We can still make a liberal Brexit work
30 June 2016
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29 June 2016
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The consequences of the Brexit vote have been brutal for the political establishment. And rightly so given the shock result we saw last week.
It highlighted a chasm between the accepted wisdom of Westminster and the position of the majority of people in Britain, and the verdict resets political and policy debates in a number of areas. Those of us who work in trying to deliver a liberal economic policy agenda and politicians more broadly ignore this at our peril.
As a colleague of mine from the Economists for Brexit group made clear in an email over the weekend, the electorate’s messages were clear. First, they want to have control and make their own laws. The major reason why people voted to leave the EU was sovereignty (53 per cent of Leavers said this was the most important reason in a Comres poll).
Second, this desire for control includes control over immigration. Almost every Leave advocate suggested, at the very least, the referendum was an opportunity to recalibrate migration policy to make it symmetric globally. Leaving in place free movement from the EU now looks a complete non-starter as a result.
Third, the people have shown they regard any short-term difficulties and pain as a price worth paying for regaining these controls (as Leavers acknowledged the likelihood of short-term uncertainty). Finally, the majority showed they did not believe that the establishment political leaders understood this desire for sovereignty and control.
Both parties must consider these lessons as they contemplate the future leadership of their parties. On the Conservative side, it looks inconceivable that a Leaver won’t be Prime Minister by the autumn. But these lessons should also inform how they will deliver the will of the people in EU negotiations.
The first three lessons above suggest to me that continued membership of the Single Market through EEA membership (a relationship a bit like Norway’s) is not a sustainable proposition. This would necessitate continued free movement of people from the EU. While being the least disruptive option to the industrial structure of the economy in the short term, it does not give the firm control of legislation and migration policy that the overwhelming majority of Leavers voted for.
A reneging on any reset of migration policy would embolden Ukip and many Conservatives with a “Leave means Leave” movement, resulting in years of further uncertainty even after EEA membership had been established. If it could clearly be established as a transitional arrangement, then fine, but given the mood of Remain politicians and voters, this simply cannot be guaranteed. Sadly, the case for free movement within this debate has been lost.
The agenda for economic liberals should therefore be three-fold. First, to use Brexit as an opportunity for an expansive free trade policy. My preference would be for a unilateral free trade position, abolishing all import tariffs, and delivering lower prices for consumers. But it is highly likely that both the UK and EU could agree a free trade agreement in a number of important areas quickly, and if unilateral free trade is politically impossible, a next best solution would be to capitalise on the positive noises from Australia, Canada, the US and New Zealand and the wishes of many politicians in those countries for free trade deals.
Next, economic liberals must argue for continued liberal migration but within a symmetric, non-discriminatory global policy framework. To take the sting out of the politics of this debate, and to move away from some of the worst aspects of the central-planning of an “Australian points-based system”, the new Prime Minister should follow the advice of the economist Jonathan Portes and allow the Migration Advisory Committee to articulate options for the new policy framework to minimise economic damage.
Finally, politicians should act to mitigate uncertainty as far as possible. Now campaigning is over, they should stop advocating for high level personnel change at the Bank of England. They should make clear their negotiating intentions and time-frame with the EU, but should not delay the process such that EU membership becomes a general election issue. And they should make pledges on corporate taxation, energy policy and broader regulation that protect the UK’s attractiveness for foreign direct investment and ensure the retention of much financial services activity.
This article was first published in City AM.
It highlighted a chasm between the accepted wisdom of Westminster and the position of the majority of people in Britain, and the verdict resets political and policy debates in a number of areas. Those of us who work in trying to deliver a liberal economic policy agenda and politicians more broadly ignore this at our peril.
As a colleague of mine from the Economists for Brexit group made clear in an email over the weekend, the electorate’s messages were clear. First, they want to have control and make their own laws. The major reason why people voted to leave the EU was sovereignty (53 per cent of Leavers said this was the most important reason in a Comres poll).
Second, this desire for control includes control over immigration. Almost every Leave advocate suggested, at the very least, the referendum was an opportunity to recalibrate migration policy to make it symmetric globally. Leaving in place free movement from the EU now looks a complete non-starter as a result.
Third, the people have shown they regard any short-term difficulties and pain as a price worth paying for regaining these controls (as Leavers acknowledged the likelihood of short-term uncertainty). Finally, the majority showed they did not believe that the establishment political leaders understood this desire for sovereignty and control.
