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17 November 2018

Deal or No Deal

Tag(s): Politics & Economics, Business, History
Deal or No Deal is a television game show hosted on Channel 4 by Noel Edmunds. I confess I have never watched a single minute of this show though I have had the pleasure of working with Mr Edmunds whom I found most amiable. But about his show I have no opinion. I also confess that I have not read the Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland of the European Union and the European Atomic Energy Community, as agreed at negotiators’ level on 14 November 2018.  This was released late on Tuesday this week and has dominated the news headlines ever since. I am now writing this on Saturday 17th and reckon that if I had devoted every waking moment to reading this I would still not have finished it[i]. But yet within a day it seems everyone in the country had an opinion on it, most of which seemed to be negative. My views are also negative but that is based on some aspects of the draft agreement that are reportedly in it. But all of us must take care.

As a graduate in law I regard myself as technically capable of reading and understanding legal documents. If I am reading a fast paced page turner of a crime novel I can usually read at comfortably 60 pages per hour, so in a day on the beach I will usually get through quite a long novel. I calculate I need 4,000 pages when I go on such a holiday. But this tome is 585 pages of densely written arcane legalese and one would need to read it much more slowly, possibly no more than 20 pages per hour and more slowly than that if one needed to take notes and/or cross–reference other pages or indeed other documents. So even if I had worked ten hours a day for the past three days I might just only have read it through once without making notes or checking back on previous references.
One TV journalist on a major news programme in his online article says he drew the short straw of reading the draft agreement and described “sifting through it”, in other words, reading it selectively and not comprehensively. Sir Keir Starmer, the Shadow Brexit Secretary for the Labour Party and himself an experienced lawyer, says that “we have read through it” which can only mean that he divided up the work among a number of colleagues and is then relying on their individual summaries to form his opinion.

But what does seem clear from the headline summaries, even with all my above expressed caution, is that this is a bad deal. On repeated occasions the Prime Minister has expressed the view that “No deal is better than a bad deal.” I think she intended this as a shot across the bows of the EU negotiators.  In other words, that she was prepared to walk away rather than signing up to a bad deal. If so, it hasn’t worked. And if so, why did she agree to pay the £39 billion? Her answer is that the UK meets its legal obligations, a perfectly valid argument if true. But in 2016 our net contribution to the EU was £8.6 billion so agreeing to pay the equivalent of almost five years net contributions for a two year withdrawal period seems highly excessive. I can see there would be some ongoing commitments like pensions but they cannot amount to this figure.

Why do I say it’s a bad deal? Primarily because it commits us to a new customs agreement which once we have entered it we cannot leave without the specific agreement of all the other 27 member states. There is no commitment that they will agree; no way can we trigger our exit without their permission. During this indefinite period we will still be under their regulatory authority for all of our economic activity without any opportunity to influence such regulation.

There is much talk of business welcoming this deal and the journalists' assumption is that if it’s good for business it’s good for our economy. This is false for various reasons. The first is that they are not quoting business; they are quoting some big business. And it is certainly true that for a number of big businesses being in the single market is positive for various reasons. Big established businesses like regulation because it means they can cope while new entrants find it difficult to break in. They like free movement of labour because they have been able to hire workers from Eastern Europe and so keep wages down. And their supply chains are deeply integrated with the EU, though often at the expense of developing economies.

The CBI, which claims to represent such businesses and so is often erroneously described in the media as ‘the voice of business’, also argued in the same way a number of years ago that the UK should join the Euro. They gave very similar reasons for that. I used to sit on the National Council of the CBI and saw at first-hand how little it represented the economy as a whole but rather the narrow vested interests of its membership. If the UK had joined the Euro we would have had similar problems to Greece and Italy, but on a much larger scale.

