Brexit and the Politicians’ Goldilocks Dilemma

Ask almost anyone with any expertise in economics, business, or politics, and they will tell you that Brexit, if it goes ahead, will be extremely costly to Britain. Some of them will say it already is. Add to that the views of those in the arts, sciences and Britain’s myriad cultural institutions, almost all of whom look upon Brexit as unalloyed bad news, and you’d think that Brexit would be about as popular as a Jimmy Savile fan club. And yet it isn’t. A great many people are still as gung-ho about leaving the EU as ever, even if the polls suggest that Leavers are now in the minority (just).

Perhaps it would be better to say that opinions, and emotions, on Brexit are as polarized as ever. The number of people who are able to shrug and say “whatever” is small; most of us feel strongly about it, and people who feel strongly about something don’t easily change their minds.

Theresa May, the prime minister, was a firm, if quiet Remainer before the referendum, as were the vast majority of MPs. Following the referendum result she has had to switch sides, and her government is now proposing a “hard” Brexit — which means withdrawal from the EU, the Single Market, the Customs Union, and the jurisdiction of the European Court of Justice (not to be confused with the European Court of Human Rights, which is not an EU body, but which the Tories also want to leave anyway). The previous prime minister, David Cameron, who was supposedly a strong Remainer, was, it seems, a closet Leaver all along. And given Theresa May’s strong preference for the hardest possible Brexit, perhaps she was too. Meanwhile, some who were campaigning for Leave now appear to be regretting their decision. There is something about this issue, and the way Westminster works, that seems to prevent politicians from saying what they truly believe, so we must take their various avowals on this matter with an extra pinch of salt.

In any case, this hard Brexit stance — of both the government and the opposition — is clearly strategic, not a sincere reflection of ministers’ beliefs about what is best for the country. Granted, there are some committed Leavers on the Tory and Labour benches (including May’s “three Brexiteers” as well as Mr Corbyn), but these account for a small minority of all members. If MPs really believed that a hard Brexit was the right course for the country, why didn’t they support Leave a year ago? And isn’t their change of heart now more a sign of personal job insecurity than concern for the national interest? The consequences of a hard Brexit are beginning to come into focus, and it would be astonishing if MPs, or the government, really believed that the imminent loss of GDP, Treasury revenue, inward investment, jobs, and thus falling UK living standards for millions, was a good idea. Will voters reward those that make them poorer, and who cut yet more public services?

The politicians — of both major parties — are caught in a cleft stick. If they were to speak their minds and recommend the abandonment of Brexit, they might lose a lot of support to a suddenly reinvigorated UKIP. There would also be accusations of anti-democratic manoeuvres and maybe even fears of civil unrest. In other words, MPs will stick with what they see as the public mood until they can safely change tack. But in the meantime, they must look on as the government staggers towards the cliff of Brexit with mounting concern.

If politicians are going to advocate remaining in the EU, then they will need to know that the public, and enough of the press, will at least listen to the arguments. In reality this means that the costs of Brexit will have to be very real and concrete for a great many people — a lot of ordinary people will need to feel some Brexit-related pain, and it would have to be clear that more will follow. Mere predictions of calamity that can be written off as yet more “project fear” won’t do. Moreover, the pain will have to come soon — the UK is on track to leave the EU in March 2019. There would surely have to be a second referendum, and that would take some months to arrange. The pain, therefore, has to be felt by autumn 2018 at the latest. But even in this scenario, where the UK withdraws its intention to leave, the other 27 members of the EU would have to agree, and they, along with the Commission, would want some guarantees that Britain wouldn’t pull this kind of stunt again. There would likely be some financial penalty too. This is a big ask.

What might this Brexit-related pain look like? What will it take to turn this super-tanker round?

First on the list is inflation. The fall in sterling has driven up the cost of many staples, and energy. Meanwhile wages have stagnated. Trade tariffs would mean even higher prices and little prospect of higher wages to pay for them. This rules out any increase in interest rates, which would in any case tip many people into insolvency and probably hammer house prices too, especially as the level of private debt is so high.

If house prices were to fall, and the fall was attributed to Brexit, I suspect the whole thing would be called off in no time. Ever-rising house prices are something of a holy cow in Britain. A bad Brexit would almost certainly see a sharp fall in house prices. No government would survive that.

Next, unemployment. Many banks and financial firms have already started the process of moving to the mainland or Ireland. The big car firms can’t be far behind. Given the labyrinthine complexity of modern supply chains, it would be all but impossible to build a car in post-Brexit Britain that could compete on price if trade tariffs are involved. Jobs in pan-European projects like Airbus are also at risk. Firms that trade in Europe cannot take the chance of getting caught out by trade barriers. Without security, they will move, and take millions of jobs with them.

Food. Britain imports nearly half its food. Mostly from Europe. If trucks have to be stopped and searched at the ports, and pay tariffs, this trade will grind to a quick halt, and some foods will rocket in price.

The list goes on. But is any of this likely to start hurting people badly enough to decisively shift public opinion in the next year?

Like Goldilocks’s porridge, the pain of Brexit needs to be hot enough, real enough, and imminent enough, to focus the public’s mind, but not so hot that the public throws up its hands in dismay or abreacts with feelings of hatred against the EU.

For the EU’s part, it is clear that the favoured outcome is that the UK remains in the EU. To this end the messages from Brussels and European capitals have been restrained and focused — they want to leave room for the UK to change course while also saving face. But again, they have the Goldilocks task of impressing on the British just how serious this is, while not provoking any more anti-EU feeling than already exists. It remains to be seen whether this slow-motion car crash can be averted.

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