Economics and politics - comment and analysis

Jeremy Corbyn, Theresa May, Henry VIII and Britain’s future. Part 2: May, the power grab, the right wing agenda and the Brexit negotiations

The power grab and the red tape lie

The Great Repeal Act grants May’s ministers the ability to rewrite reams of British law without democratic scrutiny or oversight. In any normal situation, one should expect these so-called “Henry VIII” powers to be slammed by opposition politicians. But this is far from a normal situation.

The strategy behind the ‘Great Repeal Act’ is simple. It consists of throwing everything out, making a selection in order to keep whatever is considered necessary, make changes where (in)appropriate and turn everything that remains into UK law. One hardly needs supernatural powers to predict that this ‘secondary legislation’ (parliament does not have to agree) will see the Tories strip protections on anything from human rights to wildlife and the environment. Official documents reveal the intention of the government to “scale down” climate change measures in order to successfully negotiate post-Brexit global trade deals.

Boris Johnson and other Conservative MPs hailed the opportunity to strip away what they call “burdensome regulation” (see here). Fleet Street is selling this usurpation of democracy to the masses as taking back control. In the future, little England will indeed have less “red tape.” It will also have less unions and workers’ rights. It will have less paid holidays or laws limiting working hours or sick leave. It will have less human rights. After all, the European Convention on Human Rights (which has nothing to do with the EU and precedes it by decades) is also red tape. Consumer protections will be trimmed. Changes in employment, environmental and tax regimes will be made, all outside parliament. Those on welfare will undoubtedly bleed even more and harder. A concomitant danger, highlighted by Welsh, Scottish and Northern Irish leaders, is the looming power-grab by Westminster at the expense of the devolved assemblies.

Director of Liberty Martha Spurrier demands an independent audit of the human rights protections the public stand to lose. “Where’s the guarantee to protect our EU rights so we don’t end up worse off than our neighbours across the Channel? Where’s the guarantee of proper democratic scrutiny?” she asks (see here and here). The answer is: nowhere. Where is sanity? Hundreds of parliamentarians filed, dead-eyed, through the lobbies granting May, an unelected leader, the untrammelled power to conduct and conclude exit talks most of them believe will do Britain harm. Many of them regard it as a will-full act of self-destruction.

‘Taking back control’: the neoliberal assault on democracy in action

One of Cameron’s senior advisers, Hilton was the driving force behind the report on employment law drawn up by the venture capitalist Adrian Beecroft. This 16-page document proposed ultra-liberalisation of the labour market, making it easier for businesses to opt out of parental leave allowance, compulsory pension contributions and other regulations For some Conservatives, such as Lord Lawson, the great repeal bill is an opportunity for a bonfire of EU rules, to finish the job launched by the domestic deregulation of the 1980s. Liam Fox, the international trade secretary, has declared: “We must begin by deregulating the labour market. Political objections must be overridden.” Priti Patel, the international development secretary, has expressed the hope that the newly emancipated UK will “halve the burdens of the EU social and employment legislation” (see here).

Michael Cane also voted for the Brexit, he told the Guardian (see here). He too wants his freedom back. As Monbiot writes – and he is of course right – it is nothing but an excuse for ripping down public protections on behalf of the very rich (see here). Companies without unions are freedom for the rich. Freedom from taxes means that others suffer because of failing public services. The rich and the organisations they run demand freedom from “red tape.” ‘So long Europe,’ writes Vanity Fair, ‘Good luck with Marine Le Pen.’ The Telegraph headlined an article ‘Cut the EU red tape choking Britain after Brexit to set the country free from the shackles of Brussels.’ The first paragraph is worth quoting:

“Britain must sweep aside thousands of needless EU regulations after Brexit to free the country from the shackles of Brussels, a coalition of senior MPs and business leaders have demanded. (…) Theresa May will start the formal process of leaving the EU when she invokes Article 50, giving her a “once in a lifetime opportunity” to rejuvenate the UK economy” (see here).

This is the neoliberal assault on democracy in action. “This is what Brexit – and Trump – are all about. The freedom we were promised is the freedom of the very rich to exploit us,” writes Monbiot (see here). The Telegraph makes no secret about the ultimate goal of the Brexit: it is nothing but a campaign to deregulate the entire economy, “the ultimate goal of this whole process should be to (…) to set the wealth creators free.” We might lose our rights to fair employment, an enduring living world, clean air, clean water, public safety, consumer protection, functioning public services and the other distinguishing features of civilisation, but what is any of that compared to “control,” “freedom” and less, much less immigrants? That Britain’s shortcomings are due to European “red tape” is of course a complete lie (see here). Britain has many problems. It greatest single economic problem is comparatively poor productivity, as Larry Elliott recently once again explained in the Guardian (see here).

