny of people who had no vote (both EU nationals in the UK and Britons like myself) and no say on their own future. A Conservative government called an unnecessary EU Referendum primarily in a calculated and cynical effort to save its political skin from the threat of the UK Independence Party (UKIP). Its gamble backfired, delivering political chaos and threatening the long-term economic decline of the UK. This humongous miscalculation has the potential to divide the Conservative party and consign it to the dustbin of history. It has already split the country asunder at multiple levels and a very uncertain future awaits the country as a result.

The EU has made it clear that it has three absolute priorities before it is anywhere near being ready to negotiate the only thing that really seems to matter to the UK government, namely a trade deal. These include the Brexit financial settlement, the Republic of Ireland / Northern Ireland border and the rights of EU/UK citizens. The EU Guidelines for Brexit Negotiations makes it clear that the rights of citizens matter above all else:

“The right for every EU citizen, and of his or her family members, to live, to work or to study in any EU Member State is a fundamental aspect of the European Union. Along with other rights provided under EU law, it has shaped the lives and choices of millions of people.  Agreeing reciprocal guarantees to safeguard the status and rights derived from EU law at the date of withdrawal of EU and UK citizens, and their families, affected by the United Kingdom’s withdrawal from the Union will be the first priority for the negotiations. Such guarantees must be effective, enforceable, non-discriminatory and comprehensive, including the right to acquire permanent residence after a continuous period of five years of legal residence. Citizens should be able to exercise their rights through smooth and simple administrative procedures.”

The nationalities most affected are Britons (about 1.2 million) and Poles (about 900,000). Needless-to-say, it should be the UK´s absolute priority to regulate the situation of so many British lives living in EU countries ASAP. Only it is not.

Theresa May and her merry band of Europhobic Brexiteers have chosen to play fast and loose with people´s lives. For over a year, they have made a point of perpetuating the uncertainties. They have chosen to play a coy game of waiting and seeing, using the lives of 4.7+ million people like so many pawns to be positioned and/or sacrificed in their callous and atrociously incompetent game of Brexit chess. Shameful is the word that readily springs to mind.

Interestingly, Mr George Osborne, the former Chancellor of the Exchequer and now Editor of the Evening Standard, has just alleged that, in fact, the former Prime Minister, David Cameron, had tried to settle the issue of EU citizens’ rights unilaterally immediately after the EU Referendum. However, this was vetoed by one member of the cabinet. This person was none other than the ex-Home Secretary, as it enhanced her prospects of becoming Prime Minister. We are, of course, talking about none other than Mrs Theresa May. If true, this indicates that she thought nothing of toying with people´s lives in order to better position herself to become Prime Minister. The list of wooden, robotic, crude, calculating, incompetent and downright cruel decisions keeps growing. At some point, bad luck or circumstance can no longer account for the black marks. They cast an increasingly unflattering light on her past, present and future legacy as a politician, if not as a person.

The official Brexit negotiations finally got going on the 19 June 2017, though the emphasis was on “talks about talks” and the UK´s wishful thinking was immediately exposed. On the 23 of June 2017, Mrs May travelled to an EU summit in Brussels and presented her opening offer on EU citizen rights, having let the issue hang for so long. What did she come-up with? Was it perhaps to do the simplest thing to put an end to the uncertainty for 4.7+ million lives by matching the EU offer? Not on your nelly. Why would the British government immediately end the uncertainties hanging over the future of 4.7+ million people, 25% of whom are Britons, in one fell swoop when it can continue to play politics with so many people´s lives?

Unfair and Unserious

Our beloved Maybot chose instead to continue to play the immigration card and prolong the uncertainty for short term political gain: at least she is strong and stable in this respect. She presented her vision of a “fair and serious” offer to protect EU citizen rights by offering them a new “UK settled status” for EU migrants who had lived in the UK for five years with rights to stay and access health, education and other unspecified benefits, subject to the EU27 states guaranteeing Britons the same rights. Rather than determining whether these would also apply to dependents and setting the date at which the 5 years qualifying starts, she chose to be vague about this (sometime between March 2017, when Article 50 was triggered and March 2019, when the 2-year period of Brexit ends), thereby creating another source of uncertainty for many people who have been in the country for less than the qualifying period. Furthermore, she circumvented the EU´s position that EU citizens´ rights be enforceable by the European Court of Justice, which is a sticking point among Europhobes.

This falls well short of the EU´s negotiating position which is basically that EU citizens living in the UK should retain all EU rights in perpetuity, with the same applying to Britons living in the EU27. This is a simple, transparent and fair position that people can relate to. This is what fair and serious looks like as compared a British government persisting in using EU citizen as bargaining chips in Brexit negotiations.

The EU was quick to point out that EU summits are not the place to initiate negotiations. The British Prime Minister does not appear to understand that two teams have been selected with the mandate to negotiate the terms of Brexit. Various EU, German and French politicians have stressed that the so-called fair and serious offer was “below expectation”, but a “good start” even if “no breakthrough” and that “there was a long way to go.” In other words, the offer was not taken to be either fair or serious and crashed like a lead balloon. It could have been predicted, had Mrs May and the Europhobes not been so isolated and deluded. The official UK offer will be presented on 26 June 2017; we all await it with bated breath.

Grown-up Politics Overdue

The Maybot and the Europhobes continue to try to be “bloody awkward”, rather to focus on normalising the lives of 4.7+ million people. So here are three questions for the UK government:

  • What is so difficult about understanding that millions of people are fearing for their homes, families, livelihoods, education, health arrangements, pensions, etc.?
  • Are you blind to the stress, frustration, disappointment, resentment and anger caused by the uncertainty?
  • Are you incapable of feeling empathy for such people 12 months after the Brexit vote?

4.7+ million lives are not so many bargaining chips to be used to try to extract EU concessions.

4.7+ million lives call for adult politics and truly fair and serious solutions.

Tomorrow, I expect my government to stop mucking about and sort it out.

By that, I do not mean begrudging, half-hearted solutions but the real deal.

We and our families are entitled for the rest of our lives to whatever rights existed before the EU Referendum unilaterally threatened to take them away from us.

We entitled to no more and certainly no less.

© Ricardo Pinto, 2017, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Brexit means hard Brexit: the UK is running out of options

The 8th of June 2017 is a landmark that I shall always remember. Against all expectations, the British General Election delivered a hung Parliament as well as a bloody nose for the incumbent Conservative government. Their expectation of a 100+ majority in Parliament is in ruins and, with this unexpected development, the tide of history may have turned but it is far from clear. Perversely, it could well be that Brexit means Brexit has been superseded by Brexit means hard Brexit.

Since the EU Referendum on 23 June 2016, the Conservative government under the leadership of Prime Minister Theresa May has been marching remorselessly towards “hard” Brexit. This means not just leaving the European Union (EU), as required by the referendum outcome, but also exiting the European Single Market, the European Customs Union and the European Court of Justice to boot. By contrast, keeping all three yet still exiting the EU would be “soft” Brexit and would carry the least amount of risk for the UK and the EU-27 countries.

Although the option of hard Brexit was never part of the referendum (it was a straight “in” or “out” choice), this is exactly what a Conservative Government stuffed to the gills with Brexiteers such as Boris Johnson, David Davies, Liam Fox, etc. has been working towards. Mrs Theresa May, a former (albeit reluctant) Remainer, quickly became the conductor-in-chief of this process. A hard Brexit would have been difficult to achieve with a small majority in Parliament, so Mrs May decided to ask the country for a mandate for hard Brexit (having previously strenuously denied the need for another General Election), the terms of which was hardwired into the Conservative manifesto.

The expectation among the political establishment and media pundits alike, was that the Conservative Party would increase its working majority from 13 to possible as many as 100-200, some predicting the evisceration of Jeremy Corbyn´s Labour, the second largest party in the country. With a predicted crushing majority and thus a crystal-clear mandate from the electorate, hard Brexit would have been as good as guaranteed. Theresa May´s political calculation was that the House of Commons would no longer be an obstacle to the process and that the House of Lords would not dare to stand in the way of the will of the electorate. Traditionally, the Salisbury Doctrine/Convention dictates that the House of Lords does not oppose the second or third reading of any government legislation promised in an election manifesto. The previous General Election in 2015 had enshrined a commitment to hold an EU Referendum but given no guidance on the type of Brexit to follow, no doubt assuming that this just would not happen. Obviously, the Conservative government was not sufficiently convinced that it was capable of ramming the necessary Brexit legislation through Parliament, so it felt the need to go back to the country for a hard Brexit mandate.

But it turns out that the British electorate had other ideas and decided not to give any party any meaningful mandate at all. Instead of rubber-stamping a one-way ticket to hard Brexit, it delivered an enigma. A hung Parliament means that instead of a majority of 12, the Tories have no majority at all (317 seats, 13 fewer than before), even with its unexpected gains in Scotland, where the number of Conservative MPs increased from 1 to 13. Interestingly, since the Scots are extremely pro-Remain, these new Scottish Tories are unlikely to toe the party line and support hard Brexit. Indeed, it is conceivable that their leader, Ruth Davidson, could seek to defy the Conservative´s plans for a hard Brexit and even create a separate party.

If that was not bad enough, the only way the Tories can cobble together a slim majority in Parliament is via some sort of coalition with the Democratic Unionist Party (DUP) from Northern Ireland. The Eurosceptic DUP is willing to enter into a confidence and supply arrangement and Theresa May announced on 09 June 2017 her opportunistic intention to form a new government with support from the DUP, the potential King Makers.

There are only two flies in Theresa May´s DUP soup:

  • This goes against the grain of most Tories, since the DUP are considered to be a sectarian, nationalistic, militantly Protestant party which is known to be anti-same sex marriage, anti-abortion, in favour of creationist teaching at schools, etc. In other words, “taking back control” from Brussels apparently means passing it straight off to a bunch of swivel eyed-loons (as term applied by David Cameron, the former Conservative Prime Minister to Conservative activists) from Belfast. Moreover, the DUP will insist upon a soft border in Ireland, which effectively means that the Conservative mantra of hard Brexit/”no deal is better than a bad deal” is impossible to maintain with the DUP on-board. In any case, it is still far from clear that any sort of agreement can be reached between the two parties;
  • Everyone, except for the Mrs May and her new government, which is actually pretty much the old government except for the addition to the charming, dependable and loyal Mr Michael Gove, is warning that it is not credible for the Conservatives to enter into either a formal coalition or a confidence and supply arrangement without endangering the Good Friday Agreement. Under the terms of the latter, the UK government must demonstrate “rigorous impartiality” but, as has been pointed out by several people, including IRA representatives and various former Conservative Prime Ministers, it is far from clear how this could work if the Conservative government were to invited the DUP to prop it-up in gaining a working majority in Parliament. You can bet your bottom Euro, sorry Pound Sterling, that DUP support will come at the price of a pound of flesh (politically and financially) to the Conservative party. Undeterred, Mrs May(hem) ploughs on in her cynical determination to create the most shamefully incoherent British government that I can recall. It is far from clear that she will succeed, in which case she will (surely) have no choice but to resign post-haste.

Clearly, the general election result threw a huge spanner into the Brexit works.

With one fell swoop, all the certainties of the past year have been overturned, starting with whether there will be a working majority in Parliament, let alone a workable one with the new Scottish Tories and the DUP in a rudderless boat. Moreover, the certainty that the country was heading straight for hard Brexit has been blown out of the water. By far the most likely course correction to be set, assuming the Tories manage to cobble together a working government, is for the DUP and the new Scottish Tories (together with the majority of the rest of the Conservative MPs, Labour and the Lords) to push for a soft Brexit. Rather than the General Election eviscerating the Labour Party as a political force, it is a reinvigorated party, despite defeat. Instead the most likely bet is that adjusting the course from hard to soft Brexit will be the catalyst for a schism in the Conservative party.

Hallelujah; a deliberately engineered and catastrophic hard Brexit is off the cards.

But do not rejoice too soon.

None of this necessarily means that hard Brexit will not occur. The chances of a deliberately engineered hard Brexit may have gone but is still remains the most likely witting or unwitting outcome, rather than soft Brexit. The reason that hard Brexit will probably occur, regardless of a hung parliament and the new political dynamic, is not hard to divine.

The 2-year deadline post invocation of Article 50 is ticking away and the UK has just fritted away 3 months of it holding a totally unnecessary General Election that has delivered an outcome that has totally muddied the Brexit waters.

