The commitment to EU integration must not be underestimated

Wolfgang Munchau in The FT

Aachen is close to the Dutch city of Maastricht, which gave its name to what is probably the most important European treaty of modern times. The treaty of Aachen, signed last week by German chancellor Angela Merkel and French president Emmanuel Macron, is of a different category. But you would be wrong to underestimate its significance. This treaty will set an agenda, just as the Franco-German Elysée Treaty did in 1963. And agendas matter in European discourse.

If you want to think of an analogy, consider the Werner Plan. In December 1969, in the twilight days of the Bretton Woods system of semi-fixed exchange rates, EU leaders held a summit in The Hague to set up a working group to study monetary union. It was headed by Pierre Werner, Luxembourg’s prime minister at the time. Economists were right at the time to dismiss the discussion of a future monetary union as pie-in-the-sky, just as defence experts today are right to dismiss talk about a European army. The Werner Report was an unrealistic road map to a single currency. But it nevertheless managed to put this hugely significant policy agenda on the table. It was another 30 years until the introduction of the euro. But without this first, failed step, it would never have happened. 

One of the many reasons why the UK is leaving the EU has been a persistent tendency to underestimate such symbolism. Another is the entrenched belief that the golden era of EU integration is behind us. The widespread dismissal in the UK press of the Aachen Treaty is very much in that tradition. 

Being in denial about integration does not square with the facts on the ground. I have often criticised the German government’s handling of the eurozone crisis. But I have never had any doubt about Germany’s ultimate commitment to monetary integration. The Aachen treaty provides no concrete solutions, but at the very least it underlines that commitment. Germany and France say, essentially, that they will do whatever it takes. Like Saint Augustine before them, they just do not want to do it yet. 

But they may not be able to wait too long. The EU must make some fundamental choices on the future of its dysfunctional monetary union. In the decade since the financial crisis, many of the problems in both the real economy and the financial sector have been left unaddressed. The so-called banking union has failed in its principal objective to break the doom loop between banks and sovereign borrowers. Italy continues to bail out its banks. I expect Germany to do the same very soon. 

The latest economic indicators suggest that the downturn is going to be steeper than previously thought. If short-term interest rates do not rise above -0.4 per cent at the top of the economic cycle, you know you have a very sick underlying economy. The European Central Bank’s latest bank lending survey suggests that credit conditions are now beginning to tighten in Italy, while the Netherlands is suffering from a financial bubble. In other words, we are entering a period in which policy reform will soon be on the agenda. 

In the discussion on common defence, we may only be at the point where we were in 1969 on monetary integration. The external event to prompt a rethink in Berlin and Paris has been repeated threats by President Donald Trump that the US will leave Nato. Even in the unlikely event of this happening, Germany and France would not be in a position to create a joint army. Germany, in particular, is politically not ready; it spends only 1.2 per cent of its gross domestic product on defence, as opposed to France’s 2 per cent. The German constitution mandates that any decision to deploy troops has to be agreed by the Bundestag. Attitudes towards military engagement differ fundamentally between the two.  
Aachen will not shift German political views on defence. But I would not rule out that, over time, it could become more acceptable for a German government to raise defence spending targets — so long as this occurs in a European context. After the Werner report came a series of loose currency arrangements followed by the European exchange rate mechanism. The way to a common army is not only paved with good intentions but with many small steps, such as a pooling of defence procurement. 

In the preamble to the Aachen treaty France and Germany promise to take their “bilateral relations to a new level”. One day, while you are looking the other way, that will actually happen.

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Syriza, Greece, and the Future of Left-Wing Coalitions

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Britain’s immigration debate is not only about economics

Culture, identity and a sense of fairness matter just as much to many people writes  CAMILLA CAVENDISH in The FT

Last summer I was sitting in a café in Boston, Lincolnshire , interviewing Karol, its enterprising Polish owner. He arrived in England to pick lettuces ten years ago, worked his way up to factory packing, and then started this little restaurant on a side street. Sipping tea, he told me of his high hopes for the pierogi dumplings cooked by his wife. 

I had sought out Karol as an example of the kind of immigrant we want in Britain — friendly and hard-working. He was sheepish about his very limited English, though, and said that his wife and parents, who have joined him, barely speak it at all. Their customers, he said with a tone of regret, are almost all Polish, Romanian and Lithuanian. Here on the east coast of England, the old residents and the new arrivals are largely living parallel lives. 

 This was perhaps inevitable. The population of this little town grew at more than double the average rate for England and Wales in ten years from 2004. This followed the decision of the Blair government to open the UK to the eastern European accession countries without a transitional period. There was a 460 per cent increase in immigration. Unsurprisingly, Boston registered the highest Leave vote of the 2016 referendum: almost 76 per cent. 

Boston is an extreme example, but it is only one of many places I have visited where we have utterly failed to integrate people — including, sometimes, those of Pakistani and Bangladeshi origin. The government has been attacked for attempting to limit low-skilled immigration in this week’s white paper. But it is trying to respond to a deep malaise which is driving far-right populism in both Europe and the US, and even in previously moderate Sweden. 

As Britain tumbles towards a future which I still hope will see us clinging on to the EU, not crashing out of it, I am concerned that so many members of the establishment continue to paint anxieties about migration as purely economic, the misplaced rage of those “left behind” by globalisation and the financial crisis. 

While these are clearly factors, this explanation overlooks the fact that the challenge is not merely an economic one, of wages and productivity — it is cultural, too. The Migration Advisory Committee, which has done so much to provide objective analysis of this fraught subject, has stated that migration from the European Economic Area “as a whole has had neither the large negative effects claimed by some, nor the clear benefits claimed by others”. Something else is going on: boiling resentment at years of being ignored by the ruling classes who have benefited most from immigration. 

Academics including Eric Kaufmann and Jens Hainmueller have shown that attitudes to immigration in the US and Europe are not as highly correlated with personal economic circumstances as many commentators assume. Many Leave voters and supporters of US president Donald Trump have been influenced more by deep fears about the impact on national identity. 

Economists will argue that consumers benefit from cheaper vegetables in the supermarkets. But Boston voters who might prefer to pay a bit more to preserve their sense of identity should not be lightly dismissed. If we do end up remaining in the EU, we must not simply breathe a sigh of relief and resume business as usual. 

This week’s argument over the proposed £30,000 income threshold for new arrivals will no doubt continue through the consultation period. So will the debate — vital for the NHS — over how to define a “shortage occupation”. But £30,000 was not plucked out of the air. It was based on the committee’s finding that EEA/EU migrants as a whole pay more in than they take out, in services and benefits — but only when they earn roughly £30,000 or more. 

This goes to the heart of what many people feel deeply: that no one should take out more than they have paid in. During David Cameron’s renegotiation of the terms of the UK’s EU membership in 2015-16, polls showed that many people were aware that British taxpayers were paying child benefit to children who lived in Warsaw and had never set foot in Britain. 

Mr Cameron bumped up against not only the theology of free movement of people, but also the incompatibility between Britain’s free universal healthcare and school systems, and contributory social insurance schemes in other member states which require far higher levels of prior contribution before getting entitlement to benefits. 

The white paper states that people who arrive speaking only basic English are required to become more fluent; but I have interviewed many people who have survived for over a decade with no English at all. It makes a nod towards reducing entitlements for short-term workers, but does not address the question of contributions from people who want to put down roots and bring dependants, beyond the blunt instrument of income thresholds. We must bring back the contributory principle to our welfare state. 