Both parties must consider these lessons as they contemplate the future leadership of their parties. On the Conservative side, it looks inconceivable that a Leaver won’t be Prime Minister by the autumn. But these lessons should also inform how they will deliver the will of the people in EU negotiations.
The first three lessons above suggest to me that continued membership of the Single Market through EEA membership (a relationship a bit like Norway’s) is not a sustainable proposition. This would necessitate continued free movement of people from the EU. While being the least disruptive option to the industrial structure of the economy in the short term, it does not give the firm control of legislation and migration policy that the overwhelming majority of Leavers voted for.
A reneging on any reset of migration policy would embolden Ukip and many Conservatives with a “Leave means Leave” movement, resulting in years of further uncertainty even after EEA membership had been established. If it could clearly be established as a transitional arrangement, then fine, but given the mood of Remain politicians and voters, this simply cannot be guaranteed. Sadly, the case for free movement within this debate has been lost.
The agenda for economic liberals should therefore be three-fold. First, to use Brexit as an opportunity for an expansive free trade policy. My preference would be for a unilateral free trade position, abolishing all import tariffs, and delivering lower prices for consumers. But it is highly likely that both the UK and EU could agree a free trade agreement in a number of important areas quickly, and if unilateral free trade is politically impossible, a next best solution would be to capitalise on the positive noises from Australia, Canada, the US and New Zealand and the wishes of many politicians in those countries for free trade deals.
Next, economic liberals must argue for continued liberal migration but within a symmetric, non-discriminatory global policy framework. To take the sting out of the politics of this debate, and to move away from some of the worst aspects of the central-planning of an “Australian points-based system”, the new Prime Minister should follow the advice of the economist Jonathan Portes and allow the Migration Advisory Committee to articulate options for the new policy framework to minimise economic damage.
Finally, politicians should act to mitigate uncertainty as far as possible. Now campaigning is over, they should stop advocating for high level personnel change at the Bank of England. They should make clear their negotiating intentions and time-frame with the EU, but should not delay the process such that EU membership becomes a general election issue. And they should make pledges on corporate taxation, energy policy and broader regulation that protect the UK’s attractiveness for foreign direct investment and ensure the retention of much financial services activity.
This article was first published in City AM.
4 thoughts on “We can still make a liberal Brexit work”
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Youve written:
But it is highly likely that both the UK and EU could agree a free trade agreement in a number of important areas quickly
Did you mean UNlikely?
Good article – I’d love to see greater trade as a result – if that doesn’t happen then this “moment” may well be lost.
I’m ‘intensely relaxed’ (to coin a phrase) about the precise economic arrangements that are made with our former partners in the rump European Union. I reckon the economic pros and cons of Brexit are (a) relatively small and (b) fairly evenly-balanced. In a word: negligible. The main political problem with immigration, I believe, is that both the Labour party in government and the Conservative party in government had shown that their public statements about the numbers were utterly unreliable. That was the major divide between the politicians in Westminster and the people in the rest of the country. That is not to say that there is ultimately an easy ‘solution’ — but if one can’t trust one’s government to try to tell the truth about such matters we are in a bad way indeed. Of course some of the Leave campaign’s statements during the referendum campaign were unreliable — but so were some of the Remain campaign’s. In particular the OBR was rather conspicuous by its absence in vouching for the honesty of the government’s scary economic forecasts fifteen years into the future.
Ryan, I’m 99% with you – political union, sugar tax, all of it – but, here, I don’t understand why the EEA/Norway deal is not a sustainable proposition.
If we assume that all remainers are pro single-market and if you could find 634,751 pro-single market brexiteers, then politically, the known mandate plus that small assumption might be deemed enough to just take the EEA option today. That 634k is 3.6% of 17.4m brexiteers. ASI’s poll showed that suchly-minded brexiteers were upto 54%.
Personally, I see little, if any demonstrable value in the single market – pathetic growth; protectionism; negligible innovation; hampered competition; and rapidly diminishing UK->EU exports. However, there is that fin services passporting bit, where, if I understand – I may well not – we’re over a barrel.
Unless I am missing something, I would reluctantly wear illiberal immigration in exchange for passporting, so 634,750 to find. Then we’ll see how things look in ~5 years.
The Single Market is just not worth worrying about. At +worst+, the UK would only face a 4% tariff outside it – which has already been more than discounted by Sterling depreciating against the Euro. Free trade trumps this sclerotic trading bloc every time. Why do we want to be part of this bureaucratic morass (there are even 31 directives covering toothbrushes!), membership of which will still leave the UK with no control over its borders?