Even the 2-year period is not what it seems; all commentators agree that, in reality, only 14-18 months are available for “negotiations”, followed by at least 6-8 months of ratifications by 28 governments, as well as others, such as EU Parliament and regional governments.

Moreover, whereas the EU-27 have been ready for negotiations for months, the UK is not even close to being prepared for hard, soft or any other type of Brexit. So far, there has been little but empty bluster of the “Brexit means Brexit”, “Red, Blue and White Brexit” and “No deal is better than a bad deal” variety emanating from the British government. Even a General Election ostensibly about the biggest challenge facing the country since the Second World War, namely Brexit, brought precious little debate let alone any more clarity about the government´s intentions.

The EU´s Guidelines for Brexit Negotiations have been submitted to the UK, the UK has not yet reciprocated, though the “talks about talks” started on 19 June 2017. The only thing that exists is the UK´s official letter triggering Article 50, which is vague and is effectively superseded by the new reality since the General Election. Following the one-day talks about talks, the Brexit Minister, Mr David Davies, promptly caved in to the EU´s demands, for example to settle the broad terms of the “separation” (i.e. citizens’ rights, financial settlement and the Irish border) before trying to negotiate a future trade deal. The key plank of the UK´s negotiations has been removed before the real negotiations even start.

This reinforces the point that while the 27-EU countries have agreed a unified negotiating position in a relatively short period of time, the UK government has not been able to agree a negotiating position of any description one year since the EU referendum. This speaks volumes about the parlous state that Britain finds itself in as the negotiations starts. There is not a single good omen that bodes well for the UK. The best Brexit cards are firmly in the EU´s hands, starting with the fact that time is on their hands. All the waffle, bluster and wishful thinking will be remorselessly blown away by the more experienced EU team.

This parlous state of affairs is not in the least bit surprising. Although the Brexit game has been in play for a year, the only strategy there ever was, namely hard Brexit, has been scotched by the electorate. A coalition / supply and confidence arrangement has not yet been negotiated and may fail to materialise.

The Conservative party is in total disarray and is increasingly split. The Chancellor of the Exchequer, Mr Philip Hammond has recently stated the failure of talks would be “very, very bad” for Britain in direct contravention of what the Conservative party has been claiming (“no deal is better than a bad deal”) for the last year.  Whichever way the Brexit cookie crumbles, the mother of all internal wars will break-out within the Conservative ranks if they start back-pedalling towards soft Brexit.

To add fuel to the fire, the Grenfell Tower fire fall-out is occupying much of Theresa May´s attention and could lead to her downfall. If she came across as being wooden and robotic (the Maybot) during the General Election, she now comes across as callous and heartless on top. If Grenfell Tower does not do it, her own party will topple her sooner rather than later: May is not just damaged goods, she is toxic political goods. The steady stream of concessions since the General Elections will not save her. A downfall is only a matter of time for a leader who is patently neither a strong nor a stable leader. Everyone can see that the reality is in direct contravention of the facile PR.

What a mess for a country (previously) admired for its pragmatism to find itself in.

The real danger is not that the imminent implosion of the Conservative party. It is that the EU has been deprived of a meaningful negotiating counterpart, let alone one that can deliver whatever is negotiated and agreed. This is as far removed from a “strong and stable” leadership as it is possible to imagine and poses major risks for the UK as well as the EU-27.

One option is for the British government to withdraw Article 50, but this will not happen. Both leading parties are committed to some form of Brexit in response to the EU referendum. There is no way to close Pandora´s Box without holding another referendum and that is an option that neither major party is willing to countenance at the moment. Voter fatigue is palpable in the UK and a general election is in the air. At this rate, the UK is in danger or rivalling Italy and Greece for the title of re-elections champion. But even if this option were somehow to occur, it would still be to Britain´s disadvantage. Senior EU members are on record that nothing will ever be the same again for Britain, not least its generous EU rebate and the opt-outs that it now enjoys. There may be a way to row back from Brexit, an option left open by Germany and France, but it would come at a heavy political price in the UK, apart from the sheer humiliation of such a U-turn.

Another option is for the UK government to accept the Norway option (European Economic Area), which means leaving the EU yet being part of the common market, making a financial contribution to the EU and accepting freedom of movement of people. At the moment, it is hard to see how either the Conservatives or Labour could square this with the sentiment of the UK electorate, where the continuing desire to stop EU immigration remains a red line. It is interesting that here, too, Mr Hammond is querying Mrs May´s target of reducing new migration to the tens rather than hundreds of thousands by wondering whether post-Brexit immigration controls would apply to EU workers who are highly skilled and highly paid.

If it proves impossible to opt for a ready-made solution (e.g. withdraw from Brexit or Norway Option) and a fragmented government cannot negotiate an alternative within the 2-year timeline for Brexit, the UK will automatically crash out of everything connected with the EU. Unless the EU-27 unanimously agree to an extension of the 2-year separation period (assuming the UK requests it), the economy and much else will fall off the cliff and experience the most brutal possible form of hard Brexit.

No one seriously wants to witness the latter scenario, other than hard-core Eurosceptics. But at the moment, it appears not only that Brexit means Brexit, but that, actually, Brexit means hard Brexit.

© Ricardo Pinto, 2017, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Brexit post-Article 50: between a rock and a hard place

Anyone who reads my blog knows that I strongly supported Remain in the lead up to the Referendum on whether to remain or leave the European Union (EU) on 23 June 2016. However, a very small majority (52% of the 72.2% of the electorate that voted) was in favour of leaving the EU. I have accepted that Brexit will happen and, indeed, that it should happen.

I am neither a Remoaner (a blend of remain and moan) nor a doomster in terms of the UK´s economic prospects post-Brexit, but I do remain as convinced as ever that the future will not be as bright outside the EU and could turn out to be catastrophic for the country. Whether the UK should remain a part of the Common Market, Customs Union, etc. was not debated in the lead-up to the Referendum. The British electorate was not asked whether it preferred to be better/worse off because of the specific Brexit route selected by the government.

The British Parliament has now passed the Brexit Bill and the Prime Minister, Theresa May, has signed the notification to leave the EU and triggered Article 50 on 29 March 2016, about 9 months after the outcome of the EU Referendum decision. So, it is worth pausing to consider the next stage of Brexit, following the official notification to leave the EU.

Below, I review the UK´s and the EU´s respective negotiating position before the political horse trading begins.  The starting pistol for the official part of the Brexit process has stated, but it is increasingly evident that Britain is between a rock and a hard place.

Stage 1: The Negotiation Positions

UK Position (after 9 months)

Prior to the 29th of March, the UK´s position was strangely vague. For far too long, it amounted to little more than facile slogans, such as Theresa May´s “Brexit Means Brexit” and that Britain wanted to secure a “red, white and blue” Brexit.

I have previously argued (“Brexit and the Politics of Wishful Thinking” and “Muddling Through Brexit”) that the British government, led by Theresa May and her merry band of Brexiteers (David Davies, Boris Johnson and Liam Fox) were totally deluded in imagining that they could have their Brexit “cake and eat is at the same time”, namely that the deal to be negotiated with the EU would be “at least as good as the current situation” and that “a bad deal would be worse than no deal at all”. Instead:

The likelihood of actually securing a deal that is at least as favourable as the status quo is nigh on impossible (though the EU is first and foremost a political construct and since politics trumps everything else, the possibility cannot be completely excluded). The prospect of the UK having its Brexit cake and eating it at the same time appears to be a load of wishful thinking and delusion. Everyone but the Brexiteers can clearly see the writing on the EU wall… in capital letters, underlined and bold.”

We have witnessed about 9 months of the Conservative Party primarily holding an internal discussion between its two main factions (Eurosceptics and the rest), while paying close attention to the editorial views of the more conservative right-wing press. This has been in stark contrast with the half-hearted efforts that the government has made to listen to the concerns of the 48% that voted to Remain, as well as the Scots and Northern Irish, let alone paying heed to the clear and consistent messages emanating from its EU negotiating partners.

Therefore, it was a relief that the letter sent by the Government on 29 March 2017 officially invoking Article 50, had a semblance of reality about it.

It insisted that Britain was the EU’s “closest friend and neighbour”, which raised a few eyebrows, and stressed multiple times that the UK government seeks “a deep and special partnership” with the EU, something that most observers could be forgiven for thinking had previously existed but that Brexit was intending to achieve the very opposite. But the letter showed that the government has also backtracked from the more nonsensical positions that has been floated:

  • Away from curtailing the freedom of movement of people (while seeking the opposite for the perceived good bits, such as freedom of movement of goods, services and capital) before from 29th March 2017 rather than from 2019;
  • Away from maintaining that a bad Brexit deal is better than no deal at all, suggesting some appreciation of the damage that would be wrought on the UK´s economy from the “falling off the cliff” scenario.

It still left open the possibility of a “transitional agreement” or “implementation period” being negotiated if no trade deal is struck within the short period of time available: there are only 12-18 months of negotiations, followed by 6 months required for its ratification by “super qualified majority” representing 72% of member states and 65% of the EU’s population.

It was also judiciously silent on areas which has been subject to much speculation in the UK, such as:

  • The role of the European Court of Justice in the future, which will almost certainly be needed in a future trade relationship or if a transition agreement/implementation period is needed, even if the Eurosceptics insist that it must go as soon as possible;
  • The Brexit bill for leaving the EU (i.e. the divorce settlement), which the EU estimates to be in the region of Euro 60 billion, but which the hard Brexiteers insist should be close to zero or even involve a refund to the UK. Like all divorce settlements, it could be an explosive issue.

But the document only partially reflects reality. The muddled, wishful thinking in the UK´s negotiating position continues in some important respects, such as:

  • An ongoing lack of recognition that access to the EU´s internal market requires accepting all four freedoms of movement, including of people;
  • An ongoing belief that it is possible to negotiate sector-by-sector deals, such for the financial and automotive sectors;
  • A continuing call for negotiation everything in parallel, which would represent a risk. If the aim is to do everything at the same time, it is possible that nothing will be agreed at all;
  • A strong linkage of Britain’s security responsibilities towards the rest of Europe with its desire to attain advantageous economic / trade terms. This aspiration was a political miscalculation that was immediately and comprehensively rejected by the EU, forcing the UK government to backtrack very fast from this particular “negotiation position.”
EU Position (more or less from the beginning)

Upon receipt of the official British letter, the President of the European Council of 27 national leaders, Donald Tusk, counteracted with its own draft negotiating guidelines. It showed that the EU 27 could move at least as fast as the EU 1 (UK). There is a consultation exercise at present involving all 27 Parliaments, which demonstrates the extend of the democratic process which the EU is following, as compared with what the British government sought to do, before being forced by the British courts to seek its own Parliament´s approval for Brexit.

This degree of unanimity combined with the speed of the EU 27´s response is an ominous sign for the UK, but is hardly surprising given the remarkably consistent messages emanating from the EC, Germany, France and every other EU head of state since June 2016. The most important elements of the EU´s draft Guidelines for Negotiation are:

  • The EU 27 insists upon the rights of EU nationals being fully respected until April 2019 or until any future transition arrangement comes to an end;
  • The EU 27 insists upon the European Court of Justice maintaining its role until April 2019 or until any future transition arrangement comes to an end;
  • The EU 27 will not tolerate a UK attempt to divide and conquer through individual approaches to EU member countries;
  • There must be a phased approach to the negotiations, rather than everything in parallel;
  • The UK must agree to the Brexit bill, at least in broad terms, before other discussions begin;
  • The negotiations must prioritise the future of the EU residents in the UK and vice versa;
  • The negotiations must avert a hard border between Northern Ireland and the Republic of Ireland, something which is easier to say than to do;
  • The UK can forget pipedreams such as cherry picking what it likes and ditching the rest;
  • The EU 27 will prepare itself for the possibility that the negotiations might fail.

In a nutshell: no sector-by-sector deals, no bi-lateral negotiations, no negotiations until the Brexit divorce bill is agreed, full freedom of movement during negotiations and any transition arrangement and no trade deal until the end of the Brexit negotiations (though I imagine the latter position may change).

These positions have been stated repeatedly and the discussions over 9 months carried out by May, Johnson, Davies and Fox should have made it abundantly clear what was in store, whatever the messages they may have been putting out to their own party, the right-wing media and country.

The only element which seems to have caught the UK government by surprise is the EU´s position towards Gibraltar. The guidelines say: “After the United Kingdom leaves the union, no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.” which, roughly translated means that Spain will have a strong role in deciding the treatment of Gibraltar.