I would never argue that immigration was the sole factor driving the Leave vote in the 2016 referendum. Nor will it be the sole consideration in any “people’s vote”. But we ignore it at our peril. This week, it felt as though the debate had shrunk back into convenient tracks. 

I hope that my friend Karol will succeed. Of course, if we crash out of the EU on March 29, high tariff barriers to agricultural imports will probably bankrupt our farms — and his café business. If that happens, Boston’s problem will no longer be too many people, but too few. 

My plan to revive Europe can succeed where Macron and Piketty failed

Under my Green New Deal, €500bn a year can be created without raising taxes – and it may tempt Britain back to the fold writes Yanis Varoufakis in The Guardian

 

‘Historians will mark Emmanuel Macron’s failed reform agenda as a turning point in the EU, perhaps one that is more significant than Brexit.’ Photograph: François Lenoir/Reuters


If Brexit demonstrates that leaving the EU is not the walk in the park that Eurosceptics promised, Emmanuel Macron’s current predicament proves that blind European loyalism is, similarly, untenable. The reason is that the EU’s architecture is equally difficult to deconstruct, sustain and reform.

While Britain’s political class is, rightly, in the spotlight for having made a mess of Brexit, the EU’s establishment is in a similar bind over its colossal failure to civilise the eurozone – with the rise of the xenophobic right the hideous result. 

Macron was the European establishment’s last hope. As a presidential candidate, he explicitly recognised that “if we don’t move forward, we are deciding the dismantling of the eurozone”, the penultimate step before dismantling of the EU itself. Never shy of offering details, Macron defined a minimalist reform agenda for saving the European project: a common bank deposit insurance scheme (to end the chronic doom loop between insolvent banks and states); a well-funded common treasury (to fund pan-European investment and unemployment benefits); and a hybrid parliament (comprising national and European members of parliament to lend democratic legitimacy to all of the above).

Since his election, the French president has attempted a two-phase strategy: “Germanise” France’s labour market and national budget (essentially making it easier for employers to fire workers while ushering in additional austerity) so that, in the second phase, he might convince Angela Merkel to persuade the German political class to sign up to his minimalist eurozone reform agenda. It was a spectacular miscalculation – perhaps greater than Theresa May’s error in accepting the EU’s two-phase approach to Brexit negotiations.

When Berlin gets what it wants in the first phase of any negotiation, German chancellors then prove either unwilling or incapable of conceding anything of substance in the second phase. Thus, just like May ending up with nothing tangible in the second phase (the political declaration) by which to compensate her constituents for everything she gave up in the first phase (the withdrawal agreement), so Macron saw his eurozone reform agenda evaporate once he had attempted to Germanise France’s labour and national budget. The subsequent fall from grace, at the hands of the offspring of his austerity drive – the gilets jaunes movement – was inevitable.


The great advantage of our Green New Deal is we are taking a leaf out of Franklin Roosevelt’s original New Deal in the 1930s

Historians will mark Macron’s failure as a turning point in the EU, perhaps one that is more significant than Brexit: it puts an end to the French ambition for a fiscal union with Germany. We can already see the decline of this French reformist ambition in the shape of the latest manifesto for saving Europe by the economist Thomas Piketty and his supporters – published this week. Professor Piketty has been active in producing eurozone reform agendas for a number of years – an earlier manifesto was produced in 2014. It is, therefore, interesting to observe the effect of recent European developments on his proposals. 

In 2014, Piketty put forward three main proposals: a common eurozone budget funded by harmonised corporate taxes to be transferred to poorer countries in the form of investment, research and social spending; the pooling of public debt, which would mean the likes of Germany and Holland helping Italy, Greece and others in a similar situation to bring down their debt; and a hybrid parliamentary chamber. In short, something similar to Macron’s now shunned European agenda.

Four years later, the latest Piketty manifesto retains a hybrid parliamentary chamber, but forfeits any Europeanist ambition – all proposals for debt pooling, risk sharing and fiscal transfers have been dropped. Instead, it suggests that national governments agree to raise €800bn (or 4% of eurozone GDP) through a harmonised corporate tax rate of 37%, an increased income tax rate for the top 1%, a new wealth tax for those with more than €1m in assets, and a C02 emissions tax of €30 per tonne. This money would then be spent within each nation-state that collected it – with next to no transfers across countries. But, if national money is to be raised and spent domestically, what is the point of another supranational parliamentary chamber?

Europe is weighed down by overgrown, quasi-insolvent banks, fiscally stressed states, irate German savers crushed by negative interest rates, and whole populations immersed in permanent depression: these are all symptoms of a decade-long financial crisis that has produced a mountain of savings sitting alongside a mountain of debts. The intention of taxing the rich and the polluters to fund innovation, migrants and the green transition is admirable. But it is insufficient to tackle Europe’s particular crisis.

What Europe needs is a Green New Deal – this is what Democracy in Europe Movement 2025 – which I co-founded – and our European Spring alliance will be taking to voters in the European parliament elections next summer.

The great advantage of our Green New Deal is that we are taking a leaf out of US President Franklin Roosevelt’s original New Deal in the 1930s: our idea is to create €500bn every year in the green transition across Europe, without a euro in new taxes.

Here’s how it would work: the European Investment Bank (EIB) issues bonds of that value with the European Central Bank standing by, ready to purchase as many of them as necessary in the secondary markets. The EIB bonds will undoubtedly sell like hot cakes in a market desperate for a safe asset. Thus, the excess liquidity that keeps interest rates negative, crushing German pension funds, is soaked up and the Green New Deal is fully funded.

Once hope in a Europe of shared, green prosperity is restored, it will be possible to have the necessary debate on new pan-European taxes on C02, the rich, big tech and so on – as well as settling the democratic constitution Europe deserves.

Perhaps our Green New Deal may even create the climate for a second UK referendum, so that the people of Britain can choose to rejoin a better, fairer, greener, democratic EU.

Why Germany Cannot and Should Not Pay to Save the Eurozone

Yanis Varoufakis at the Leibnitz Institute

The best thing Germany could do for Europe is quit the single currency – but it won’t

Larry Elliott in The Guardian



 

‘Germany is the one country that has really benefited from the single currency.’ Photograph: Hannelore Foerster/Getty Images


Even when it was clearly in decline, the Soviet Union commanded loyal devotion. Its admirers could never quite grasp that the nation instrumental in winning the second world war had a broken economy.

The same cognitive dissonance applies to the European Union today. There is the EU as it exists in the minds of its most avid supporters: fast-growing, a defender of progressive values, fighting the good fight against Thatcherism, and marching steadfastly towards greater integration.

Then there is the EU as it really is: struggling economically; wedded to an aggressive form of neoliberal economics; insistent that there is no alternative to a top-down, ever-closer union; and spawning anti-elite parties across the continent.

Like the USSR under Gorbachev, Europe needs radical reform before it is too late because, as George Soros noted last week, everything that could go wrong has gone wrong. The EU is saddled with a single currency that doesn’t work but unable to admit it. It has forced its weaker members to suffer the consequences of the euro’s design weaknesses with austerity policies; it has told those who complain about low growth and high unemployment to sort out their own problems through structural reforms (wage cuts and privatisation); and it has failed to comprehend the anger felt at mass immigration, which has increased the pool of readily available cheap labour. 