Theresa in the Wonderland of “negotiations”

The exit talks, which are euphemistically called ‘the negotiations,’ are expected to last about two years. Needless to say, this too is a joke, or, more accurately, a plain and obvious lie. The talks will include the terms on which British exporters will be allowed access to the European market, the rights of EU nationals living in the UK and Britain’s departure fee. May can say whatever she wants, her negotiation power is zero. Retaining open access to the EU for British goods will require keeping on paying into the EU’s budget and allowing migrant workers into the country: concessions that May will never be able to sell to the Englanders of her own party (even more right wing than herself), let alone to the tabloids (euphemistically called ‘the press’), which proudly call everyone who argues against a (hard) Brexit – MPs, professors, judges of the constitutional court, you name it – “the enemy within.”

These tabloids have played an absolutely scandalous and dysfunctional role for many years. It has never been this bad. Anyone’s views on things like trade, immigration and financial regulation are matters of policy second and expressions of her very faith in the nation first. If this faith is somewhat lacking or of suspect quality one is considered unpatriotic, an “enemy of the people” (characteristically printed in capitals) by the Daily Mail and the Fleet Street lapdogs. The Economist has described the atmosphere which has characterised the hard Brexiters’ public discourse as “McCarthyite.” This is not wrong.

What then will May do? She wants to leave the EU and seek a new trade agreement that preserves the “frictionless” movement of goods and services. She was prepared, she said, to walk away from the negotiations if Britain did not get what it wants, in which case the country will crash out of the EU in 2019 with no agreement at all. “No deal” is preferable to “a bad deal for Britain” – the sort of language that makes the Daily Mail, the Sun and Boris Johnson euphoric. It is nothing more than sheer despair. Put a gun to your head and threaten to shoot if you do not get what you want. British humor at its best if it was not that sickeningly serious.

Leaving the EU without a deal would be absolutely catastrophic. Given the political evolution, not even that is no longer completely out of the question. British goods would face tariffs and would be subjected to customs checks. Even more damaging, a lot of multinational companies that have set up operations in Britain because of its access to the EU would move their operations across the Channel. Arguably, this process is already beginning. A number of big banks have said that they will be shifting staff from London to Frankfurt.

The blow for May fell on Friday last week, with the publication by Donald Tusk, the European council president, of the EU’s draft negotiating guidelines. To May’s repeated requests for immediate and parallel talks on a free trade deal while departure terms are discussed, the answer is an emphatic “No.” Instead, Britain will sign any trade deal as a third party, after it had left the EU, as Article 218 of the EU Treaty stipulates. No exception. To May’s absolutely scandalous gambit that the rights of EU citizens in Britain be used as a bargaining chip: another resounding “No.” To the government’s attempt to bypass the issue of the Irish border: “No.” On special, sectional single market deals for car manufacturers and the City: “No.” On the idea that the UK could somehow elude the EU principle of freedom of movement and EU jurisdiction during a post-2019 transition: “No.”

In one word: it is no. Not only will the EU set the agenda for the exit talks, it will also control their pace, parameters and conclusions – or else, no deal. It will be the EU that decides when “sufficient progress” has been made to allow talks on trade to commence. It will be the EU that sets the terms governing the transition needed to avoid the cliff edge so feared by business. It will be the EU that decides whether Britain has paid its dues. Of course, nobody in last year’s Leave campaign talked about a leaving bill of tens of billions of pounds.

Last week, Sky News‘ Faisal Islam finally got May to admit that she would have to abide by another timetable than her own (no parallel talks on trade). This may take the form of a seven-year transitional EEA agreement. There is of course no admission from Brexit MPs about this. They fixate on the one prediction economists got wrong – the surprising resilience of consumer spending – while ignoring everything their side was wrong about: the fall in sterling, the announcement of a second Scottish independence referendum, the threat of a sudden hard border in Ireland (what did they actually think?), the repeal of the European Human Rights Convention, EU immigrants becoming a pawn in the Brexit game.

The art of negotiating a Brexit that is not a Brexit

What will eventually happen is anyone’s guess. I remember a conversation I had with Nat O’Connor (former director of a Labour think tank in Dublin) last year: everything I had written in one of my articles was completely correct, Nat said, but my conclusion – that there will ultimately be no Brexit – was almost certainly completely wrong. How could I say this when the contours of a hard Brexit become clearer by the day?