But should this part of the draft negotiation guidelines have come as a surprise? The facts are: we live in a post-colonial world; Gibraltar is a geographical part of the Spain (though this does raise the issue of Spain´s own bits of North Africa, namely Ceuta and Melillia); the UK is well on the way to being an ex-EU-member, which results in a repositioning on the issue of Gibraltar; not surprisingly, the Spaniards have been lobbying behind the scenes, just as Britons have; and the EU cannot be expected to continue to maintain a neutral position towards Spain/UK in relation to Gibraltar.

Let there be no uncertainly about this: from now on, if the EU must choose between the UK and Spain, Spain it will be. ´Twas ever thus is an expression that Britons should be familiar with, despite the ludicrously injudicious sabre rattling by Michael Howard, a hard Brexiteer Conservative MP who suggested that the UK might go to war over Gibraltar in the same way as it went to war over the Falkland Islands. This is not just nonsense. It is irresponsible, dangerous tosh. The EU and British government moved quickly to dampen this explosive development, but the tension has just started.

The European Parliament has also had its say on the matter. On 05 April 2017, is voted overwhelmingly in favour of its own red lines for the Brexit negotiations, which amounted to a tough negotiating stance on Brexit. By a large majority, it voted to:

  • Back the EU 27 position of “phased negotiations” in the Brexit divorce proceedings, rather than exit talks and discussions of a future trade arrangement to happen in parallel;
  • Oppose any piecemeal economic relationships based on sector-specific deals, such as a special deal for the City of London;
  • Insist that any transition arrangements to cushion the UK’s departure, such as tariff-free access to the single market, can only last a maximum of three years;
  • Stress the importance of securing equal and fair treatment for EU citizens living in the UK and British citizens living in the EU;
  • Open the possibility that UK citizens might be able to individually apply to keep the rights they currently enjoy, etc.

The European Parliament will have to approve any agreement regarding the UK’s withdrawal from the EU and will check whether its red lines have been complied with. Again, there is a bit of a contrast between how democratically the EU is treating the issue of Brexit as compared with the British government. For all the talk of a supposed EU democratic deficit, this seems like a pretty good process to me, unlike the UK being forced, kicking and screaming, by the British courts to allow Parliamentary scrutiny of Brexit. It is still unclear whether the UK Parliament will be given the opportunity to accept or reject the final Brexit deal.

Of Rocks and Hard Places

The empty internal talk within the Conservative party, the delusions of its Brexiteers over the last 9 months and the substance of much of the official letter sent by the British Government invoking Article 50 have been stripped away by the EU 27 and European Parliament.

The dynamics of the relationship between the EU and the UK changed the moment May came out with “Brexit means Brexit” and it is far from evident that we will witness a “red, white and blue” Brexit. It is as plain as day that the UK is the one with the cap in hand, asking for EU favours, just as it was in 1973, when it finally joined the EU, having had its application vetoed twice by the French. The UK was in a weak position joining the club and is in an even weaker position leaving the EU.

The British government is now between a hard rock and a hard place in respect to Brexit, even if it is a situation of its electorate´s own choosing.

Internal rocks

The UK rocks that need to be circumnavigated are ones with the Brexiteers have placed themselves. These include but are not limited to the following:

  • An insistence to the public that Brexit will be painless: all the evidence before the government shows the opposite. During the Referendum, the much-maligned experts were derided by the Brexiteers for concluding that the country would be poorer because of Brexit. The experts are almost unanimously of the view that Britain will be even poorer if a hard Brexit takes place (i.e. without a trade deal with the EU and dependence on World Trade Organisation rules), something which is a distinct possibility;
  • An insistence that Brexit will save money: the distortions and downright lies about spending the annual contribution to the EU on the NHS were broken immediately after the Referendum. Worse still, no one mentioned to the electorate that there would be a whopping Brexit bill. This will not go down well, especially with prominent Brexiteers insisting that Britain will not pay a penny more and might even get a refund from the EU;
  • A suggestion that immigration will be controlled: the idea of an immigration points system was shelved by the leading lights of the Leave campaign shortly after the Referendum (just like the NHS dividend). Now, as it becomes increasingly apparent just how reliant the NHS and various other segments of the private and public sectors are on EU migration, the Brexiteers have already started to beat a retreat. Only it will be hard, if not impossible, to put the tiger that they have unleashed back in the cage. It will not be a pretty sight when the racist and bigoted segment that voted for Brexit (I am not suggesting that this is all, let alone most those that voted Leave) realise that their dreams of splendid nativist isolation will not be brought about by Brexit;
  • Restive Eurosceptics: The Conservative party has a working majority of 17 Members of Parliament but a boat load of Eurosceptics who would like nothing better than a cathartic, hard Brexit. These MPs have been a thorn on the side of the Conservatives since the John Major days and they will continue to push Theresa May towards the exit door until the bitter end. Any compromise (after all, to negotiate is to compromise, especially if all the cards are staked in the favour of the EU) will be seized upon and the slim majority in Parliament will be threatened;
  • British Parliament: the government has had to accept the courts´ rulings that it cannot initiate Brexit without scrutiny by both Houses of Parliament. Parliament has voted the Brexit Bill through but it is not likely to be so amenable once the final terms of Brexit are known. There will be growing pressure to allow Parliament to take the final decision on Brexit and if it happens, no one can predict how the voting will go;
  • The most complex negotiations since World War II: there is agreement that the scale, complexity and multi-dimensionality of Brexit represents the greatest challenge since WWII. However, all the indications are the British are unprepared. The PM is new, the Brexit ministers relatively inexperienced and the Brexit and Trade ministries are understaffed and underqualified in terms of trade, as the past 9 months show. This does not exactly inspire confidence;
  • Fair weather press friends: the influential diehard Brexit bloodhounds (Times, Telegraph, Daily Mail, Sun and Express) will be sniffing around for any signs of slacking by the UK government in the negotiations. They can be relied upon to whip-up a nationalist fervour and to viciously turn on Theresa May´s government at the first sign of perceived weakness;
  • A disunited kingdom: the Scots are insisting on a second independence Referendum, once the terms of the Brexit divorce are known. The Brexiteers´ arguments to justify Brexit will come back to haunt them: sovereignty, control of own borders and all the rest will be used against The Union and it is hard to see the counter arguments to avert a break-up, other than the economic one. Scare tactics worked in the first Scottish Referendum but failed to stop Brexit and will almost certainly fail to prevent Scotix (Scottish exit) second time around. This is especially so because the Spanish government´s confirmation that it would not veto a Scotland application for EU membership. It could also lead to the same development in Northern Ireland (Irexit), since a bad Brexit deal could spur the reunification of the Republic of Ireland and Northern Ireland. Unlike Scotix, Irexit would lead to automatic EU membership of the EU, since the Republic is already a member. I will not speculate about Wales or Gibraltar for now, but the prospect of a rather DisUnited Kingdom emerging cannot be entirely discounted.

So there are, to put it mildly, quite a lot of potential internal Brexit rocks for the Conservative boat to circumnavigate, even if the Labour Party is shamefully incapable of presenting any sort of meaningful opposition in Parliament at present.

External hard places

The external or EU Brexit hard places have been well-known since mid-2016. These include the following:

  • The house always wins: it is the EU 27 that will determine the rules of negotiation (draft Negotiation Guidelines and Red Lines). Moreover, the EC (Jean-Claude Juncker), the EU Council (Tusk) and the Parliament (Guy Verhofstadt) must agree to the terms of Brexit and/or a future trade deal. Not only that, but there will also be multiple opportunities for EU member states (Sangria anyone?) to derail any potential deals, not to mention the quirky regional parliaments, such as in Belgium, which almost scotched the EU-Canada Trade Deal. Whatever the Brexiteers may imply, the UK really has much more to lose from the failure of negotiations than the EU. There is no doubt whatsoever that the EU holds all the aces in this Brexit game of cards;
  • United by Brexit: for all the Eurosceptic allegations that the EU is fragmented, incapable of action, sclerotic, etc., one thing is clear: there is absolute unanimity in respect to the stance on Brexit. This is coupled with a steely determination among the EU 27 not to allow the UK to divide and conquer, not to allow the UK to cherry pick what it likes and drop the rest and not to allow the UK to secure anywhere as good a deal as that conferred on its club members. The Brexiteers and their right-wing press buddies will undoubtedly foam at the mouth, rant and rave as the negotiations get underway, but this will only foment even greater division in the UK itself (48% voted to remain and this chasm in British society can only grow and become more bitter), as well as between the EU and UK. It will be of no use: the EU 27 will remain united and firm in its resolve. Anything else would be tantamount to the end of the EU itself;
  • A hard deadline (12 – 18 months): there is very little time to agree the terms of Brexit: the French and German elections will result in delays and when the real negotiations start, the EU will insist on settling the key issues first, including the Brexit divorce bill, status of EU national in the UK and vice versa and the Northern Ireland border. Any of these could result in significant delays before the real horse trading begins, let alone trade negotiations. It will take 6 months for any deal to be ratified. The longer the Brexit negotiation game goes on, the stronger the EU cards will become. This does not bode well for the UK´s ability to have its Brexit cake and eat it as well;
  • EU members are more important than outgoing members: the EU appears to have handed Spain a big stick to beat the UK with. This is not just the apparent Gibraltar veto, based on the draft negotiating guidelines. Even if this is negotiated away (something that the British government will go all guns blazing for, as it were), the Spanish Parliament will have to approve the overall Brexit deal. This is a pretty large stick to beat the UK into submission with. Many national and regional government have the same capacity. Put simply, if they wish to, they have got the UK over a barrel;
  • Experienced and hardnosed negotiating team: The EC´s Chief Brexit Negotiator is the highly experience Michel Barnier, combined with his Deputy, Sabine Weyand, a trade expert and behind them stands Jean-Claude Juncker. The EU Council have the highly experienced ex-Polish Prime Minister, Donald Tusk. And finally, the EU Parliament have an old hand at negotiations, namely Guy Verhofstadt. This amounts to a formidable team of EU negotiators. By contrast, UK has Theresa May, David Davies, Liam Fox and Boris Johnson. There is no UK civil servant that is of the same calibre or experience in trade matters as the EC officials. Which side would you bet on to get the best Brexit deal?

Brexit Countdown

The UK has 12-18 months to agree Brexit and a trade deal (highly unlikely) with the EU.

The countdown has started and there is very little time, given the multiplicity, multidimensionality and complexity of the issues involved. The process of EU accession can take 10 years. The process of EU divorce will be a lot faster but after 44 years, whether the Brits realise it or not, the EU is interwoven into the very fabric of British life, economy and law.

The Brexit clock is ticking louder by the second. Any disagreements, delays, posturing, prevarication, haggling, intransigence, etc. in the negotiations favour the EU 27, rather than the soon-to-be-ex-EU 1.

This means that it is likely that the UK will have to repeatedly compromise or risk “falling off the cliff edge” of a hard Brexit, since it cannot count on any extensions in the timetable, unless the EU 27 agree to it. This is not likely to be achieved unless the EU 27 feel that sufficient progress is being made and, even then, is likely to be limited to 3 years.  Trade deals can last a decade to hammer out.

On the other hand, the UK has become decreasingly influential in the EU. It has either voluntarily removed itself from active engagement or was not able to engage because it is outside the Eurozone. Following Brexit, this has reached a point where the UK is irrelevant to the future of the EU, except in the short-term context of the Brexit divorce settlement. It was not even part of the recent low-key celebration of 60 years of the Treaty of Rome.

This is the new reality for Britain and for Britons in Europe. The British government is caught between a rock and a hard place. So are British citizens and the rights and benefits accumulated over almost half a century, whatever the UK government may claim about preserving them.

No matter how often the letter triggering Article 50 repeats the desire for a “deep and special partnership” with the EU, that was in the past. The future is nothing of the sort and may deteriorate further, once the serious negotiations start in earnest. This will be doubly so, once the hard Brexiteers and the English right-wing newspapers begin to see their long-held delusions crushed between the rock of EU determination that ex-EU members cannot have the same benefits as current EU members and the hard place of ensuring that Britain does not fall off the Brexit cliff edge.

The outcome of this dreary process will be the final Brexit. The jubilant Eurosceptics will have regained the prize of the UK´s sovereignty and full control over the island. It will come at a heavy price to the rest of society and the economy. But they will undoubtedly consider it a cost well worth paying.