A particularly serious form of this cognitive dissonance seems to afflict some left-leaning remainers in the UK. They appear to have forced Jeremy Corbyn and John McDonnell into softening (or fudging) Labour’s stance on the single market, even though they were two of the very few Labour MPs who rightly predicted where Europe would end up if it insisted on following rightwing economic policies.

And their insistence that the best way to help those who voted for Brexit is a reformed UK in a reformed EU glides over the fact that they rarely come up with any ideas for what these reforms might look like or how they might come about. That, of course, is because they have no plan other than to return Britain to its blissful prelapsarian state before the referendum. Gordon Brown’s plan to tackle the causes of Brexit – low wages, the sense of being cast adrift, the pressures from migration, the loss of sovereignty and concerns about the NHS – is a welcome and timely exception to this rule. But Brown’s warning that serious change is needed to prevent Britain being permanently paralysed applies equally to the rest of Europe, divided between social liberals and conservatives, between a rich north and a poorer south, and between those for whom globalisation works and those for whom it doesn’t.

Those who think that Euroscepticism is just a British phenomenon need to take a long, hard look at the populism on the march across Europe and ask themselves why it is happening. Then they need to work out what they are going to do about it.

One option, proposed by Emmanuel Macron, is to make Europe more like the US. Macron’s argument, which makes a lot of sense, is that the single currency is an unfinished and hence inherently unstable construct, which needs a much bigger budget, run by a single finance minister, to even out variations in economic performance. But there is little appetite in the rest of the EU for Macron’s plan, particularly where it really counts: in Germany.

Another option would be for Italy to precipitate change by leaving the euro. This is even less likely than adoption of Macron’s plans, because as soon as the financial markets got whiff of the idea it would result in sky-high Italian interest rates and the collapse of an already shaky banking system. Italians with savings would see their value decimated by a return to the lira. The only way Italy will leave the euro is by mistake, and then it would be catastrophic.

A third option would be for the conduct of European economic policy to become less fixated on austerity. There could be less emphasis on hitting arbitrary budget deficit targets, a move away from the neoliberal structural adjustment policies imposed on those countries seeking support, an acceptance that those countries trying to cope with migration flows across the Mediterranean need much more financial help than they are currently getting, and a Marshall plan for Africa of the sort floated by Soros. All would be welcome: all would meet with strong opposition from Angela Merkel.

By far the best option would be for Germany to take the initiative and announce that it was leaving the single currency, taking a small group of northern European countries with it. This would have a number of clear advantages. First, it would remove the stigma of leaving the euro because the decision would be taken from a position of strength not weakness. Second, the new mark would be a lot stronger than the euro and that would help iron out some of the imbalances in Europe’s economy by making German exports dearer and German imports cheaper. Third, the new hard eurozone would be more like Germany’s original vision of what it imagined monetary union would look like.

Fourth, it would breathe new life into plans for European integration because it could start small and get bigger over time. Countries such as the Netherlands and Austria would be obvious choices as founder members of a smaller club bound by common fiscal rules.

Finally, it would make a reality of a multispeed Europe in which some countries would be members of the hard eurozone, some would be actively planning to join it once their economies were ready, and some would decide they never wanted to join.

As things stand, this is just as big a fantasy as Macron’s integrationist blueprint. Germany is the one country that has really benefited from the single currency and is not going to propose a hard-mark zone that might exclude France. Macron would throw a wobbly if it did.

But if European leaders had the opportunity to turn the clock back to before the euro was introduced, this is the sort of plan they would probably come up with. And if this sort of EU had seemed feasible in June 2016, the UK would never have voted for Brexit.

The Brexit myth of no-strings frictionless trade

Chris Giles in The Financial Times


Take a wooden pallet and stick two sets of mundane goods on to it — Chinese plastic cutlery and British cuddly toys. As it trucks towards Dover, ask yourself the following question: how will this consignment enter the EU after Brexit? 

The answer is more complicated than you think, but serves as a simplified guide to the costs and benefits of different future trading models. British MPs, preparing to debate these matters next week, might want to take note. 

Today, there are no checks. When a good is in free circulation for sale in the UK, that also applies in every other EU country. Under an antagonistic “no deal” Brexit, the consignment probably would not make it to France, such would be the chaos at ports. The question is what deals can be struck, between these two extremes, to ease the flow. 

Both the EU and UK want to strike a free-trade agreement. This would eliminate the 4.7 per cent tariff on stuffed toys, but there would still be customs declarations to fill in and many other checks in addition to a 6.5 per cent tariff on the Chinese kitchenware. A free-trade agreement is far from friction free. And for Britain to secure this deal, the EU has insisted it must accept “level playing field” conditions, preventing the UK from undercutting EU standards in competition, state aid and many other regulatory areas. 

So, I am sorry to tell the Tory Brexiters: the promised bonfire of regulations will not ignite under a “free trade” deal. (And sorry, too, Labour Brexiters, but your nirvana of state-subsidised industries will also not fly.) 

How about getting rid of more friction by joining a customs union with the EU? This would avoid the complicated burden for business of proving the cuddly toy was indeed of British origin and the tariffs on the cutlery. But it would not do much to lower other frictions at the border. For the lower business burden, Britain would give up its right to an independent trade policy in goods with countries outside the EU. 

A greater border simplification would come from a legal commitment to align UK regulations with the EU for all industrial goods. It would eliminate the risk that goods would be stopped at the border with demands to see whether the requisite approvals conform with EU regulations. The downside is Britain would become a rule-taker. 

Our consignment is more tricky than simple industrial goods, however. Because people lick plastic cutlery and there is a history of contaminants in Chinese imports, special rules apply to the vast majority which come into the EU via the UK. To be allowed to enter Calais, we would have to pre-notify the French authorities at least two days in advance, declare that our cutlery met EU standards and at least one in 10 consignments would have to wait days for a lab test to verify its safety. 

That is not the end of the new border checks. If the goods had been loaded on any old pallet, we would also face the likelihood they could not enter the EU because wood packaging was not compliant with ISPM15 international standards which ensure it is pest free. 

The only way to avoid such onerous checks on plant, food and animal hygiene would be to become a rule-taker in these special regulations — as Switzerland and Norway have done. 

But our pallet would still not be allowed to cross before value added tax was paid on the consignment. Officials would do a paper or physical check that the contents in the truck matched the customs declaration. To avoid this burden, Britain would have to join the EU VAT area and follow the relevant European tax law with EU judicial oversight. 

Of course, our truck and driver still would be stuck at the port unless Britain also signed a transport services agreement, allowing lorries and drivers to operate on the continent. Brussels has already said such an agreement would require “a strong level playing field” on regulatory harmonisation, with effective enforcement mechanisms. 

This is the choice. Technology can help lower border barriers, but even for a relatively simple consignment, frictionless trade is available only with the full list of agreements alongside the lost sovereignty outlined above. Even then, the combination would almost certainly fall foul of the European Commission’s “no cherry picking” clause, requiring Britain also to concede to freedom of movement and payments to the EU budget. 

Once politicians accept these trade-offs we can start a serious discussion of what Brexit means and whether we still want it. Rather than prevaricate, it is time to admit to the public that there is no magic solution which maintains frictionless trade with the EU and allows the freedom to be “Global Britain”.