Nat may well be right, but what is May realistically supposed to achieve in the next two years? She is going to battle about money and the EU immigration issue. There will be time, let us assume, to negotiate transitional arrangements, although these seem ever-more likely to be a simple grandfathering of existing rights and responsibilities. They will probably include free movement and European Court of Justice jurisdiction. At the end of it all, the British Prime Minister will proclaim that both the UK and the EU prefer tariff-free trade (who would ever think of that?). This incredible surreal “result” of the heroic “negotiations” will be sold as a moderate success – an honourable compromise for all parties. Parliament will agree and the British electorate will base their judgment on this fine achievement. It can also go differently. In both cases, there will be one major loser: the hapless Labour party.

Hapless Labour flirts with electoral annihilation

Last week, Labour’s Shadow Brexit secretary Starmer set out six “conditions” for backing May’s final Brexit deal. Labour will only vote in favour of May’s deal if it passes these “six tests.”

The “tests” are:

“1. Does it ensure a strong and collaborative future relationship with the EU?

2. Does it deliver the “exact same benefits” as we currently have as members of the Single Market and Customs Union?

3.Does it ensure the fair management of migration in the interests of the economy and communities?

4. Does it defend rights and protections and prevent a race to the bottom?

5.Does it protect national security and our capacity to tackle cross-border crime?

6. Does it deliver for all regions and nations of the UK?”

For those who are yet not desperate enough: “it” refers to the Brexit.

McDonnell, from his part, said that:

“Labour will fight for a Brexit that works for everyone, unlike the hard-right Tory elite who want a low-wage, tax-haven, bargain-basement economy. Our six tests, including preserving existing benefits of membership, must be met before Labour will support any Brexit deal” (see here).

At least – after ten months – Labour’s position is now unequivocally clear: it will support any Brexit that is not a real Brexit.

Starmer’s “test” and McDonnel’s comments shows how far Labour removed itself from reality. None of these “tests” make sense, they are completely hollow. One is forgiven for considering that this might be strategy. It is just complete haplessness. Labour is losing members and voters every day now. There is simply no deal available outside of the Single Market and the Customs Union which will deliver the “exact same benefits” as being inside of the Single Market and the Customs Union. Once the UK leaves the Single Market, there is no longer what Corbyn refers to as “unfettered access” to European markets. Having “unfettered access” is one of the main reasons for being part of the EU in the first place. You cannot leave a club and then expect to be able to use all the club facilities you used before. John McDonnell knew this in the Autumn when he pledged to vote to trigger Article 50 no matter what. Corbyn knew it in February when he whipped his MPs to back the Brexit bill, even if Labour failed to pass a single amendment. Starmer knows it. What game is Labour playing?

There is no doubt that Brexit has been seriously damaging to Labour. Since the referendum, the party has seen a growing exodus of both supporters and members. Most of this exodus has been to the Liberal Democrats and other Brexit-opposing parties. Labour’s determination to not to be seen as defying “the will of the people,” which is a very disingenuous argument in itself (as I explained here), while also trying to cling on to its overwhelmingly Remain-supporting voters, has backfired completely. By trying to please everybody, Labour has ended up pleasing nobody (see also here).

That this strategy will end in utter defeat is not a matter of opinion or ideology, it is a question of logic. In two years from now, when May brings home any inconsequential deal she has managed to secure, Labour will have a simple choice. They can either vote for or against it. Starmer’s“tests” suggest that Labour will vote against. It sounds attractive on the surface, but it comes with a huge risk. Imagine the following not unlikely scenario: in 2019 May brings home a deal which promises zero tariffs, but falls well short of a comprehensive trade deal.  The deal comes attached with a divorce bill of tens of billions of pounds and the possibility of transitional supranational trash talk continuing for up to a decade. A significant number of outraged Tory backbenchers decide to vote against the deal, so May suddenly needs the support of Labour to get it through parliament. What is Labour supposed to do? If they are consistent, there is no other choice than to join the Tory hard Brexiteers and vote against whatever it is that May tries to sell as a deal.

This would be political strategy of the highest caliber indeed. All because Corbyn lacks the courage to go to the industrial wastelands in order to explain that Labour – not UKIP, not the Tories, but Labour – has a realistic plan to make life better for people. They only thing they cannot do is to vote UKIP (I explained this here). This was the way to win the next election. There never was another way. Just imagine that this scenario pans out – May has insisted that there will be no renegotiation if Parliament votes against her deal and in any case there will be no time. Instead, Britain will crash out of the EU on World Trade Organisation terms with all of the ruinous economic and political consequences that would surely follow such an outcome. Labour would then immediately be complicit in ensuring the hardest and most extreme form of Brexit possible. That from a party which is supposed to defend workers, a party that campaigned for Remain in the referendum.