The only crumb of comfort (if such it is), is that the UK government will thereafter no longer be able to pin the blame for anything and everything that is wrong with Britain and its welfare state on “Europe”, the whipping boy of choice, or EU immigrants, the scapegoats for all the UK´s long-standing social policy failures.

What happens next is certain to be interesting, but it will not be a pretty sight.

© Ricardo Pinto, 2017, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Brexit and the Politics of Wishful Thinking

It has been a little while since I last posted something on the AngloDeutsch Blog.

The reason is simple: the UK´s referendum decision in favour of Brexit was not entirely a surprise but it still came as a shock that the majority of my fellow Britons voted to leave the European Union (EU), a club that they had been part and parcel of for over four decades (Britain joined in 1973), even if it has always been a less than wholehearted member.

Since 23 June 2016 I have observed the unfolding UK-EU divorce while trying to come to terms with that it means for Britons, for Europeans and of course for me personally, a Briton who has lived in various parts of the EU and is a resident of Germany.

I remain as shocked as ever but unlike many Remainers who retain dim hopes that Brexit might somehow be averted, that Parliament could override the outcome of the referendum or that a second referendum could be held when the actual terms and conditions of Brexit have been negotiated, I am expecting Brexit to occur. Not only that, but I do strongly believe that having voted for Brexit, it must happen. The referendum was a democratic process, the decision was clear and democracy would be undermined, perhaps fatally, by anything other than Brexit.

Slow-burning Brexit fuse

This is not to say that I think Brexit is a good thing for either the UK or the EU, as I have made clear in my blog. I remain as convinced as ever of the opposite, even if a growing number of people are jumping on the bandwagon to claim that there has been no crisis post-Brexit. This is hardly surprising since Article 50 triggering the process of withdrawal from the EU has not yet been invoked, Brexit has not yet happened and the Bank of England has been very active in pre-empting a possible crisis by launching an aggressive “sledgehammer” stimulus package. The real Brexit impact will be medium- to long-erm in nature; it will have a slow burning fuse but it will eventually be more keenly felt in terms of investment, jobs, real wages and wealth.

The most notable thing about the three months since the referendum is how little progress has actually been made in terms of defining what Brexit actually means. Since there have been no notable decisions made, investors have not had anything substantive, positive or negative, to react to and are keeping a watching brief on what happens. This in itself is a negative, albeit not one that the Brexiteers would acknowledge.

The extent of the current policy position of the new British Prime Minister, Theresa May, boils down to a political soundbite: “… Brexit means Brexit, and we’re going to make a success of it.”

Beyond this, very little is clear about the British Government´s Brexit position in respect to fundamental issues such as:

  • When Article 50 will be triggered to officially start the Brexit negotiations (sometime in 2017);
  • Whether Parliament will have a vote on Brexit;
  • If the aim is to stay in the common market or not (hard vs soft Brexit);
  • When Britain will actually leave the EU;
  • How long it will take to sign new trade agreements with the EU and other countries;
  • What the rights and responsibilities of the EU citizens living and working in the UK;
  • What does Brexit mean for Scotland and Northern Ireland;
  • The same for the Britons living in EU countries, etc.

The only firm policy position is that the UK will not accept one of the EU´s fundamental requirements, namely the freedom of movement of people, and insists upon taking full control of the borders in terms of who is let into the country. These are non-negotiable for the government.

Wishful thinking

Theresa May said in advance of her first cabinet meeting as Prime Minister: “So we will not allow the country to be defined by Brexit; but instead build the education, skills, and social mobility to allow everyone to prosper from the opportunities of leaving the EU.”

However, Brexit will undoubtedly define her government´s work for the current political term. Not only that, it will involve nigh on Herculean efforts to unpick over 4 decades of close legislative, economic, trade, cultural, financial, environmental and other ties. Without a doubt, Brexit will define the next 2-3 UK governments´ policy agenda and thus the country´s destiny. Whatever the Prime Minister may suggest, Britain has already been defined by Brexit, certainly for the other 27 countries, and this will only intensify in period until 2019 when the divorce proceedings are likely to conclude.

The wishful thinking does not stop there.

The Eurosceptic knives are out and being sharpened; the Government already stands accused of not doing enough to bring about Brexit, as if it such a complex and critical issue in terms of Britain´s future economic wellbeing is something that could be decided upon at the drop of a hat. The Brexiteers may have gone into the referendum in a blithe manner in terms of their complete lack of post-referendum plan but at least they are being consistent.

The headlong rush towards Brexit is irresponsible. To be sure, Britain has the right to unilaterally withdraw from the EU at any point of its choosing but there is broad consensus that this would be disastrous for all concerned. The default position is thus the negotiated route to Brexit, despite the unrest among the hard core Brexiteers. However, choosing to enter complex Brexit negotiations without adequate analysis, preparation and forethought in respect to Britain´s long term interests would be the equivalent of tying both Britain´s metaphorical hands behind its back in the forthcoming marathon negotiations with the EU. Just as in the case of unilateral withdrawal, there would only be losers from such a process. The Brexiteers have won the debate, so whatever their ideological desire to head for the exit door host-haste, they will just have to rein their horses in the interests of their country.

There is a school of thought that Mrs May has made a strategic mistake by offering key ministerial positions to leading Brexiteers as Boris Johnson (Foreign Office), David Davis (Brexit Negotiations) and Liam Fox (International Trade). I think it has actually been a strategic masterstroke on her part. The political onus has been neatly shifted to the Three Brexiteers, who must now take responsibility for preparatory work, negotiations and whatever outcome Britain is able to negotiate with the EU. The Brexiteers cannot claim to have been undermined by the Remainers if the critical political posts are all held by the Three Brexiteers.

Row, row your boat…

The advantages of this approach are already becoming evident. Among the chaos and obfuscation (which might be characterised as Project Lies or Project Fear, depending on which side of the fence you sit on) evident during the referendum campaign, there were a few concrete promises made by the Leave Campaign, though the Brexiteers are busily rowing away from them:

  1. GBP 350 million per week will be invested in the NHS: Nigel Farage (UKIP) admitted that it was a mistake to make such a claim and that the NHS would not get the extra funds.
  2. Article 50 to leave EU will be immediately triggered: Liam Fox (Conservatives) has admitted that Britain is nowhere near being prepared to begin negotiating Brexit and that this will take time.
  3. Brexit is a relatively straightforward process that can proceed quickly: David Davis (Conservatives) admitted that the Brexit negotiations may be the most complicated negotiation ever and that they will start sometime in 2017, followed by two years of negotiations.
  4. Introduction of a points based immigration system to take back control of the borders: Boris Johnson (Conservatives) has abandoned the plan for a points based immigration system promised during the election campaign stating that what matters is taking control of the borders.
  5. A favourably UK-EU free trade agreement will be negotiated as the EU has more to lose than the UK: David Davis (Conservatives) admitted that it might not happen and that the UK might exit without a trade agreement, thus having to revert to less favourable WTO tariffs instead.

The above can be interpreted in one way: the loud and clear sound of retreat can be heard and the buglers are none other than the Three Brexiteers.

For her part, Theresa May is keeping her cards close to her chest, holding bilateral preparatory meetings with the French, Germans, EU, etc. and repeating her “Brexit means Brexit” mantra. The three leading Brexiteers are the ones having to do all the running, carry the weight of political expectation and toil under the pressure to come up with a coherent plan for Brexit.

They are not giving the impression having much of a clue about what they are doing, let alone being capable of coordinating the process among themselves in a manner which inspires confidence about an outcome that will be at least as much in Britain´s interest as is the case today. Their fellow Eurosceptics in the Conservative Party are increasingly restless and if the current state of affairs continues, Mrs May might just be tempted in the future to relieve the Three Brexiteers of their duties. If she were then to appoint more capable replacements, whether Brexiteers or not, that might not be such a bad outcome and the Brexiteers would only have themselves to blame.

Choppy waters ahead

It takes two to do the Brexit tango, so how is the EU preparing for it?

Firstly, the rest of the EU insists upon Article 50 being triggered as soon as possible for the simple reason that an indeterminate period of uncertainty can only be negative for Britain and for the other EU countries. Ironically, the EU is pushing much harder for a quick Brexit than the Three Brexiteers and the rest of the government. However, since it cannot do anything about it, the rest of the EU is resigned to the likelihood that the UK will not invoke Article 50 and enter the negotiation phase until sometime in 2017, possibly later 2017 once the French and German General Elections are safely out of the way. Furthermore, the EU is firm about the fact that it will not start Brexit negotiations, formal or informal, until Article 50 is triggered by the UK. The hard core Brexiteers must be as bitterly disappointed about this likely delay as the rest of the EU, but at least they have finally one thing in common.

Secondly, it is not feasible for Britain to remain in the Common Market or join the European Economic Area (assuming the existing EEA members do not veto the UK from joining this club – the early indications are that these relatively small countries might not appreciate the prospect of being joined by what would become the dominant country, resulting in very different political dynamics) unless freedom of movement of people is guaranteed. Since this is a Rubicon that will not be crossed by the Brexiteers and/or the British Government, this option appears to be out of the question. The EU is inflexible on this fundamental issue, as illustrated by its handling of the Swiss referendum and the failed attempt to restrict freedom of movement while remaining in the EEA / common market. The omens are not good and the implication would be “hard” Brexit – leaving the EU and single market altogether without a free trade agreement with the EU.

The EU members are also unusually strong and consistent on other important issues.

Firstly, to make the UK divorce too easy would be to encourage other EU countries to consider leaving the EU club. Put simply, this is the very last thing that the other leading EU countries want. The negotiations will not be a stroll in the park, whatever the Brexiteers may claim. This is wishful thinking on their part and is misleading to it.

Secondly, it is entirely out of the question for the UK to expect to have its Brexit cake and eat it too. In other words, whatever is negotiated with the UK cannot possibly be as good as the current situation as a full and (formerly) leading member of the EU, something that the three Brexiteers continue to imply. Forget that sort of wishful thinking; it simply does not add up. If you join a club, you pay your membership fees, live by the rules and reap the benefits. If you choose to leave the club, you do not pay the fees, do not abide by the rules but do not get the benefits either. Period.

Thirdly, Angela Merkel has made Germany´s view unusually clear by stressing that Brexit is irrevocable (a one way ticket and Britons cannot expect otherwise) and that it is not feasible for the UK to be part of the common market without the EU´s four freedoms, one of which is freedom of movement. She has also stressed that Brexit negotiations cannot be a “cherry picking exercise” of keeping the good economic, trade and finance bits and ditching the rest. For someone renowned for mincing her words, this is as clear a statement as the Three Brexiteers will ever hear; not that they are paying any attention in their delusion.

The British government will also wish to factor in other important considerations in securing a Brexit deal. Whatever it turns out to be good, bad or indifferent, it can be vetoed by any of the remaining 27 countries. Any marginal hopes that Britain might harbour to somehow remain in the Common Market while avoiding the freedom of movement of people can and most probably will be vetoed by Visigrad nations such as Poland.

Loaded dice

There is thus a whole series of pitfalls to be avoided and the reality is that it will be very hard for a deal to be agreed within the maximum prescribed period. The negotiations are loaded in favour of the EU due to the time limit to finalise negotiations once Article 50 is triggered. Two years (unless there is a unanimous agreement by 27 nations to extend the negotiating period) does not sound like ample time to complete “…the most complicated negotiation ever” (David Davis) and do so in Britain´s favour while also securing a qualified majority of the EU leaders and the 27 Parliaments across the EU (as well as the European Parliament – see below).

As if that little lot was not enough to give the Three Brexiteers and their ilk food for thought, the EU has just appointed its team of Brexit negotiators and no one can claim that the intention is to give the UK and easy ride. The European Commission (EC) has put a Frenchman and former EU commissioner, Michel Barnier, in charge. The UK media was pretty clear about the possible implications. The Sun branded him “anti-British” and the Evening Standard called him the “scourge of the City”, with important implications given the significance of the financial sector and the sensitive issue of the UK retaining financial “passporting rights” without which a chunk of the financial sector concentrated in London could shift to Frankfurt, Paris and other EU cities.

Furthermore, the European Parliament has selected the MEP and former Belgian PM Guy Verhofstadt as the lead Brexit negotiator, since any deal agreed by EU Leaders will have to be ratified by the European Parliament, an institution which has often been in the crosshairs of the leading Brexiteers. The media immediately branded Verhofstadt a “diehard European federalist,” the worst possible insult that could ever be levelled by a Brexiteer. Without approval by the majority of the European Parliament, there will not be a Brexit deal. Perhaps Nigel Farage was a little unwise to gloat about Brexit at the European Parliament while still holding on to his seat and salary as a MEP (17 years and counting). Some might have concluded that Brexit was mission accomplished, but obviously not our Nigel.