Europe’s strategic choices on Brexit

Gideon Rachman in The FT



Talk to EU policymakers and you will be told that Britain has yet to make the hard choices on Brexit. The standard line is that Theresa May’s government is still trying to “have its cake and eat it” — leaving the EU, but retaining many of the benefits of membership. Britain must drop this “magical thinking” and make some crucial decisions. Once that is done, the structure of the future EU-UK relationship will be dictated by law and precedent. 

That argument has some truth to it. But what it misses is that the EU also has important choices to make. By treating Brexit as, above all, a legal process, the EU is largely ignoring the political and strategic implications of Britain leaving the EU. That is an intellectual failure that could have dangerous consequences for all sides. 

It is clearly true that the EU is a legal order. But it is also a political organisation. The EU is perfectly capable of creating new laws — or interpreting current ones with extreme flexibility — when it is politically necessary. 

There are many examples of this flexibility in action. France and Germany broke the EU’s Stability and Growth pact — rather than accept legally mandated fines for breaking its budget-deficit rules. There was a “no bailout” clause for the euro, but Greece was bailed out. Now the European Commission is pursuing Poland for breaching the rule of law, but ignoring equally egregious breaches in Hungary. 

So the EU can cherry-pick the law, when it is politically convenient. It can therefore make strategic and political choices on Brexit. And, broadly speaking, it has three options. 

Staying tough means sticking with the current line. Britain has chosen to be a third country. There can be no special deals — no “cherry-picking” in the EU’s favoured jargon. There are only two viable models for a “third country”: Norway (which involves membership of the single market) or Canada (which is a pure free trade agreement). Britain must pick one and then accept the consequences. 

The arguments for this purist stance are that it protects the integrity of the EU’s single market. If Britain keeps some benefits of EU membership, while ditching many of its obligations, then all 27 members of the EU might seek special deals, and the single market could unravel. 

By contrast, if Britain suffers economically from Brexit, that could actually benefit the EU. It would underline the negative consequences of leaving the organisation and undermine Eurosceptic parties across the continent. And jobs and tax revenues could migrate from Britain to the EU. 

Compromise on Brexit, the second option, would mean embracing the idea that there should be special arrangements between Britain and the EU. Britain is not any old third country. It has been crucial to the European balance of power for centuries. It has been a member of the EU for decades. And it is currently a major trading partner and military ally for most EU countries. So it sounds unrealistic to say that the UK must be treated exactly like Norway or Canada. 

As the EU attempts to navigate an emerging world order — with a rising China and an unpredictable and protectionist US — the strategic alignment of Brexit Britain is uncertain. So it makes sense for the EU to try to pull the UK into a new sort of “special relationship”. By contrast, a Britain that feels humiliated or impoverished by the EU could be an uncomfortable neighbour — with Russia as an extreme example of what can happen when a major European power is at odds with the EU. 

Some Europeans, particularly the French, agree that Britain should continue to play a major strategic role in European affairs. But they do not accept that this has any implications for Britain’s economic relationship with the EU. This sounds like a European version of the dreaded “cherry-picking”. 

There are plenty of areas where the EU could adopt a more flexible approach on its economic partnership with Britain — if it made the political choice to do so. These could involve the free movement of people, the role of the European Court of Justice, and the mutual recognition of product standards and financial regulations. 

The EU’s final option is to force a crisis. If it concludes that Brexit can be reversed and that this is in the EU’s interest (and those are both big “ifs”), then Europe might try to force a political crisis in Britain. This would involve hanging tough for now, hoping that the political fissures in Britain widen and that the May government collapses. 

A new administration in the UK might reconsider Brexit — particularly if there was a fresh offer from the EU, perhaps on free movement of people. That might create the impetus for a second referendum in the UK, and a vote to reverse Brexit. 

But this approach is also fraught with danger. Crises are obviously unpredictable. If the crisis happened too late in the process, Britain might simply crash out of the EU without a deal. And it is also entirely possible that a second referendum would result in a second vote to leave the EU. 

There are powerful arguments to be made for and against each of these three courses of action. But pretending that there are no strategic choices facing the EU should not be an option. That is simply an evasion of responsibility.

How to stop Brexit

Simon Kuper in The Financial Times



I’m not a natural activist, because I’m too pessimistic, but the other evening I helped gather some stop-Brexit people in a room in London. Much as I love them, they looked like a Daily Mail cartoon of the cosmopolitan elite. Going home on the bus afterwards, I read The Daily Telegraph’s story that the whole event had been funded by international investor George Soros (obviously no offshore plutocrats backed Leave). In fact, though, Stoppers come in several mutually suspicious groups, only one of which is financed by Soros. Most Stoppers are highly self-motivated. One man told me: “I want to be able to tell my children later that at least I tried to block it.” 

You’d think Stoppers have no chance. Flawed though the Brexit referendum was, everyone agreed its rules in advance. After Leave’s victory, most Britons almost instantly switched off. Since July 2016, Google searches for Manchester United (or for Chelsea or Arsenal football clubs) have always outnumbered those for Brexit. Yet Stoppers finally feel they can win, perhaps this autumn. I think their best chance will be in 2020. 

This autumn, parliament will vote on the government’s “withdrawal agreement” with Europe. MPs won’t vote the bill down. Most think they lack the legitimacy to stop Brexit, since “the people” have spoken. However, MPs might just vote for a second referendum that gives voters final approval over the terms of withdrawal. Labour’s leader Jeremy Corbyn is a Brexiter, but he knows his party is now overwhelmingly Remain. “Crablike, he’s moving in that direction,” says Andrew Adonis, a chief Stopper and former Labour minister. If Labour and 20 Conservative MPs vote for a referendum, that’s probably enough. The EU would give Britain time to hold one, because it’s committed to letting each state follow its democratic processes before enacting a treaty. 

Meanwhile, Stoppers are trying to shift public opinion through mostly youth-led campaigns. Already, polls since last summer show a consistent if slight lead for Remain over Leave. Now Stoppers need to persuade voters they aren’t simply the liberal elite, says Adonis. That means promising radical policies to help left-behinds. 

The problem is that a narrow win for Stop in a second referendum would hardly put the Brexit issue to bed. Anyway, the EU probably wouldn’t halt Brexit to readmit a divided UK. 

But even if the withdrawal bill passes parliament, the fight continues. The key point is that the bill will be almost content-free. The government cannot say what kind of Brexit it wants, because then it would split. So the bill, after its thrilling front page (“The UK will leave the EU on March 29 2019”), will be just another fudge. It will say something like: “After a two-year transition, we will leave the single market (though possibly not the customs union), having negotiated new arrangements giving us full access to European markets.” 

But everyone knows Britain can only have full access by staying in the single market. So the bill will simply delay to 2021 the unanswerable question: what kind of Brexit does Britain want? The issues will be the same as today: a hard Brexit would cause economic pain, and could be vetoed by the Irish Republic. A soft Brexit would anger hard Brexiters. 

From March 2019 through 2021, the UK will have officially left the EU, but won’t have chosen its future status. Meanwhile, during the transition, it will remain in the single market and customs union, and keep paying into the EU budget, only without any say in European decisions. 

Nobody will like that. So, in 2020, Stoppers can say: “You’ve been negotiating Brexit for four years and got nowhere. Meanwhile, demographic change means the electorate is now clearly Remain. How about a second referendum on whether to jump off the cliff?” 

