After months of relying on the tautology ‘Brexit means Brexit’, Theresa May has finally spelt out what she means by it.
Her speech on Tuesday setting out her ‘twelve goals’ won her a good press. And her Brexit secretary, David Davis, told me on Wednesday morning that he was sure the negotiations ‘will succeed’. Is the government’s optimism justified or is it just whistling to keep its spirits up?
One of the tasks the Prime Minister faced this week was to dispel the growing impression that the challenge of finding a way through the political minefield of Brexit was proving too much for her. Lack of a clear steer from the top was leading to jibes such as the Economist’s ‘Theresa Maybe’. Tuesday’s speech has put paid to such talk, at least for the time being. Now we know where she stands. She has, in the most important respect, come down off the fence.
Her main message was that Britain no longer wanted to be a member of the single market. This was the inevitable consequence of her view that Britain could not be ‘half-in, half-out’ of the EU and that we couldn’t ‘hold on to bits of membership as we leave’.
Her judgement is that the two things that chiefly drove the Leave vote in last June’s referendum were a determination to ‘take back control’ of Britain’s affairs from Brussels and in particular to do something about ‘uncontrolled’ immigration. It was always clear that if responding to these demands were the Prime Minister’s principal goals, then staying within the single market could not be an option. Our EU partners’ insistence that free movement of people as a condition of membership of the single market could not be compromised meant that we would have to leave the market if we wanted to control EU immigration. Equally, the role of the European Court of Justice in adjudicating disputes within the single market (as well as the EU more widely) couldn’t be squared with our wish to escape its jurisdiction.
So Mrs May spelled out that we were definitely leaving the single market. At first glance it may seem odd that it has taken her so long to do so, given that the logic is unavoidable. But the reason for the hesitation is not hard to see. When the British people voted by two to one in the referendum of 1975 to join up it was not the European Union we were joining but the European Economic Community: a bird of a very different feather. We were persuaded that our prosperity would be enhanced by our joining and when Mrs Thatcher helped create the single market in the 1980s, an era of even greater prosperity was promised. In the eyes of many, and not just Remainers, it was also delivered.
So deciding to leave the single market seems not only a repudiation of one of the central achievements of Thatcherite economics, but also to be taking a huge risk with British prosperity. That indeed was the chief argument of those pleading with British voters not to opt for Brexit. The essence of Mrs May’s political problem has been how to deliver what the voters voted for in the referendum without risking their economic wellbeing.
Her answer came in her speech. Britain would certainly leave the single market but at the same time it would seek a ‘bold and ambitious free trade agreement’ with the EU, giving us as free access as possible to the single market. She would also seek some sort of new relationship with the EU’s customs union and she would aim to secure it all within two years.
In the eyes of many, such an aim is not so much ambitious as delusional. The timetable alone is regarded as hopelessly optimistic: trade deals take years to negotiate and the EU is notoriously among the slowest to complete them. But it is the substance of what she is after that is causing the greatest scepticism.
Her optimistic tone implies she thinks Britain can achieve all of the advantages for free trade within Europe without any of the disadvantages. But that is exactly what her critics say she cannot possibly achieve. Such ‘cherry-picking’, which would leave Britain in a better position outside the single market than within it, is precisely what the other members of the EU cannot agree to, they say, because it would simply encourage other EU member states to follow suit. The result of that would be the break-up of the EU. So the EU must ‘punish’ Britain for deciding to leave, ‘pour encourager les autres’.
When I put this to David Davis on Today on Wednesday, he denied it by deploying an argument more usually articulated by Remainers. He said that that line of thinking misunderstood the reason why most other countries in the EU are members. Their chief motivation for joining was not economic, as Britain’s had been, but political: to secure peace on the continent and, in the case of recently-joined members, to secure democracy and the rule of law in their own countries. So Britain getting a good economic deal over Brexit would not encourage them to follow suit.
To some this may seem like wishful-thinking. Europe’s political elites may cherish the EU for such reasons, but their voters seem increasingly less enamoured. Elections in Holland, France, Germany and possibly also Italy in the coming months may demonstrate how far the anti-EU sentiments revealed in our own referendum have spread to the continent. In order to contain that threat, the elites in these countries may feel they need to remind their own voters how cold life outside the EU might be by using Britain as a warning.
Mr Davis thinks this unlikely to happen and takes comfort from the fact that there has been no ‘push-back’ from our European partners of the sort one might expect when one side in an impending negotiation sets out its demands. But he is also relying on the fact that Europe sells £290bn-worth of exports to Britain every year so will itself want as free a trade deal as possible with us. Maybe, say the sceptics, but Britain constitutes a far smaller proportion of their overall export market than the EU is of ours, so they can afford to take a tough line.
The Prime Minister argued that for the EU to resist the sort of new trade deal she is proposing would be a ‘calamitous act of self-harm’ on its part but she also made clear what she would do if they did so. ‘No deal for Britain is better than a bad deal for Britain’, she said and implied that if she couldn’t get what she wanted, Britain would change its economic model. This has been taken to mean that Britain would slash its corporate taxes and free up its regulatory system in order to lure business away from mainland Europe into a sort of new Singapore that Britain would then become.
Whether this is a meaningful threat is moot. Sceptics point out that Britain has one of Europe’s biggest fiscal deficits so is hardly in a position to start slashing taxes. Furthermore, they say, there’s no evidence that the British people want to live in a country with much lower public spending, fewer controls on how business operates and less protection for workers.
Mrs May, however, is confident we won’t be going there. Her whole approach is built on the belief that a deal advantageous to both sides can be struck and she went out of her way to say that she (unlike, it would seem, the incoming American president) wants the EU to succeed and not fall apart. She has also left herself negotiating room, especially on Britain’s future contributions to the EU budget and on the numbers of EU citizens allowed into Britain to work post-Brexit, to try to get one.
Mr Davis acknowledged the obvious: that it is still early days. But there is no doubting the government’s optimism, in public at least. Is that optimism justified, or are the risks of our being punished economically for having the effrontery to leave the EU still very real?
What’s your view? Let us know.
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