Dream on

So the Brexit battle lines are being drawn.

It is evident that the EU´s position is a lot clearer than that of the UK, where pretty much everything is still up in the air, other than the intention to control its borders (despite being an island and not being part of the Schengen area) and avoiding freedom of movement of people (despite having almost as many Britons living in other EU countries, benefiting economically from EU migration and receiving the majority of its immigration from non-EU countries such as the Commonwealth).

The UK has yet to come up with the semblance of a cogent Brexit plan (“soft” or “hard” for a start), let alone one which unites the leading Brexiteers (a substantial minority of the Conservative Party) while also satisfying the majority Remainers in the same party. This is going to be tricky in the extreme: the Conservative Party has a slim overall majority of 16 in Parliament and UKIP will continue to breathe down the Conservatives´ political neck (the Labour Party is even worth mentioning, given its ongoing chaos and disarray).

Britain will need uncommon diplomatic and negotiating skills (eh hem! – yes, I am thinking of our Foreign Secretary), as well as a hefty dose of luck in navigating through the choppy waters coming up in 2017 and still coming out of with a Brexit deal, let alone a favourable one, whatever the Three Brexiteers and the British government may claim.

The likelihood of actually securing a deal that is at least as favourable as the status quo is nigh on impossible (though the EU is first and foremost a political construct and since politics trumps everything else, the possibility cannot be completely excluded). The prospect of the UK having its Brexit cake and eating it at the same time appears to be a load of wishful thinking and delusion. Everyone but the Brexiteers can clearly see the writing on the EU wall… in capital letters, underlined and bold.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Brexit has happened: good luck!

And so, the day after the EU Referendum, a small majority of my countrymen and women have voted to leave the European Union (EU). Today is my “D” Day: D for “Disaster”. I always knew that this outcome was a distinct possibility, which is why I have spent time in the last couple of months writing a series of blog posts on difference aspects of the Brexit debate.

My effort has come to nought, hence my personal Disaster Day.

As I stare at the rubble of defeat, I am reminded of a few lines from “If”, by far the most popular poem in Britain, written by an Englishman, Rudyard Kipling. The lines are:

“If you can dream – and not make dreams your master;

If you can think – and not make thoughts your aim;

If you can meet with triumph and disaster;

And treat those two imposters just the same…

Yours is the Earth and everything that’s in it,

And – which is more – you’ll be a Man, my son!”

So I shall try to treat this disaster in the same way as I would have treated triumph, had the referendum decision been to Remain in the EU.

It has been hard fought and divisive referendum.

But more than 50% of British adults with a vote (I could not vote because of a rule that forbids this after a certain period of time living away from Britain) have made their view clear and it is pretty consistent across almost every region of the UK, except for London, Scotland and Northern Ireland.

It was always going to be a close run race.

I offer congratulations to the winners and commiseration to the losers. The world will not end, nor will it change radically for the better as a result of Brexit.

There may be stormy weather ahead but Britain is strong enough, sufficiently wealthy and well-educated enough to not only withstand the turbulence but hopefully to thrive.

I wish Britain and my fellow Britons a prosperous future, despite what I consider to be the wrong referendum decision.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU

 


What has the EU ever done for us anyway?

Britons will be voting on the EU referendum tomorrow. The vote will determine Brexit whether Brexit will happen or not. This is actually Britain´s second great Brexit debate, the first being the referendum of 1975, which the Remain side won comfortably. There is a different scenario now and the vote could go either way on the 23 June 2016. In this divisive and intemperate debate about whether to Remain or Leave, the emphasis has been on the negative. Fear is the name of the game: if we stay/leave, the UK will retain/lose x, therefore, vote to leave/remain. It is rare to read a positive set of reasons which connects up with people are interested in the things that affect our day-to-day lives.

This is the focus of this article. This one is written from the perspective of a citizen who happens to be British, has a German partner and has friends and family scattered all over Europe. It is the view of someone who has created a business in another EU country and who is active in EU nations as well as EU Candidate Countries and other nations.

The thing I love most of all is the freedom of movement of people. It is the greatest gift to be able to travel, work, live, study, au pair, retire, etc. wherever we like, whenever we like, as often as we like in any of 28 countries. This is the epitome of freedom and we lucky enough to have it.

If the climate in one country does not suit you, go to another. If the costs of living, such as housing, are too high, go somewhere else. If you cannot find a job in one place, try somewhere else. Britain is booming today but it might not tomorrow; this is when Britons will begin to appreciate it. Remember Norman Tebbit´s “on your bike Speech? If you can move freely within one country, to be able to do so in 28 / 508 million people is absolutely amazing.

And the beauty of it all, is that no one has the right to question or hinder you. You can study or work abroad, alone or taking your family, without applying for visas or other waiting at the borders for hours, paying any fees or being dependent on any bureaucrat´s whims. Once the freedom of movement of people is lost, life will never be the same again.

Not only that, the EU directives mean that I cannot be discriminated in any of the EU 28 countries on the basis of nationality, language, gender, religion, ethnicity, etc. This is priceless within the 28 countries, as well as between them all. This makes us the most advanced region in the planet – by far.

Despite the fears being put about by the Leave Campaign, only 5% of the 508 million EU citizens take-up the freedom of movement of people. Most people are quite happy to live where they are, but use the other benefits of the EU. What are those?

I love the fact that I can go on holiday whenever I like, wherever I like. I take for granted the fact that I can book a journey and set-off without delays due to visa requirements, border controls and other factors which transfer power from me, as a citizen, to others. The bureaucrats in 28 countries all have to apply the same rules to everyone from the EU. This increases transparency and freedom.

It also makes for cheaper, faster, more efficient travel. And since there is a group of 28 countries involved, it is much harder for telecom operators, travel agencies, airlines, commercial banks, etc. to divide and conquer customers, ripping us off by imposing the highest prices they can for no reason.

I now pay low mobile roaming charges and in 2017, I shall pay none because of the EU´s competition policy. I have an EU wide airline policy to ensure that I am compensated if my plane in unreasonably delayed, something that I have made use of. I can buy anything I like in other EU nations or via the internet and still have my consumer rights protected, regardless of where I live or which country I purchased something in – and I do not need to return to that country in order to make a claim. This is a great, even though I do not even think about it.

I particularly like the fact that if I fall ill in any of the EU countries, I shall be treated without having first bought a private insurance policy, thus saving me money, time and hassle. That is great when I am on business. When I am on holiday, especially with my family, this is wonderful. I don’t think about it anymore, but it is a saving and it is very welcome. Britons cannot benefit from this yet begrudge others of the same rights in Britain. Ask the British pensions living in Spain and France.

I am only too aware that the Eurozone, comprising 19 countries, is unfinished business, as the situation in Greece and other countries continues to show. On the other hand, even more countries are joining over time, which shows that others do not share the British newspapers´ Euroscepticism. They keep pronouncing the Euro dead: read the archives of any of the top journalists of the Mail, Sun and Telegraph and you will see how many times the Euro has been written off since 2007. Yet it is still here and is the world´s second reserve currency, not Sterling. Those journalists should occasionally re-read their previous articles and learn to a bit of humility.

I love the fact that I do not have to pay a provision to exchange money every time I go to another country and to pay again to change it back if I do not want have tons of useless coins and notes in a box somewhere. I transfer money between Germany and other countries freely or for a pittance, yet still pay through my nose to transfer money to and from Britain.

I can, if I wished to, buy a holiday / retirement home in any place I like, etc. If I fall ill and my health system forces me to wait years for an operation, I can just go to another EU country that can do it faster; it is up to the health systems to sort out the payment amongst themselves. I get treated faster and my quality of life improves immeasurably. I am empowered by the EU´s capacity to make this happen for 508 million citizens. Bureaucracies such as restrictive health systems lose. I gain.

I know my children can study anywhere they choose to at primary, secondary and university level. Mobility is increasing and Europe will be their oyster in terms of studying, living and working. Should they, like me, wish get married to someone from another European country, I know their spouse will not be disadvantaged and they can live and work where ever they desire. Families will not be split.

The EU regulations are often vilified. But the rights that they assign over 28 countries mean that my children will not be discriminated. Their health and safety will be protected. They will also have at least 1 day off a week, 20 minutes break if they work more than 6 hours, 11 hours´ rest from work each day, not work more than 48 hours per week if they don’t want to, get at least 4 weeks´ paid holiday a year, etc. They will get the minimum package across all 28 countries: this means that employers across 28 nations have the same basis deal and they cannot screw the employees in a race to the bottom. Why would anyone, other than unscrupulous employers or politicians, turn down a package that upholds human dignity and protects health and well-being?

There are other things that I love but which are harder to pin down.

I know the mankind is flirting with disaster unless we do something about climate change. 28 countries doing nothing or perhaps something about climate change is not the same as all EU doing it together: working in concert is the only way to tackled the “tragedy of the commons” across the whole of Europe. This applies to the water I drink, the rivers and beaches I enjoy, the air I breathe and the birds, animals and habitats that I interact with and depend upon. I know that Britain did not take these things all that seriously until it joined in 1973 but that the EU rules apply to all: this is the reason why fish stocks are being preserved and renewed and is the reason why British beaches have become clean. I am glad the EU steps-in because I know for sure that some countries would otherwise just ignore environmental issues. Not all government care equally about what we leave behind for future generations and one that does today may change its mind tomorrow.

But it also applies to other abstract issues. I remain stricken by Europe and NATO´s inability to deal with the collapse of the former Yugoslav Republic. The war may be over, but there are still issues festering in parts of the Balkans and now, the situation in Ukraine/Russia threatens to spill into the rest of Europe.

I have lived through a civil war and I am only too aware of its consequences, even if my fellow Britons may not be. So I say this: Britain may be an island but it is not immune to what happens beyond its coastline. Two World Wars should make that abundantly clear. Even when Britain won, Britain lost big time in people, trade, wealth, empire and much more. I would rather live with the EU´s flaws and cost (as a German tax payer I contribute more than any other nation) than with the unquantifiable cost of possible future conflicts in Europe.

Criminal and terrorist activities are nothing new to Britain (I remember plenty about the IRA´s previous campaigns), Germany and the rest of Europe, though the nature and origin have changed over time. A terrorist is a terrorist is a terrorist regardless of nationality, race, religion or gender. My safety is enhanced when 28 nations share information, coordinate activities and act in unison. Going it alone is not my view of how to deal with a globalising world that brings new threats to every nation and every doorstep. If asylum seekers can find their way into Britain, so can a determined criminal or a terrorist, even if Britain does not have open borders as the Leave campaign wrongly claims.

Working in concert, working with 27 other EU nations, carries a lot more weight in terms of health, environment, defence, counter terrorism, international relations, trade, crime prevention, fraud prevention, consumer protection, research and development, education, etc. etc. etc.

This is a small sub-set of the benefits of being in the EU, as I see them.

So, what has the EU ever done for Britons? Plenty since 1973, I would say.

Is it worth paying less than 1% of GDP into the EU budget for and pooling parts of our sovereignty with the EU? Yup! Every single time.

Is the EU, perfect? Hardly. But neither it the UK now, let alone when it is on its own.

Would I want to give up the above on the 23 June 2016? The answer is obvious.

So the question to my fellow Britons who are undecided is: why would you want to?

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The Brexiteers vs The Establishment: a very tall tale

And so, with less than a week to go before the EU Referendum scheduled of the 23 June 2016, the Leave (or Brexit for British Exit) campaign took a lead in the opinion polls for the first time, quickly followed by other polls showing that everything is to play for. Such polls are not an exact science: they have not known for their accuracy in the UK. In the last referendum they were predicting that Scotland would choose to divorce from the UK. More recently they did not predict a majority for the Conservatives in the last General Election. Still something is happening which might result in the unimaginable: Britain could soon find itself heading out of the European Union (EU).