Reversing Brexit in 2020 would be logistically doable given that the UK would never have abandoned European rules. Northern European states — led by Ireland and the Netherlands — would press for Britain’s readmission. The EU would demand guarantees that Britons wouldn’t try Brexit again for a generation. It could then trumpet Brexit’s failure as proof that there’s no life outside the EU. 

There’s a third, more painful scenario in which the Stoppers ultimately win. This entails the UK achieving a genuine Brexit. The day Brexit happens, the British political argument changes. For now, all the country’s problems are blamed on Brussels and immigrants. After Brexit, all problems will be blamed on Brexit, even if they have nothing to do with it. The Stoppers — by then Reversers — will ask every day: “Where are the sunny uplands that the Brexiters promised?” 

Rejoining the EU should be feasible given that the EU is already reluctantly starting to accept that it’s not a union but several coalitions of states, each moving at different speeds. The divides between countries such as Finland, Hungary and Italy are simply too big to permit unity. A returning UK could rejoin the northern ring of anti-federalist states, stay outside the Schengen passport-free zone and the euro, and finally try tackling its real problems.

With Farage rattled and MPs flexing their muscles, the real Brexit battle is just beginning

Toby Helm and Michael Savage in The Guardian


When Nigel Farage emerged from a meeting in Brussels with the EU’s chief Brexit negotiator Michel Barnier shortly after midday last Monday his increasingly gloomy mood had darkened further. “The message I got was that they will be happy to trade chocolate and cheese and wine freely with us but when it comes to services, forget it. It ain’t going to happen. I think we are going to have a very bad deal.”

In the early hours of 24 June, 2016, the former Ukip leader, who had, arguably, done more than anyone to deliver the Leave vote, toured TV stations, triumphantly hailing the UK’s “independence day”. In Farage’s view it was not only a defining moment for Britain. It was also one that would demonstrate to other EU member states with strong or emerging eurosceptic movements – he cited Denmark, Italy, Sweden and Austria – that there was another way. “The EU is failing, the EU is dying. I hope that we have knocked the first brick out of the wall,” he declared in the glow of victory.

Nineteen months on, that joy and optimism have been replaced by doubt and fear. These days Farage is a genuinely worried man. He deeply regrets that the Leave campaign effectively “shut up shop” the day after the referendum, believing it was job done. The result of doing so, he told the Observer on Friday, was that the Leave side is now being seriously outgunned by well-funded, well-organised supporters of Remain who are intent on overturning the referendum result.

Three days after his meeting with Barnier, Farage went on TV again and said he was coming round to the view that a second referendum might be the only way to regain the initiative, to cement Brexit and shut down the issue for a generation. He said then that he thought Leave would win again, and by a bigger margin.

But on Friday he was less sure – and revealed the real depth and root of his anxieties. The momentum, he made clear, was running away from the Leavers. They had vacated the field for Remain to run all over. Anti-EU MPs were making a grave mistake, he argued, if they believed that parliament and the British people would just accept any deal that Theresa May could extract. Leavers needed to mobilise for the cause.

“There is no Leave campaign,” Farage said. “I think Leave is in danger of not even making the argument.” He added: “I feel like I did 20 years ago when it looked like we were heading into the euro. We had to set up Business for Sterling to stop it.” Things felt eerily familiar now. “The Remain side is making all the running. They have a majority in parliament and unless we get ourselves organised we could lose the historic victory that was Brexit.”

With the clock ticking, and with parliament having voted to trigger the article 50 process that puts the UK on the legal track to leave the EU on 29 March next year, it is still extremely difficult to see how the Brexit train can be derailed entirely.

But Farage’s interventions over recent days are highly significant, and about far more than the rogueish populist yearning to be back in the headlines. He is nothing if not a shrewd interpreter of prevailing political and public moods. “He is dangerous – and brilliant, in equal measure,” says one ardent Tory MP from the Remain side. “We know that from painful experience.”

Farage fears a very soft Brexit as much as no Brexit at all. And he is not alone in spotting that the forces favouring soft Brexit – in Westminster at least – are now in the ascendancy. It is not just pro-Remain Labour MPs who are marshalling their troops to great effect to demand that their party and parliament as a whole backs as close a relationship as possible with the EU after March next year.

Where John Major and David Cameron had rightwing Eurosceptic rebels to deal with, May, with no Commons majority, now finds her biggest problems coming from those on the pro-EU left flank of the Tory party. Her chaotic reshuffle last week added new recruits to that ever more confident rebel army, among them sacked education secretary and Remainer Justine Greening.

At prime minister’s questions last Wednesday, the day after she left the cabinet, Greening arrived early. When anti-Brexit Tory rebel Dominic Grieve came into the chamber, Greening caught his eye and patted on the vacant seat by her side in a gesture that invited him to be her new neighbour in the naughty soft Brexit corner. Grieve duly accepted.

“It was a fantastic moment for us,” said another in the group, who added that May had made a big mistake ousting the MP for Putney from the cabinet. “A Remainer, from Rotherham, educated at a state school. Who just happens to be in a same sex relationship. How many bloody boxes does she tick for us? For too long this party has been run by a few rightwingers intent on destroying our country. Now we are taking the party back.”
Ryan Shorthouse, director of the modernising Tory pressure group, Bright Blue, said: “Before Theresa May became prime minister, for decades Conservative governments only really faced concerted pressure on the backbenchers from the right of the party. Now, there is a group of high-profile and senior backbenchers on the ‘one nation’ wing who are increasingly co-ordinated, empowered and outspoken.”

This week will be another crucial one in the parliamentary battle on Brexit, over which Farage is agonising. The EU withdrawal bill will complete its third reading and report stage in the Commons on Wednesday before heading to the House of Lords, where it faces a mauling, not least from dozens of pro-Remain peers who favour a second referendum.

Before Christmas, Grieve, a former attorney general, led a successful Tory rebellion against hard Brexit to ensure MPs will have to vote for a new statute before any Brexit deal can be agreed. The effect is to give MPs a vote – and an effective veto, on the outcome of negotiations with Brussels – something the hard Brexiters were determined to resist.

This week the focus will be on Labour, as a growing number of Jeremy Corbyn’s MPs put pressure on their leader to adopt a firmer pro-EU, pro-single market line. Upwards of 60 Labour MPs are now believed to back permanent membership of the single market and customs union after Brexit and are ready to rebel.

Labour has already come a long way down the soft Brexit road – but not far enough for dozens of its MPs. Last summer, shadow Brexit secretary Keir Starmer shifted to support membership of the single market and customs union during a post-Brexit transition of up to four years.

He is now being urged to go much further. This weekend, in a sign of that pressure, the leadership announced it would back an amendment tabled by former shadow Scottish secretary Ian Murray, which he drew up in the belief it would leave the party effectively backing single-market membership for the long term.

The amendment says that, after the final Brexit deal is done and known, Labour will insist on a full independent economic analysis, involving the National Audit Office, the Office of Budget Responsibility, the government actuary’s department, and the finance directorates of each of the devolved administrations, before MPs vote on the final deal.

Chuka Umunna, one of the Labour MPs leading cross-party efforts to secure a soft Brexit, sees this as a step forward, though still an insufficient one.