Only 5% of Britain’s businesses trade with other EU countries. 95% don’t. But 100% of Britain’s   businesses are subject to 100% of EU regulation.  Many say that the EU is the UK’s largest trading partner. This is true but the share of trade with the EU as a proportion of total UK trade has been declining fast. Ten years ago it was 57%. It is now down to 44%. Further our trade with the EU is in deficit while our trade with the rest of the world is in surplus. That is because there is no EU single market for services where the UK excels. So our service industries like insurance, consultancy, legal, etc trade profitably with the rest of the world.

Business likes certainty and so the sprawling nature of these negotiations over 28 months now has been bad for investment and long term planning. But that is not a reason to capitulate and sign up for a certain future of being an unrepresented colony of the EU.

We are facing a constitutional crisis and in such crises the need for cool headed leadership is essential. But we must not conflate stubbornness and intransigence with cool headedness. In military conflict it is a truism that plans do not survive the first contact with the enemy. And so resourcefulness, bravery, cunning and cool headedness are the hallmarks of great leaders like Wellington and Nelson.

In the 20th century there were four great constitutional crises:

In 1909 the Conservative dominated House of Lords refused to pass the Liberal Government’s budget. The resulting crisis in which King Edward VII got involved in the last year of his life was only resolved after seemingly endless constitutional wrangling by a new Parliament Act in 1911 which restricted the Lords’ ability to block legislation for which the Government of the day had an electoral mandate. It also restricted parliamentary terms from seven years to five.

In 1936 King Edward VIII precipitated a crisis by declaring his intention to marry an American Wallis Simpson who had been divorced once and was going through a second. At the time divorce was still frowned on by the Church of England of which Edward once crowned would become titular head. The Prime Minister Stanley Baldwin advised the King not to marry. Edward insisted he would marry Mrs Simpson once she was free. Baldwin said his whole cabinet would resign if the King ignored their ministerial advice. The affair divided the whole country. While the major parties both opposed the marriage other minor parties supported the King including Winston Churchill who was out of office at the time. Nevertheless, the King eventually accepted Baldwin’s advice and abdicated leaving the throne for his brother to assume as King George VI, the father of the present Queen. History might have been very different if matters had taken a different course as Simpson was thought to be a Nazi sympathiser.

In 1940, after the appeasement of Hitler, the invasion of Poland, the declaration of War and the dreadful first few months of that war, Neville Chamberlain was forced to resign as Prime Minister. Unusually he still had the support of his cabinet but it was pressure from the opposition that forced his hand. After the retreat from Norway it was felt that a coalition government was required to manage the war effort and the Labour and Liberal party leaders refused to serve under him. The choice of Churchill rather than Halifax to take over was another event that could easily have gone the other way, again leading to a possibly very different chain of events.[ii]

The Suez crisis in 1956 was an invasion of Egypt by Israel followed by the United Kingdom and France. The objectives were to regain Western control of the Suez Canal and to remove Gamal Abdul Nasser as President of Egypt, who had just nationalised the canal. After the fighting had started the United States, the Soviet Union and the United Nations put huge political pressure on the three invading nations who all withdrew. The episode humiliated the UK and France and very much strengthened Nasser and his standing in the Arab world.  In Britain Sir Anthony Eden resigned as Prime Minister and the affair led indirectly to the establishment of the fifth Republic in France under General De Gaulle. Historians mostly agree that this event signified the end of the UK and France as World Powers. Some also say that it was under cover of the crisis that the Soviet Union invaded Hungary.

Is today’s situation in similar territory? In some ways I think it is with real dangers facing us. Three of the four surviving British Prime Ministers have called for a second referendum. But what would the question be? It could not just be In or Out as before. But if alternative Outs were proposed while In remained a simple question then the Out vote would split and Remain would win. I think that could lead to civil insurrection. If the Remain question was also modified to Remain in a reformed EU that would be dishonest as in 2016 David Cameron campaigned on the basis that he had achieved reform and to offer something that has not been negotiated is misleading at best.

We are certainly living in interesting times.

[i] But I have downloaded it and will start to read it.
[ii] I commend the excellent film The Darkest Hour and the equally excellent new biography of Churchill by Andrew Roberts

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