A theme which becomes more and more apparent in recent polling is that a shift has occurred and it is connected with particular social groups representing the working population pushing for Brexit. The reason has probably little to do with the EU itself, which is generally not that well known (in itself is an on-going problem and not just in the UK). Rather this seems to reflect be a groundswell of concerns, anxieties and fear which go beyond EU immigration:

“… the EU referendum debate has opened up a Pandora’s box of working-class anger and frustration… I would argue that the referendum debate within working-class communities is not about immigration, despite the rhetoric. It is about precarity and fear … For them, talking about immigration and being afraid of immigration is about the precarity of being working class, when people’s basic needs are no longer secure and they want change. The referendum has opened up a chasm of inequality in the UK and the monsters of a deeply divided and unfair society are crawling out. They will not easily go away no matter what the referendum result.”

This analysis rings true to me and hence my fear that the EU Referendum could swinging towards Brexit, whatever the merits of the Remain case. The Leave campaign has detected and tapped into this sentiment, and is now milk it for all it is worth. By contrast, the utter failure of the Remain campaign to articulate a strong case for remaining, as opposed sketching gloom and doom Brexit scenarios, has an alarmist and thus false ring to it.

Instead, the Brexiteers have positioned themselves to pander to these fears and anxieties, while at the same time offering them a golden opportunity to giving a bloody nose to the toffs representing the British Establishment / Elites that would preserve the status quo (i.e. remain in the EU) at all costs and against the best interests of ordinary Britons.

Austerity has  undoubtedly intensified the sense of precarity in British society and this is being exploited by the Brexiteers. However, the issue is what exactly is the motivation of the leading Brexiteers and their backers? Should Brexit occur, would they prioritise dealing with these legitimate concerns upon Brexit or are the Brexiteers spinning a very long tale?

The Noes

The “Noes” camp is led by Boris Johnson and his band of merry men such as Michael Gove, Iain Duncan Smith, Priti Patel, etc. (all Conservatives). Nigel Farage (UKIP) is ploughing his own furrow. The others consider him to be “toxic” to the Brexit because of his focus on the issue of EU immigration,  most recently demonstrated in UKIP´s intemperate use of the refugee crisis, though in reality the immigration theme is one which the rest of the leading Brexiteers have increasingly latched on to.

They are joined by those well-known supporters of democracy and transparency who only wish Britain well for the future, such as Marine Le Pen, Vladimir Putin and Donald Trump. All are encouraging Britons to Brexit, thus freeing the UK from the clutches, if not shackles, of the EU.

They all stress the need to regain control of the borders (i.e. stop EU immigration), stop EU benefit tourism, stop EU heath tourism, stop housing being taken up by EU foreigners, stop school places being taken-up by EU migrants´ children,  stop the loss of British sovereignty, stop EU enlargement, stop payments flowing to the EU, etc. (follow the links for an alternative analysis of the causes and the solutions). The grand plan is to stop anything and everything emanating from the EU because it is self-evident (to them) that all of Britain’s problems stem from being in the EU. This has the simplistic ring of pure populism and we all know what that has led to in the past.

The Brexiteers have few ideas about what they would do upon Brexit. The plan is basically to stop the EU, regain full sovereignty, regain control of the borders, reduce immigration through an Austria style points system, sign-up new trade deals and plough Britain´s EU financial contribution into public services. Britain will soon thrive upon Brexit. Apparently.

The possibility that most of the key problems in Britain (housing, health, education, low productivity, infrastructure, massive public and private sector debt, etc.) are the direct result of Britain´s own systemic policy failures and would cost a few zillion pounds more that the EU annual contribution seemingly does not cross their mind.

The EU is to blame for everything and the British Establishment / Elites (i.e. pretty much anyone daring to challenge the Leave arguments, especially experts) with it.

The Ayes

On the other side of the fence is a very long list of those calling for Britain to Remain in the EU because it is in Britain´s present and future interest to do so, including:

  • The majority of the Conservative Party, including the Prime Minister and Chancellor:
  • The majority of the Labour Party, including the leader of the opposition (officially);
  • The Social Democrats;
  • The Scottish National Party;
  • The Greens;
  • Barack Obama and Hillary Clinton;
  • The Treasury;
  • The Institute of Fiscal Affairs;
  • The Federal Reserve;
  • The World Bank;
  • The World Trade Organisation (WTO);
  • The Organisation for Economic Cooperation and Development (OECD);
  • The International Monetary Fund (IMF);
  • The other 27 EU nations;
  • The trades unions;
  • The great majority of established businesses;
  • The great majority of health professionals, NGOs and similar;
  • Almost all economists (since there are almost as many differences of opinion as there are economists, the fact that about 600 have united behind Remain is remarkable).

This is an overwhelming group of institutions that favour Remaining in the EU.

Such an incredible array of opinion would normally sway public opinion.

But the reality is that they are cutting little or no ice with the social groups previously discussed.

Instead, the Brexiteers have gained momentum and could well win the day.

The Anti Establishment Band?

The Brexiteers are putting-up a fight – an increasingly bitter one at that (as was the previous Brexit referendum in 1975).

They stress that they are fighting the British Establishment / Elite, pointedly alluding to the wealthy toffs such as David Cameron and George Osborne.

They emphasise that the Establishment prefers the status quo, rather than what is right for Britain.

They maintain that the Establishment from abroad (USA, Japan, Germany, France, Italy, Canada, Australia, etc.) should butt-off and allow Britons to get on it, as if we are not all interconnected in this globalised world where whatever Britons decided affects all other EU national, as well other countries.

They dismiss international organisations for being stuffed full of overpaid and under-taxed bureaucrats that simply trot out what the EU and the Establishment wants to hear. They do the same with any other experts, Britons or not, for all being in the EU´s pocket.

Since the economic and trade case for Brexit is non-existent, except in their own imagination, they increasingly contrast themselves with the Elites / Establishment, while they uphold the interests of ordinary working class Britons by braving political correctness and speaking out against current EU immigration as well as immigration from future accession countries such as Turkey and Albania.

They point out that, unlike them, the Establishment has lost contact with ordinary, working class voters, who are suffering from the consequences of the EU.

And they insist that they are not racists, they are not nativists, they are not isolationists and they are not Little Englanders. They just want what is in the best long-term best interests of the UK.

There is an element of truth in some of the above; there has to be a veneer of it in order to connect with people.

But there is a very tall tale at the core of it too, which is what I would like to emphasis in this post.

Question: when is the Establishment not the Establishment?

Answer: when you belong to the leading Band of Brexiteers

Maybe it is possible that all the British and other institutions previously listed are not in cahoots in a someMachiavellian national, European and global  conspiracy to get Britons to vote for something that would be detrimental to their own future.

Maybe ending EU membership will not miraculously cure Britain´s structural problems, which are the main reason that the key British public services are in their current state.

Maybe Britain´s austerity, which has nothing to do with the EU, is the driver of all the angst.

Maybe Brexit might actually accentuate the problems, not least the massive and growing public sector deficit, in the short, medium and long-term.

And maybe, just maybe, the Brexiteers are themselves deeply embedded in the very bedrock of the Establishment / Elite which they are so dismissive of.

Consider the following:

  • Boris Johnson: Eton, Oxford University, ex-Mayor of London, Cabinet Member;
  • Michael Gove: Robert Gordon´s School, Oxford University, Cabinet Member
  • Iain Duncan Smith: St. Peter´s RC Secondary School, Sandhurst Royal Military Academy, ex-Cabinet Member;
  • Nigel Farage: Dulwich College, ex-city trader, Member of European Parliament.

Put in these terms, and not even alluding to their likely personal wealth, the band of leading Brexiteers dismissing everyone else for being the British Establishment / Elite could be construed as a good case of “the pot calling the kettle black,” to use a quaint but fitting British saying.

The most prominent Brexiteers did not exactly grow-up in a council housing estate, attend a public school, let alone go around waving a flag of St George or driving a white van, to use some of the usual terminology which the media and politicians now use to denote the white, working class social groups in England (Scotland, Wales, Northern Ireland remain solidly for staying in the EU).

I doubt that Boris Johnson and his band of merry Brexiteers are to be regularly found at the local pub, quaffing a celebratory pint of ale after a football match to wash down their bacon butties (unless TV crews are present, of course). I exaggerate, but the point is that all the leading figures of the vote Leave campaign appear to have done rather well out of being an integral part of the British Establishment /Elite. You can be confident that their children and grandchildren are likely to do well out of being part of the same social group.

Therefore, for this set of people to be tapping into the palpable angst among working class Britons in order to further their own political ambitions grates with me. They are seeking to mobilise working class sentiment to achieve an ideological objective which, in the long-term, may very well work against those same voters while, at the same time, propelling BoJo and his band of merry Brexiteers ever further up the greasy pole of British politics and Establishment positions.

The fact is that the leading Brexiteers are not exactly committed to protecting the average person.

In a recent televised debate, Boris Johnson said that the Leave side is determined to protect the workers after Nicola Sturgeon quoted something he once wrote: “The weight of employment regulation is backbreaking. We should get rid of the collective redundancies directive, the workers’ directive, the working time directive and 1,000 more.”

Yet these are the very things which are protecting British employees from having their rights undermined by such British developments as “zero hour contracts”.

Nigel Farage has been widely reported for calling for a move away from a state-funded NHS.

Gove is the architect of educational academies that is not only flawed but may well be damaging education while also increasing inequality.

Iain Duncan Smith is the author-in-chief of the austerity drive which has cut out billions from the welfare state, thus impoverishing the lives of the non-working population of the UK, while also dismantling various parts of social security safety net for low income workers.

The sad fact is that the leading Brexiteers and Brexit, which is definitely on the cards likely, may actually accentuate the fear, insecurity and precarity that is driving the recent trends in voting intentions in relation to the forthcoming EU referendum. When they no longer need to take the EU into consideration, further deregulation and labour market flexibility will lead to even more winners and losers. Your guess about who is likely to be on the losing side is as good as mine: the very people that might vote for Brexit as the outlet of their frustration and anxieties?

The EU Bashers

The band of Brexiteers is far from being alone in the aggressive fight for Brexit.

There is a strong anti-EU bias at the core of the British Establishment. A recent study by the Reuters Institute for the Study of Journalism found that the British press coverage of the EU Referendum is “heavily skewed in favour of Brexit”. It is not just any newspapers that are anti “Europe” but specifically the ones which just happen to be most influential in terms of the social groups turning towards Brexit, as well as having massive circulation compared with the pro-remain newspapers, as illustrated below.

Pro Leave Circulation Pro Remain Circulation
Sun 1.800,000 Mirror 809,000
Mail 1.700,000 Financial Times 198,000
Telegraph 472,000 Guardian 164,000
Express 408,000 Independent 55,000
Times 404,000
Total 4,784,000 Total 1,226,000

 

In other words, much of the British reporting (printed and online coverage) has a strong anti-EU spin and they are not particularly concerned about such trivialities as balanced argument and truthful reporting. The fact is that the Brexiteers are not exactly in their own: they are strongly and systematically aided and abetted by the most influential newspapers in terms of circulation and readership by social groups which are turning against remaining in the EU. The “drip drip” effect clearly works.

Billionaire Brexit Backers (BBB)

The Brexit backers are not restricted to a few billionaire newspaper tycoons such as Rupert Murdoch, Barclay Brothers, Lord Rothermere, Richard Desmond, etc. A simple internet search of the backers of the UKIP / Leave campaigns reveals that quite a few multi-millionaires / billionaires are bankrolling Brexit. These are mainly financiers of various sorts, as well as property tycoons, ICT and retail magnets.

This is not to suggest that the Remain campaign does not have über-wealthy supporters but to illustrate the sort of people that are funding the Brexit campaigns. If these über-wealthy individuals are not, like the leading Brexiteers, and much of the British media, not part and parcel of the very essence of Elite / Establishment, then I do not know who is. If these sorts of individuals not extremely well-placed to take advantage of the opportunities that might arise post-Brexit, not least from the turmoil that might be caused in the property and financial markets, then I do not know who is.

These are not the sort of individuals who are likely to take much notice of the concerns of working people in relation to jobs, wages, housing, social services, etc. It is a safe bet to suggest that protecting British workers´ rights upon Brexit and thus counteracting the drivers of the recent referendum polling trends is not likely to be at the top of their post-Brexit agenda. Take an illustrative quotation from one of the billionaires bankrolling Brexit. Peter Hargreaves has acknowledged the insecurity that would result from Brexit and stressed that: “It would be the biggest stimulus to get our butts in gear that we have ever had” … “We will get out there and we will be become incredibly successful because we will be insecure again. And insecurity is fantastic.” Maybe a billionaire stockbroker truly believes this but I doubt that the average Briton will see perceive insecurity in quite the same manner. This very insecurity is what is driving part of the trend in the possible Brexit vote.