“This is a significant move, which shows we are rightly focusing on the need to demonstrate what the economic impact of Theresa May’s Tory Brexit will be on people’s lives.

“If such an assessment is not carried out, or if it is and concludes that a Tory Brexit deal would be bad for the economy, we should oppose it. Labour should be clear that at a minimum we should back single market and customs union membership (or full participation) for good.” Meanwhile peers – including many who take the Tory whip – are joining cross-party alliances in an attempt to secure long-term single-market and customs membership.

Some are also planning amendments calling for a second referendum before the UK leaves the EU – the same suggestion as that made by Farage on Tuesday.

On Saturday it emerged that, following Farage’s meeting with Barnier in Brussels last week, it will be the turn of Tory Remainers Grieve and Anna Soubry and Labour MPs Leslie, Umunna and Stephen Doughty to bend the ear of the man leading the EU negotiations on Brexit.

Their meeting with Barnier will be another blow to Farage – and further confirmation of his growing conviction that victory for Leave on the night of 23 June 2016 was far from the end of the story.

How British politics rediscovered Tony Benn and Enoch Powell

John McTernan in the Financial Times

All political lives . . . end in failure”. Enoch Powell’s memorable line resonates 40 years on not only because it seems so true, but because it was underscored by his own career. A brilliant academic, a decorated soldier and a reforming health minister, Powell was set for the highest office until the racist “Rivers of Blood” speech exiled him to the Commons backbenches and eventually to Northern Ireland as an Ulster Unionist MP. 

Yet despite the well-known arc of triumph to tragedy, the time has surely come to revisit his dictum — for Powell is the politician who dominates our age as no other does. The arguments that he articulated in the 1960s and 1970s resonate across the world. On the one hand, the seemingly unstoppable rise of the populist right, from France’s Marine Le Pen to Hungary’s Viktor Orban. On the other, the abiding split on Europe within the Conservative party that no leader has ever healed. The age of Brexit is the age of Powell. 

Why? First, British politics is dominated by immigration, a discussion conducted in terms that could have been drawn straight from the book of Powell. His infamous 1968 speech is still deeply disturbing to read but its tropes are all too recognisable. 

There is the obsession with numbers. Powell asks that since “it be not wholly preventable, can it be limited?” — a view that has its echo in the current Tory government’s fixation on cutting net migration to tens of thousands. There is the argument, too, of the pressure on public services. And there is the acceptance that UK residents are the victims of immigration: “The . . . sense of alarm and resentment lies not with the immigrant population but with those among whom they have come and are still coming.” The eugenicist strand is all that is missing from contemporary politics. 

Arguments which were so repellent and unacceptable that Powell was sacked from the Tory shadow cabinet have become mainstream. Paradoxically, it was the migration of white Christians from eastern Europe after 2004 that proved the political tipping point in the UK, legitimising a discourse about immigration that claimed to be about culture rather than race, but had clear roots in Powell’s racism. All this despite the fact that the apocalyptic visions of Powell were refuted by the reality of modern Britain. When Prince Harry marries Meghan Markle next year, the Royal Family will, like so many families, have a mixed race member. That success is a measure of just how wrong Powell got his predictions. 

Yet, arguments are one of the great political legacies — and while Powell lost in fact, he has won in rhetoric. The Brexit Leave vote was not just due to his argument but also to the cowardice of leaders of both main political parties in not challenging outright untruths about migration. Powellite arguments were marshalled against one of the institutions he most strongly opposed, the EU. It was Enoch wot won it. 

Finally, Powell would appreciate the irony that his once mighty Conservative party is being propped up in power by the Ulster Unionist’s usurpers, the Democratic Unionist party. The narrow views of a political party from Northern Ireland hold the whip hand in the most important peace time negotiations ever undertaken by the UK. 

The observation that all political careers do not end in failure is not restricted to the right of British politics. It is not merely that Jeremy Corbyn spent decades in the wilderness before increasing votes for the Labour party in this year’s snap election, depriving Theresa May of both a majority and a mandate. Take a look at his policies and his politics. They are routinely assaulted as coming from the 1970s. Nationalisation, council house building and government-planned industrial strategy. 

But they come from a very specific source in the 1970s: Tony Benn, another grand politician whose career ended in apparent failure. A successful technocratic minister in Harold Wilson’s government in the 1960s, after Labour’s surprise defeat in the 1970 general election Benn turned sharply to the left. He shaped the Labour governments of the 1970s, with their increase in nationalisation and state investment in industry. He was the architect of Labour’s 1983 manifesto — the so-called “longest suicide note in history” — which led the party to a historic defeat. Benn’s state-sponsored companies collapsed, his bid for deputy leader of the Labour party failed, the Alternative Economic Strategy — the siege economy which was his great ideological project — abandoned. 

And finally, under Tony Blair the party became New Labour, accepting much of the Thatcherite settlement. It embraced the market, celebrated business and was an unprecedented success electorally. Benn and Bennism was over. 

Or so it was thought. Now Benn and Powell — whose careers ended so badly in the 1970s — dominate the ideas of British politics. The Tory party is riven by a divide over Europe deeper than it has been at any time since Powell and Benn led the campaign against common market membership in the 1975 referendum. With the migration target, and a majority sustained only by DUP MPs, Mrs May’s government cannot escape Powell’s long shadow. Meanwhile, in Mr Corbyn’s Labour party, state planning is back. With promises of tax rises targeted on corporations and the wealthy, this is the return of Old Labour with a vengeance. In British politics there has rarely been such successful second acts.

May can berate Putin. But Brexit is his dream policy

As the Russian leader tries to diminish Europe, he finds ideologues such as Boris Johnson are doing the job for him


Rafael Behr in The Guardian

With lighter diplomatic baggage, Boris Johnson might have been a hit in Moscow. The foreign secretary’s artfully dishevelled, pseudo-Churchillian kitsch is not to everyone’s taste, but it could work in the bombastic idiom of Russian politics.

But as Theresa May’s emissary to the court of Vladimir Putin later this week, Johnson faces a tough audience. May has accused the Kremlin of aggressively targeting an international order based on law, open economies and free societies. In a speech last month, the prime minister listed offences including territorial theft from Ukraine, cyber-attacks on ministries and parliaments, meddling in elections, and spreading fake news to sow discord.

Russian interference in British democracy is currently being investigated by the Electoral Commission and parliament’s culture, media and sports committee. The latter’s chair, Tory MP Damian Collins, has signalled that he doesn’t believe recent claims by Twitter and Facebook that Kremlin-funded efforts to boost Brexit in 2016 were negligible.

He is right to be sceptical. The tech companies have a record of stonewalling any suggestion that their business model has been co-opted for organised malfeasance. They have commercial incentives to duck moral responsibility for the sinister content shared on their networks. It is beyond doubt that Donald Trump’s presidential campaign had a hefty Russian boost. Facebook has removed tens of thousands of pages believed to be involved in sabotage of French and German elections. British ballots are unlikely to have escaped dirty money and molestation by troll battalions.

That doesn’t mean Brexit is a conspiracy that blew in on the east wind. Mistrust of the EU was not made in a factory outside St Petersburg. To connect tweets in Murmansk to a leave majority in Merthyr Tydfil misses the point about misinformation. The goal is not always to execute a specific outcome but to stoke existing tensions, nurture rage, exacerbate polarisation and shroud everything in such a fog of lies that truth becomes ungraspable. The purpose of fake news is to debase the currency of all news, and so undermine the foundations of pluralistic politics.