The likely electoral outcome of this scenario is the complete electoral annihilation of Labour. This evolution is already underway. The Liberal Democrats almost doubled its membership since the general election. They won more than 30 council by-elections up and down the country since the referendum. The Liberal Democrats are now acknowledged by the media – and increasingly by the public – as the real opposition to the hard Brexit Conservative Government. Together with the Greens, they fight to stay in the single market. Many do not believe Labour’s metaphysics of being outside and retaining all the advantages. They lose patience with Labour’s position. Many within Labour feel betrayed by the party’s Brexit position.  The Liberal Democrats and the Greens on the other hand articulate a clear – and most probably a correct – position:  divorcing Britain from the world’s most lucrative single market is lunacy. You cannot have a hard Brexit and a successful economy and without a functioning economy you cannot invest in schools or hospitals (see also here).

It is painful to watch the damage that Labour is inflicting upon itself. Corbyn may have good policy proposals, his views on the Brexit are ruining any chance for Labour to return to power. The latest figures put Labour at 25 per cent. Labour has fared worse than the 25 per cent figure in other polls by other polling companies, and the 18 per cent deficit to the Tories on 43 per cent has been higher too, but strictly comparing this poll to previous results, Labour has not fared so badly since 1983. The poll put the Conservatives on 43 per cent, 2 per cent down since two weeks ago. Labour are down 1 point to 25 per cent, UKIP are up one to 11%, the Liberal Democrats are up two to 11 per cent, and the Greens on four per cent have recorded no change. Support for Labour has only fallen this low only twice since it began conducting regular surveys, in June and August 2009, when Gordon Brown was prime minister and the effects of the credit crunch were at their most severe. John Curtice, who is Professor of political science, predicted Labour could lose between 50 and 100 seats in next month’s local elections (see here).

One last word: on economics and the power of ideology

John Weeks notices that because of the near-universal predictions of difficult negotiations leading to a severely negative Brexit economic impact, criticism of the May government’s fiscal policy has almost disappeared from the media (see here). No one talks about much of anything else than the Brexit. Yet public attention in both Britain and on the Continent should also focus on the issue of whether government fiscal policy is helping or hurting, writes Weeks. Certainly, but when was the last time this happened?

Just look at this week: the latest employment figures came out. The figures look great on the surface. The UK unemployment rate stood at an almost 12-year low of 4.7% in February 2017. The employment rate stands at an all-time high of 74.6%. The Tories are telling everybody that their policies are working. They can do even better once we liberate ourselves from the shackles of a hopelessly dysfunctional Europe. In fact, it is pure ideology. But has it ever been different?

The truth is that Britain is not doing well. The lack of increasing average real incomes and living standards tell the story (see here). Most of the new jobs are low-paid, temporary and/or part-time.  As a result, growth in weekly earnings is not keeping up with employment. Average weekly earnings for employees in nominal terms increased by 2.3% compared with a year earlier. Inflation is rising at the same rate, so average real earnings are flat.  Real pay growth fell to 0.1 per cent in the three months to February. The Resolution Foundation notes that pay is falling in nine sectors of the UK economy, including accommodation and food services, transport, finance and the public sector (see here). Together these sectors for account for 40% of the workforce (see here).

This is not new. Some years ago, Michael Roberts drew up a measure of ‘economic well-being’, a somewhat simpler model than Andy Haldane’s (former Bank of England chief economist) agony index (an index of real wages, real interest rates and productivity growth). Roberts’ measure is based on the growth in real income per head less the unemployment rate (see here). He recently redid his index, going back to the 1970s and found that the index has been steadily falling since the 1970s, implying that for the majority of British households, economic well-being has deteriorated in the last 50 years (see here).

Yet, did you hear anyone talk about the need for fiscal policy – as rational, necessary and intelligent this may be? Such is the power of ideology. It will always be something else – immigrants, red tape, Europe (yes, it is dysfunctional), regulation, even democracy, whatever it is, it is not productivity growth, investment and wages.

new-index

Figure 1: Michael Roberts’ Economic well-being index (an explanation of his theory on the political cycle has been left out (see here)).

issues

Figure 2: The role of immigration as a political issue (for those who doubt it was the most important issue during the Brexit) (see here).

Weeks makes the point that austerity (the obsession with the deficit) has been very bad for the UK. Whatever the economic consequences of the Brexit will be, it is unlikely that they will be as bad as Osborne’s six years. Also, if the Brexit turns out to be negative, there is fiscal policy to stimulate the British economy (see here). I do not doubt that all of this is true. I also have no doubt that this message will fall on deaf ears. For it to be heard, it is necessary to change power relations first. As I explained, it is absolutely not going in the right direction.