Picking-up on the earlier quotation, for once BoJo is correct: the fact is that millions of the currently working-class people are actually protected by the common rules applied throughout the EU designed to create a single market. The protections include:

  • Anti-discrimination rights;
  • Written terms and conditions;
  • Maximum 48 hour working week, rest periods/breaks;
  • Paid annual leave;
  • Improved health and safety protection;
  • Maternity rights;
  • Parental leave rights;
  • Equal pay for equal work between men and women;
  • Fair treatment of part time, fixed term and agency workers;
  • Rights for outsourced workers;
  • Collective rights such as human rights, collective bargaining, information and consultation, etc.

Source: UK employment rights and the EU

These are not the sort of things to give-up lightly… unless you are so well-off that you do not need them. The people that are feeling the consequences of austerity most certainly do benefit from these labour market protections.

Wolves in Sheep´s Clothing?

 

Don´t be fooled by the über-rich advocating for Brexit on behalf of the ordinary working (and non-working) class British citizen. The great majority of the journalists / media advocating for Brexit stem from the same privately educated, Oxbridge elites. Whatever they may imply, protecting the average working (and non-working) person in Britain from the angst that plagues many of them is not their beer.

What many of them seek is a future where Britain can continue unimpeded down the path of deregulation and maximum labour market “flexibility” such as zero hour contracts.

A lot of Britons are anxious and angry. They have seen a few do very well indeed while austerity and the poor economic performance since 2007 has taken a chunk off their disposable. They know that we are certainly “not all in it together”. They have seen politicians such as David Cameron saying one thing to them and doing another himself. They have seen public services steadily deteriorating and that the future for people that depend on them is anything but rosy. This the result of decades of lack of investment in public services due to lack of political prioritisation. But during the EU Referendum the media and the Brexiteers point to the EU and EU immigrants and ordinary Britons fear that there will be even greater competition for a perceived smaller share of the social and economic pie.

But Britons are nothing if not fair and sensible: they know that when things appear to be too good or too simple to be true, they usually are. They know that pointing to the EU and EU immigrants (and who else post-Brexit?) is a simplistic solution to a complex set of British problems which will not be solved overnight and may well be accentuated by Brexit, especially if the economy takes a turn for the worse. The EU budget will not make much of a dent on the needs.

I grew-up in a council housing state in inner London.

I went to a low achieving secondary school and I was in the tiny minority that lucky enough to get to university.

I worked my way up my profession without the benefit of old boy networks.

I stumbled into an international career which has taken me throughout the EU member countries, as well as all the Candidate Countries knocking at the EU door.

My friends and family count among the people that are suffering from the angst that afflicts Britons.

So I feel able to say this: by tapping into the anxieties and frustrations of ordinary working Britons, the leading Brexiteers, their Oxbridge educated journalist buddies and their billionaire backers are spinning a very tall tale so as to tap into the legitimate concerns of ordinary Britons.

They are doing this knowingly, manipulatively and without the least intention of doing something about those concerns, should Brexit occur. Quite the opposite: their privileges and advantages are likely to be reinforced once they no longer have to look over their shoulder or deal with the bright glare of the other 27 countries of the EU.

Brexit will undoubtedly lead to winners and losers.

You can be certain of which side the leading Brexiteers, their über-wealthy and well-connected friends funding the campaigns and writing the misleading newspaper articles will be on.

But can you be so certain that your employment rights, wage levels, social benefits, etc. will be protected, let alone improved, upon Brexit?

I´m not. Not in the least.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


The crisis in school places: is Brexit the quick fix?

With about a month to go before the EU referendum scheduled to take place on 23 June 2016, high-profile Brexiteers keep pushing the line or argument that it is because of the European Union´s (EU) freedom of movement of people that Britain has major problems with its public services, not least health (EU health tourism), housing (being priced out by EU migrants), benefits (EU benefit tourism), education (too few places due to EU immigrant families), etc.

I have already discussed some of the arguments (see links above), so now attention turns to another major public policy concern in the Brexit: education. If it true that the education system is under pressure specifically because of immigration from the EU, then this could be a reason for considering leaving Brexit from the EU.

On the other hand, if the pressures for educational places predate 2004, when the EU immigration to the UK started in earnest, or if EU migration is only one factor among others that are causing the particular problem of pressures for school places, then it is also reasonable to discuss those other issues, thus putting EU immigration in context.

After all, everyone knows that government has ultimate responsibility for securing public goods which the market cannot deliver on its own: where an important public policy gap is diagnosed, it is for government to devote the necessary public funds to correct the market failure. No one is suggesting that Brussels is responsible for education (or housing construction, funding hospitals and clinics, etc.), not even the Brexiteers.

My kingdom for a school place!

In a clear echo of their diagnosis of the nature of the crisis in the health sector (i.e. the NHS is at breaking point because of EU health tourism and similar), the Brexiteers they are once again pressing the crisis button and pointing in the direction of Brussels: the school system is under “huge and unsustainable pressure” from a dramatic rise in the number of children from European migrants’ families. Ms Priti Patel, the pro Leave Employment Minister, echoing her now familiar anti-EU immigration refrain, keeps making comments such as: „These figures show how the EU’s open borders policies, and the uncontrolled immigration that stems from that, is leading to huge and unsustainable pressures on our schools.“

This possibility is deeply troubling for the average British family, so let us try to unpack this issue.

First of all, it is clear that Ms Patel and her bedfellows are not making allegations about the performance of the school system. There, it is clear that educational performance is a long running concern that cannot be pinned on the EU: Britain is responsible for the national curriculum, the schools and the teachers, not the EU. In any case, Britain has a long and proud history of accepting children whose mother tongue is not English and turning them into integrated citizens. Furthermore, the experience of EU migrant’s children has generally been positive in pushing up standards, especially in the urban areas where EU and other migrants tend to concentrate. So instead, the Brexiteers are focusing on the issue of insufficient school places (i.e. the unsustainable pressure bit) and pointing to EU immigration as the reason for the crisis.

So the central question to be asked is: are there sufficient places for school age children in the UK?

The answer is a clear and unequivocal “yes”. At the national level there is a notable surplus of both primary and secondary school places.

While Ms Patel and other Brexiteers are pointing the accusing finger of blame in the direction of EU immigrants, even Migration Watch, an initiative that maintains that immigration is neither properly managed nor sustainable and thus has an impeccable Brexit pedigree, says otherwise:

“There are currently 4.416 million primary school places in England and 4.011 million pupils on school rolls which means there are 434,000 unfilled places. At the moment the number of unfilled places as a percentage of total places is 9.8%…  The current number of secondary school places in England is 3.637 million while the current number of pupils is 3.191 million. This means that there are over 450,000 places currently unfilled. The number of unfilled place as a percentage of total places is currently 12.9%.” (emphasis added, 2014 data).

The real issue is that Britain’s fertility rate combined with immigration has resulted in a projected increase in school age children, which will feed into the school system from 2018 to 2020, as illustrated in the chart below.

So the point is not that there are currently unsustainable pressures but that in the future there might be unsustainable pressures if the British government fails to act. Perhaps this is what Ms Patel actually means, as opposed to what she and the rest of the Leave campaign are implying. Either way, the effect on the average voter can be imagined.

Responding to present or future school place demand is categorically not the responsibility of the EU or of EU citizens who choose lo live in Britain, as is their right to do.

It would be absurd to blame the large numbers of Britons living in France and Spain for causing unsustainable health / housing / education, etc. pressures there. Relatively little of the projected increase in demand for UK school places can possibly be attributed to EU immigrants. Generally speaking, they tend to be younger, better educated and single, factors which tend not to be correlated with large families and thus disproportionate number of school age children. As far as I can tell Britons, including Ms Priti Patel and Mr Nigel Farage, as well non-EU migrants who make-up the majority of the annual immigration to the UK, also find the time to make babies. British children clearly and unequivocally make-up vast majority of the children taking-up places in the schools.

When it comes to forecasts about future school places, it is the responsibility of Ms Priti Patel, Mr Boris Johnson, Mr Michael Gove (former Secretary of State for Education (2010-2014) and previously Shadow Secretary of State for Children, Schools and Families (2007 – 2010)), Mr David Cameron, Mr David Osborne, etc. to ensure that resources are allocated to meet those needs. Since politicians keep on about our children being our future, one would expect them to get on with funding the necessary school places, so as to avoid any future unsustainable pressure from a well-documented surge in school age children. Is this too much to expect of a responsible government and its leading ministers?

Bread today, not tomorrow

It would not be appropriate to suggest that the problem of school places is only about the future: it is also about today. The point is that demand for school places varies from location to location. Some schools are much more attractive than others for the simple reason that some perform much better academically than others. Most parents want to send their children not just to the nearest local school but to the best performing nearest school, since this is likely to affect their educational performance and thus their chances of getting to university and land a good job. That is a perfectly rational desire on their part.

But the result is that in high demand locations/schools, the parents’ first choice of school may or may not work out. The issue is thus not one of not getting a school place, whatever the Brexiteers may imply (though it may come to that in the future), but of getting a place in the school that the parents would prefer their child to attend. The better schools will always attract more demand for school places than they can possibly satisfy. In this context, available primary and secondary school places may not match demand for specific schools in particular parts of the country, especially in urban areas. In some places, it is possible that simply not enough school places are available to cope with demand.

None of this is new, unusual or driven by EU immigration.

Since demand and supply vary across time and space, it is up to central and local government to meet that future demand (based on population projections), as well as current demand in hot spots. This is at the core of governance, which includes taking into account the fact that EU migration not only happens, but has been happening since even before the UK joined in 1973. Nothing new there, though the scale of EU immigration has increased since 2004.  That is nothing new either, so the responsible individuals have had more than enough time to factor it into their planning.

It is up to each local authority not only to ensure that there are sufficient school places, but also to promote parental choice, diversity and fair access.

If there are access hot spots in particular locations, would you blame the parents for choosing to live in those parts of the country or wanting to send their kids to be best possible schools? If there are particular areas with insufficient school places, would you blame people for still wanting and expecting their children to get a school place? If there are problems, I would point to central and local government for failing to act according to the population forecasts and patterns of demand. There is absolutely no rocket science and there are no sudden unexpected factors involved. The nationality of the children or parents involved is irrelevant, except if some choose to make a political issue out of it.

The Department for Education is tasked with making capital funding available to establish new schools and maintain existing ones. For their part, local authorities argue that they cannot cope with the funding pressures: in 2014, 3 out of 4 claimed that capital funding for new places was insufficient. The National Union of Teachers argues that where there is a school places crisis, it is caused by the curtailment of local authorities’ powers and the centralisation of decisions over where to build new schools.

I can see that a problem exists in the policy nexus between the Department of Education, local authorities and the National Union of Teachers. What I fail to see is how Ms Priti Patel can attribute blame to EU immigrants when she and her fellow Brexiteers, such as Mr Gove, have systematically failed to perform their day job. It is British politicians and ministers who are paid to assess, plan and fund school places (and housing and health services and infrastructure and all the rest of public goods that only government policy can deliver) according to changing patterns of national, regional, local and micro demand. This applies equally to all public services.

Surely Ms Patel and Mr Gove can understand this point and their own role in the future availability or otherwise of primary and secondary school places? But fear not, it is not too late. There are still a few years before the looming school place crisis hits the school system (see chart above), so they may as well just get on with building the necessary schools, rather than blaming all and sundry for national and local politicians’ own policy failings. It is not just a bit too convenient to push the blame for public policy failures to someone else?

Scapegoating immigrants is never a pretty sight and can be downright dangerous.

With her background, Ms Priti Patel should understand this point much better than most even if the EU referendum, so dear to her ideological heart, may be at stake. I acknowledge that for someone with an immigration background in theReferendum Party and now the Conservative Party, talking tough about EU immigration may be some sort of mark of distinction, but she has to be  fair and reasonable in apportioning blame for the problem. As far as I am concerned, that particular bar is set even higher for senior members of the British government with constant access to the media. With power should come at least a sense of proportion, if not responsibility. The longer the Brexit debate goes on and the more the polls shift slowly towards Remaining, the more shrill the Brexit case become. The same could be said about the Remain campaign to some extent, though the focus is different.

One is tenuous and based on the premise that EU immigrants are to blame for almost all the public policy problems (housing, education, health, etc.). The other talks principally about the economic consequences of leaving on taxes, wages, pensions, house prices, jobs, etc.  This claim and counter claims muddy the waters and confuse the public prior to what will undoubtedly be the most important vote for a generation. However, this decision cannot possibly be reduced to just the issue of EU immigration, no matter how emotive it may be. Apart from anything else, British people returning home to the UK, together with non-EU immigration, constitute a larger portion of annual net migration than does EU immigration.