The advantage to Russia is in weakening western governments and their alliances. Putin despises Nato and EU influence in countries that were, until 1991, Soviet territory. He sees their sovereignty as fictions imposed by enemies. Undermining European and US resolve to uphold their borders is his goal.

There is a strain of Brexitism that is complicit in that project, regardless of whether leave campaigns knowingly or unwittingly took laundered roubles. Nigel Farage’s admiration for Putin is no secret: he has pushed the Kremlin line on Ukraine, preposterously depicting Crimea’s annexation as a defensive answer to EU provocation. He has described Russian military support for Syria’s murderous president Bashar al-Assad as a “brilliant” manoeuvre.

Putinophilia has the same cause as Farage’s Trump fandom. It is the nationalist’s fetish for a strongman, combined with nostalgia for the days when the world was run as a game between big countries using little countries as chips. It is unresolved grief at the UK’s 20th-century relegation from the ranks of imperial pawn-pushers.

That slow-burn trauma is analogous to the more sudden loss of status mourned by Russia, the reversal of which is Putin’s mission in life. During the cold war, British ideologues who swallowed a Kremlin agenda and regurgitated it as their own used to be called “useful idiots”. The difference now is they aren’t confined to the far left. Some of them are in government.


We may never know how much influence the Kremlin had in the referendum, but we can be sure its result was popular there

The Brexit delusion is that enslavement by Brussels inhibits our promotion back to the global power premier league. Boris Johnson is not immune to this fantasy. He would rather be a foreign secretary in the 19th-century style of Lord Castlereagh, carving out spheres of influence at the Congress of Vienna, than yawn through EU council meetings.

It is true that the EU empowers smaller countries. Witness the clout that Ireland has had in Brexit talks. But Britain has also benefited from aggregating its medium-sized might with Germany, France and 25 other nations. That is not a Brussels empire. It is a model of peaceful, collaborative power without historical equal.

May once understood this. In the referendum campaign she made a solid case for EU membership on the grounds that it could “maximise Britain’s security, prosperity and influence in the world”. When she now promises a “deep and special partnership”, she is not just talking about trade, she is pledging loyalty to European democracy as one of its few significant military underwriters. When the prime minister berates Putin for undermining institutions that uphold the rule of law, she is signalling strategic solidarity, not economic alignment, with the EU.

This is chasing a bolting horse when the stable door hangs off its hinges. We may never know how much influence the Kremlin had in the referendum, but we can be sure its result was popular there. Brexit has already fractured an alliance that will be hard to repair. May will never be a friend of Putin, but he doesn’t need her friendship when she is committed to a policy he would choose for her anyway.

A tax haven blacklist without the UK is a whitewash

Prem Sikka in The Guardian







At the heart of the intensifying debate about fairness and inequality is tax. Who can think without shuddering of the opportunity costs incurred by needy economies robbed of the tax to which they are entitled? In that context, and against the backdrop of exposure exercises such as the Paradise Papers, there was understandable enthusiasm for the European Union’s latest list of uncooperative tax havens. It arrived this week, amid much ballyhoo and talk of toughness. What a disappointment.

The EU put 17 extra-EU jurisdictions on a blacklist: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates. They could lose access to EU funds and incur sanctions soon to be announced. But contrast the list with what we know was revealed about international tax avoidance by both the Paradise and Panama Papers.

The EU seems to have targeted countries with little economic, military or diplomatic weight. The list includes Panama, which was central to the Panama Papers, but not Bermuda, which was central to the Paradise Papers. In imperialist mode, the EU paints a picture that broadly says that “those over there” in low-income countries, at the periphery of the global economy, are a source of the world’s economic problems and should face sanctions. The blacklist does not include any western country, even though accountants, lawyers, banks and much of the infrastructure that lubricates global tax avoidance are located in the west. Also excluded are UK crown dependencies and overseas territories, which have undermined the tax base of other countries for decades.

Another 47 jurisdictions are included in a “greylist”: these are not compliant with the standards demanded by the EU, but have given commitments to change their rules. This list includes Andorra, Belize, Bermuda, the Cayman Islands, Guernsey, the Isle of Man, Jersey, Liechtenstein, San Marino and Switzerland. But even that is deficient. And Luxembourg is missing altogether.

Where is the UK on either list? It offers special tax arrangements to non-domiciled billionaires that are not available to British citizens. We are deeply complicit. The UK has long enabled large companies and accountancy firms to write favourable tax laws, and has entered into sweetheart deals with major corporations.


The UK has long enabled accountancy firms to write favourable tax laws, and entered into sweetheart deals

The issue of tax avoidance is not going away. Corporations and wealthy elites are addicted to it. And many of the tax havens, as comparatively small countries, are not readily going to dilute their practices, as a decent standard of living cannot easily be provided by seasonal tourism, agriculture and fishing.

But the EU blacklist is a wasted opportunity because there are things the international community can do. Tax havens should, for example, be offered favourable financial grants by the EU and other countries to rebuild their economies and become hubs for new industries, and research and development. Grants should be conditional on step-by-step progress towards meeting specified benchmarks on transparency, accountability and cooperation, including a publicly available register of beneficial ownership of all companies and trusts, and a list of the assets held by wealthy individuals. Havens would need to commit to automatic exchange of information with other countries on any matter relating to tax or illicit financial flows.

The accounts of corporations and limited liability partnerships holed up in tax havens should also be made public. At the very least, the EU and the UK should insist that the public accountability mechanisms in tax havens match those on mainland Europe.

As for jurisdictions that reject reform, they should face sanctions. The imposition of a withholding tax, of say 20%, on all interest and dividend payments to individuals and companies would reduce their attractiveness. Labour’s 2017 manifesto contained that idea.

The EU, the UK and other countries could also ensure that no individual or company under their jurisdiction would be able to import or export any goods or services from designated tax havens. The UK is being asked to pay a fee to secure access to EU markets after Brexit; by the same logic, a fee should be demanded from tax havens in the shape of better transparency and accountability. Persistently aggressive jurisdictions might suffer travel and visa restrictions, or be denied the use of international satellites that tax havens rely on for communications and financial transactions.

These ideas, and there are others, may not curb the predatory practices of tax havens overnight, but any or all would give the sponsors and users of these territories considerable food for thought. Action is often promised, but how many weak governments have sought refuge behind the claim that global tax avoidance requires international solutions, while at the same time undermining possibilities of international solutions? Too many.

We cannot afford to go on like this. Be brave and follow the money.

For many, free movement causes more pain – and Brexit seems to be the cure

Deborah Orr in The Guardian


The last 16 months have made one thing clear: it’s much easier to vote to leave the EU than it is to actually leave. Remainers such as myself now find it tempting to say: “I told you so.” This, broadly speaking, is because we’re a bunch of smug know-it-alls, who haven’t even properly asked ourselves why we failed so badly to get our point across last June.

The answer, of course, is that we were and are too busy being smug know-it-alls: certain before the referendum that the idealism of the EU was plain for everyone except the terminally thick and racist to see; and certain afterwards that surely at some point even the terminally thick and racist will start having buyers’ remorse.