Returning to the issues of school places, let us keep things simple: any way you choose to look at it, Brexit cannot possibly be a quick fix for the forthcoming crisis in school places at primary and secondary school level. The surge in school age children is coming because of fertility rates: that means first and foremost Britons, as well as non-EU immigrants and EU immigrants. Why single out the least important contributing factor that is dwarfed by the impact of Britons themselves? Leaving the EU will change little in this respect, not least because EU migrants are attracted by work, are younger, are better educated and are more mobile, all of which tend to reduce fertility levels compared to the UK average.

Neither will Brexit affect well-established and long-standing local patterns of demand for the better performing schools. That is, unless Brexit is to be combined with forcing non-native Britons back to the other EU-27 countries. This is something which has been ruled out by everyone, even UKIP, since it would prompt a retaliatory reverse flow of almost as many Britons back to the UK. Apart from unleashing unpredictable forces in Europe (there are enough of those around at the moment) for very little gain, it would be one heck of a mess to sort out.

Blaming is easy, solving is not

So if Brexit is not the answer to the coming surge in school age children, as well as the high local demand for certain schools in particular locations, what would improve matters? There no prizes for guessing the answers:

  • The UK government (Department of Education and Chancellor of the Exchequer) should take its responsibility seriously and allocate the capital funding today in order to create the necessary new school places tomorrow and relieve localised pressure for school places.
  • Local government should ensure that public funds result in schools being built in the right locations, especially in high demand urban areas, while also ensuring fair access in demand hot spots so as to avoid accentuating social segregation.
  • Ms Priti Patel and the rest of the Brexiteers, not least Mr Michael Gove, should acquire a bit of humility and refrain from pinning their and their fellow British politicians’ own long-standing public policy failings (e.g. housing provision, NHS funding, capital funding for school, etc.) on the EU and scapegoating EU immigrants at the same time.

Now that would be a nice start in actually trying to solve at least one of Britain´s public policy challenges.

Will it happen? Fat chance.

It is much easier and politically rewarding to keep pointing the finger at EU immigrants. In the past, that finger was pointed at any old immigrant. These days, in the lead-up to the EU referendum, it is no coincidence that it is EU immigrants that are singled out.

And what happens after the 23rd of June 2016, when it has become normal and acceptable to blame Britain´s long-standing public policy ills (e.g. access to housing, access to education, access to health, benefits abuse, etc.) on foreigners, rather than the Britons who are responsible for policy-making, planning and funding? Will Britons wake-up and find that those public services have miraculously improved? Scapegoating is far too easy; trying to understand the problems and then solving them is much, much harder.

“It’s too easy to criticize a man when he’s out of favour, and to make him shoulder the blame for everybody else’s mistakes.” ― Leo Tolstoy, War and Peace

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU


Britain’s Productivity Puzzle and Brexit

Britain has a huge challenge. In the fractious lead-up to the Brexit referendum on the 23rd of June 2016, almost everything imaginable is being use for or against the European Union (EU), but on this occasion I am not referring to the EU challenge. I am alluding to the title of this post, namely the productivity of the UK, as this has direct implications for economic growth, wages and ultimately living standards. Given its importance, it should be the No 1 issue in the debate about the future of the UK, except that it is barely touched upon. This is a mistake.

The Theory

Productivity refers to how efficiently inputs (i.e. capital and labour) are used to produce outputs (i.e. goods and services), the best measure of productivity being output per hour. In theory productivity matters a good deal: Britain’s capacity to raise its standards of living over time depends almost entirely on its ability to increase its output per worker.

Productivity is also crucial in determining the long-term growth rates of the economy; stronger productivity growth leads directly to faster GDP growth. If this happens, tax revenues increase and budget deficits decrease. Governments have more to spend on public services such as health, housing, school places, GP / hospital capacity, infrastructure, etc. all of which are at the centre of the Brexit discussion. Naturally, the reverse also holds true: with lower productivity. And if Britain’s productivity is lower than its competitors, such as other EU nations, its relative standard of living decreases over time.

Productivity matters a great deal. The Nobel Prize winning economist Paul Krugman is reported to have said that: “Productivity isn’t everything, but it’s nearly everything”. What is the situation in Britain?

Productivity Puzzle

British labour productivity has traditionally grown at around 2% per year since the 1970s. That is not at all bad but the point is that since the global recession began in 2007, Britain´s productivity stagnated and continues to do so almost a decade later. Official reports stress that: “… such a prolonged period of essentially flat productivity is unprecedented in the post-war era”. The Chart below illustrates the trend.

Chart UK Productivity and GDP

Although economic growth has resumed quite strongly since 2013, this is mainly the result of an increase in the total number of hours worked in the UK, rather than rising productivity. What this means is that Britons are working harder to produce the same amount of goods and services than was the case prior to 2007, and much harder than if productivity growth had continued at its 2% annual trend rate. The feeble productivity level leads directly to the stagnation in UK wages and living standards. This is already having significant effects in terms of the on-going package of austerity in Britain, which is being felt across the whole country and is, if anything intensifying. People´s economic pain is much more a consequence of low productivity than of the costs of the EU or the freedom of movement of people (EU immigration).

If Britain’s productivity does not bounce up to the 2% trend, the implications for the economy, public finances and future living standards will be even more severe than is already the case.

International comparisons illustrate just why this is the No. 1 challenge.

Chart International Productivity Comparison

Based on real GDP per hour worked in 2014, the UK was ranked sixth among the Group of Seven (G7) countries, with Germany top and Japan bottom (the Chart below illustrates the issue). UK productivity was 18 percentage points below the average of the other G7 countries, the widest productivity gap since at least 1991. To illustrate the point further, it was 10 percentage points lower than Italy (which is hard for Britons to swallow), 30 percentage points lower than Italy and 36 percentage points lower than Germany. On the basis of output per worker, UK productivity was 19 percentage points below the average for the rest of the G7 in 2014.

The resumed economic growth and low unemployment rate combined with stagnant productivity has led people to talk of the UK’s “productivity puzzle”, as Britain loses ground to its major competitors.

Pumping-up Productivity: Brexit implications

Unlike Eurozone economies, Britain has its own currency and is fully in charge of its monetary policy. Blaming the EU and European immigrants for all its ills is far too easy and convenient. Instead, Britons should take a good, hard look at their own economy and what is required in order to increase productivity not just back to 2%, but ideally above this threshold.

What kinds of solutions are available to Britain in order for it to rise to the productivity challenge? The good news is that there is broad agreement about the main policy options. The bad news is that none of them are quick fixes and most of them will almost certainly not be improved by leaving the EU. The possible solutions include the following:

  • Raise the skills and qualifications of the labour force: the education system has to produce a better educated labour force and employers need to invest more in skills via training, apprenticeships, etc. These are known to increase labour productivity, however, the evidence is that this is not happening sufficiently. This may be part of the reason why Britain has been attracting ready-made, educated and trained migrants from the EU and non-EU countries (academia, R&D, industry, health service, financial sector, etc.). It is doubtful that the UK can immediately raise skills and qualifications to substitute what comes through the EU (the EU labour force is more highly educated in terms of average levels of human capital), thus productivity levels are unlikely to be enhanced by Brexit in the short to medium term. It takes time, investment and planning to systematically build-up the human capital base.
  • Increase investment in technology: the adoption of new technology is a key factor in improving productivity, as illustrated by the advent of computers and the internet in the recent past. A strong focus on generation of innovative products, services and processes would translate into high productivity levels. However, exiting the EU may either slow down this process or increase the investment cost. This is not just because of the potential loss of international collaborative innovation and R&D networks across European countries, which the EU funds. Brexit would also result in uncertainty about trade in the short-term and almost certainly less favourable trade agreements with the remaining EU trade block of 27 countries. This is likely to translate into increased import and export costs for Britain, including of equipment and technology. By opting out of the EU and its 50+ trade agreements, less favourable trade agreements will eventually be negotiated with 120+ countries. If investment in technology becomes more costly, firms may delay or avoid it, so it is unclear if the UK’s productivity levels will be enhanced by Brexit.
  • Increase substitution of capital for labour: if labour becomes cheaper and more freely available, firms may have fewer incentives to invest and may choose to use labour intensive methods, rather than capital-intensive ones. This would result in lower levels of productivity, though jobs and incomes would be maintained, at least for a certain period of time. A surge in productivity would require a reverse in the trend of underinvestment in plant and machinery, as well as physical infrastructure. If Brexit means much less availability and/or more expensive skilled capital, this could spur greater levels of substitution of capital for labour, thus stimulating productivity. At the same time, this might have implications for employment.
  • Improve the morale of workers: during recessions or periods of industrial unrest and low worker morale, productivity tends to fall. By contrast, if workers are motivated and happy, productivity is likely to be higher. The morale of employees can be affected by numerous variables, including but not only wages, bonuses and other monetary incentives. It is also affected by issues such as state of industrial relations, sense of having a stake in the company and enjoyment of the job. These are specific to each nation and enterprise. But to the extent that morale is affected by other factors such as nature of the labour contracts, hours worked, leave of various sorts, etc. Brexit is unlikely to affect morale positively, since many of those factors are influenced by EU rules and regulations (see below) affecting all 28 countries.
  • Minimise rules and regulations: regulations should not impose excessive costs on enterprises and a balance has to be struck between say being able to get rid of poor or disruptive employees and having lax labour market regulations which exploit employees and results in high turnover and demotivation. EU regulations affect health and safety standards, discrimination at work, hours worked, paternity/maternity periods, minimum breaks, minimum paid holiday periods, etc. Brexit might well be good for British employers if regulations are scrapped and labour market flexibility is increased, but would almost certainly come at the expense of employees. Many other regulations are the solely the purview of the British government. Britain has already spawned zero hour contracts which maximise employer flexibility over almost a million employees. It widely acknowledged that Britain already has one of the most deregulated business environments around – some have argued that there is excessive deregulation, for example in the financial sector. Further deregulation would be possible upon Brexit, but it is questionable whether this would necessarily be desirable. It might undermine labour gains, for example, if rules and regulations concerning discrimination, maximum work hours, health and safety, etc. are undermined. These would reduce job security, employer costs and possibly spur productivity, but much would come at the expense of employees.
  • Maximise capacity utilisation: during economic booms, firms tend to squeeze more output out of existing capacity by encouraging people to work overtime, thus increasing labour productivity. In recessions, they may hold on to workers, rather than releasing them even if they are working below capacity, resulting in labour productivity falls. There is some evidence of “labour hoarding” (firms cutting output but keeping labour in reserve for the recovery), which is part of the reason for the productivity puzzle previously discussed. It seems unlikely that leaving the EU will increase capacity utilisation. Britain´s trade balance is already poor, it exports 44% of its goods and services to the EU and Brexit would mean negotiating new, less favourable terms with the other 27 countries of the EU and 120+ countries that the EU has trade agreements with. Rather than maximising capacity utilisation, it is likely that the reverse will happen upon Brexit (less favourable trade agreements, more risk, higher costs, etc.), with negative implications for employment, wages and tax revenue.

The above does not represent a complete list of possible solutions to the British productivity puzzle. Other factors could be considered, such as seeking to rebalance the economy away from services (about 75% of GDP) towards manufacturing (about 10% of GDP).

In 2015, the Government published its productivity plan (Fixing the foundations: Creating a more prosperous nation), covering issues such as improve transport and digital infrastructure, increase investment, enhance workforce skills, build more houses, move people off welfare and into work, encourage exports, rebalance economy away from London, etc. The 15 point plan is illustrated in the Chart below.

Chart 15 Point Productivity Plan

The productivity plan seems worthwhile implementing but none of it is a quick fix to Britain´s fundamental problem and, on balance, Brexit would not unleash an immediate gain in productivity.

To conclude, the cause of austerity, low productivity and stagnating wages in the UK are first and foremost to do with the UK, not the EU or Europe more generally. The number one priority for the country is to raise the productivity levels, regardless of whether Britain remains in the EU or not. If this happens, the wages, the public expenditure and the standards of living take care of themselves. But it is hard to see just how the UK’s productivity puzzle could be eased by Brexit.

© Ricardo Pinto, 2016, AngloDeutsch™ Blog, www.AngloDeutsch.EU