The sheer tragicomedy of EU-UK negotiations is indeed getting some people so fed up with the whole farrago that a few Brexiteers are crossing the floor. But, mostly, people view the difficulty of leaving the EU as yet more proof that it’s a money-grabbing, navel-gazing, inert and self-serving bureaucracy, as respectful of democracy as Kim Jong-un and as responsive to the needs of actual people as a gigantic mudslide. An in-depth survey of Brexiteers in Wales last month confirmed pretty much exactly that.

Politicians do understand, on the whole, that the factor above all others that motivates white working-class Brexit voters is free movement, as again the Welsh survey attests. This is why Labour in particular is hamstrung. Backing remain would please its Guardian-reading supporters. But that would alienate many of its core voters. Whatever Jeremy Corbyn’s own views about the EU, the sensible strategy for the short-term is not to seem at all remain-oriented.

Short-term being the operative word. The big trouble with the idealism of free movement is that its intellectual underpinnings demand pain now for future gain. The idea is that people will crisscross the various member countries, working where there’s work to create economic growth, returning home with money, experience and ideas, to start businesses that will attract others in turn, until every country is as prosperous as its neighbour.

This transformation, if it happens, will take generations. But the architects of this grand plan – the experts, the economists, the “elite” – are not the people who feel any short-term pain.
It’s completely unrealistic to ask people to spend their lives wondering where the money is coming from to pay the next electricity bill, whether their children will ever get out of their expensive private accommodation, and whether their grandchildren will be on zero-hours contracts forever, all so that maybe 80 years from now the average living standard of a Lithuanian will be similar to that of a Welshman.

People need their lives to improve now, not to live in stress and worry because things might work out in the future. The theoretical utopians who support the EU are not those who are expected to feel solidarity with their Polish colleagues in the salad-bagging factory. Especially when those colleagues are working towards a different goal. It’s easier to work for low wages if these wages are higher than you would be getting back home; easier to save when you know that a deposit on a house back home with your family is an achievable goal; easier to go without when you know that it’s for a finite time.

Where in the EU do young, unskilled British people head to get such a start in life? Reciprocity doesn’t exist.

In the 1980s, builders went to Germany, as dramatised in Auf Wiedersehen, Pet. In Germany today, builders come from eastern Europe. Wealthy countries in the EU are rightly expected to be generous. But when your own country has not generously shared its wealth with you, it’s hard to accept that you’re the ones expected to carry the burden in this grand new wealth-sharing concept.

In his book Austerity Britain, historian David Kynaston quoted evidence from the Mass Observation project that the people who lived in the areas most devastated by the war were far less likely to be optimistic about the future than those who had got off lightly. Part of their ennui was the knowledge that change had been promised after the first world war, yet hadn’t come about.

The same goes for the areas that were economically devastated in the early stages of globalisation. The EU didn’t save them then; it isn’t saving them now. No amount of promises that the EU is the best hope of shelter from economic change in the future will persuade enough of the hard-up Brexiteers in that 52% vote.

If progressives want to change the minds of Brexiteers, waiting for them to see the error of their ways isn’t going to work. What people need is a quid pro quo that offers them tangible improvements in their lives right now. That, and only that, will keep Britain in the EU.

The pendulum swings against privatisation

Evidence suggests that ending state ownership works in some markets but not others


Tim Harford in The Financial Times


Political fashions can change quickly, as a glance at almost any western democracy will tell you. The pendulum of the politically possible swings back and forth. Nowhere is this more obvious than in the debates over privatisation and nationalisation. 

In the late 1940s, experts advocated nationalisation on a scale hard to imagine today. Arthur Lewis thought the government should run the phone system, insurance and the car industry. James Meade wanted to socialise iron, steel and chemicals; both men later won Nobel memorial prizes in economics. 

They were in tune with the times: the British government ended up owning not only utilities and heavy industry but airlines, travel agents and even the removal company, Pickfords. The pendulum swung back in the 1980s and early 1990s, as Margaret Thatcher and John Major began an ever more ambitious series of privatisations, concluding with water, electricity and the railways. The world watched, and often followed suit. 

Was it all worth it? The question arises because the pendulum is swinging back again: Jeremy Corbyn, the bookies’ favourite to be the next UK prime minister, wants to renationalise the railways, electricity, water and gas. (He has not yet mentioned Pickfords.) Furthermore, he cites these ambitions as a reason to withdraw from the European single market. 

Privatisation’s proponents mention the galvanising effect of the profit motive, or the entrepreneurial spirit of private enterprise. Opponents talk of fat cats and selling off the family silver 

That is odd, since there is nothing in single market rules to prevent state ownership of railways and utilities — the excuse seems to be yet another Eurosceptic myth, the leftwing reflection of rightwing tabloids moaning about banana regulation. Since the entire British political class has lost its mind over Brexit, it would be unfair to single out Mr Corbyn on those grounds. 

Still, he has reopened a debate that long seemed settled, and piqued my interest. Did privatisation work? Proponents sometimes mention the galvanising effect of the profit motive, or the entrepreneurial spirit of private enterprise. Opponents talk of fat cats and selling off the family silver. Realists might prefer to look at the evidence, and the ambitious UK programme has delivered plenty of that over the years. 

There is no reason for a government to own Pickfords, but the calculus of privatisation is more subtle when it comes to natural monopolies — markets that are broadly immune to competition. If I am not satisfied with what Pickford’s has to offer me when I move home, I am not short of options. But the same is not true of the Royal Mail: if I want to write to my MP then the big red pillar box at the end of the street is really the only game in town. 

Competition does sometimes emerge in unlikely seeming circumstances. British Telecom seemed to have an iron grip on telephone services in the UK — as did AT&T in the US. The grip melted away in the face of regulation and, more importantly, technological change. 

Railways seem like a natural monopoly, yet there are two separate railway lines from my home town of Oxford into London, and two separate railway companies will sell me tickets for the journey. They compete with two bus companies; competition can sometimes seem irrepressible. 

But the truth is that competition has often failed to bloom, even when one might have expected it. If I run a bus service at 20 and 50 minutes past the hour, then a competitor can grab my business without competing on price by running a service at 19 and 49 minutes past the hour. Customers will not be well served by that. 

Meanwhile electricity and phone companies offer bewildering tariffs, and it is hard to see how water companies will ever truly compete with each other; the logic of geography suggests otherwise. 

All this matters because the broad lesson of the great privatisation experiment is that it has worked well when competition has been unleashed, but less well when a government-run business has been replaced by a government-regulated monopoly. 

A few years ago, the economist David Parker assembled a survey of post-privatisation performance studies. The most striking thing is the diversity of results. Sometimes productivity soared. Sometimes investors and managers skimmed off all the cream. Revealingly, performance often leapt in the year or two before privatisation, suggesting that state-owned enterprises could be well-run when the political will existed — but that political will was often absent. 

My overall reading of the evidence is that privatisation tended to improve profitability, productivity and pricing — but the gains were neither vast nor guaranteed. Electricity privatisation was a success; water privatisation was a disappointment. Privatised railways now serve vastly more passengers than British Rail did. That is a success story but it looks like a failure every time your nose is crushed up against someone’s armpit on the 18:09 from London Victoria. 

The evidence suggests this conclusion: the picture is mixed, the details matter, and you can get results if you get the execution right. Our politicians offer a different conclusion: the picture is stark, the details are irrelevant, and we metaphorically execute not our policies but our opponents. The pendulum swings — but shows no sign of pausing in the centre.