speri.comment: the political economy blog

Brexit blues: the election, austerity and leaving the EU

The election will have profound consequences for Brexit, in a transformed political climate where the initiative has been handed to Labour

Andrew Gamble, Professorial Fellow at SPERI

Andrew GambleWhat a difference an election makes. Two months ago Theresa May reversed her previous insistence that there would be no early election and called one.  She was twenty points ahead in the polls, her approval rating was plus 10 per cent, Jeremy Corbyn’s was minus 40 per cent, the Conservative party had united behind her leadership and her determination to deliver a red, white and blue Brexit.  She had won overwhelming support in Parliament to trigger Article 50.  Labour was badly divided both over its policy on Brexit, and most of its MPs were still not reconciled to Jeremy Corbyn’s leadership.  With a pledge to hold a vote to repeal the fox hunting ban and the Tory tabloids in full hue and cry what could go wrong?

Almost no-one foresaw this result, not even Corbyn’s campaign team and certainly not the Conservatives who concentrated their resources in the wrong constituencies. The Conservatives did not lose the election.  They increased their vote share and number of votes.  They were easily the largest single party.  But they lost their majority, when they had been expected to come back with a greatly increased one.  Theresa May’s authority was shattered, particularly because she had fought the campaign in such a presidential style.

Two aspects of the vote are particularly worth noting. The Tories failed to increase their majority in England, while in Scotland the Tories made 12 gains, their best result since 1983.  The failure in England was due partly to the youth vote and the youth turnout, but also because many 2015 Labour party voters who had been thinking of defecting from Labour at the beginning of the campaign stayed with Labour.  They were joined by a significant minority of UKIP voters, who preferred Labour’s anti- establishment and anti-austerity message to the Tories.

The consequences of this election for British politics and for Brexit are profound. Not only does the Government lack a majority of its own, but there is no consensus in the Conservative party, in Parliament or in the country on the form Brexit should now assume.  But the negotiation process has already begun.  Article 50 has been triggered, and by March 2019 Britain will have left the European Union.  The uncertainties around Brexit were already very large, but the election has magnified them further.  May hoped by increasing her majority to strengthen her hand in the negotiations, not least with her own unruly backbenchers.  She has done the opposite.  The Chancellor she planned to sack is now increasingly assertive about the need to put the economy first in any negotiations, and avoid falling out of the EU without a deal.  That is code for saying that making concessions on free movement, budget contributions to the EU, and even the jurisdiction of the European Court of Justice should be considered before damaging key sectors of the economy.  This is echoed by many liberal Leavers and even many hard Brexiteers who say that the important thing is sovereignty, and building a ‘global Britain’, one which is more internationally competitive not less, and has lower taxation and less regulation than ever before.

Is this what Leavers voted for? Taking back control is now revealed as a cynical slogan to help one section of the political elite take back control.  The citizens who voted in such large numbers for more money for the NHS, for immigration to be halted and for cosmopolitan and multicultural Britain to be reversed are it seems to be disregarded.  The collapse in the UKIP vote in the general election from four million to 600,000 seems to vindicate that strategy.  The Conservative party by promising resolutely to implement Brexit made UKIP seem redundant.  But what will these voters feel when in a few years time very little will have changed apart from the colour of the passport?

The fundamental paradox of Brexit is how to reconcile greater openness with greater closure. The vote could not have been won if many millions had not believed they were voting for greater closure.  Yet what they are being offered now is greater openness, only with a less advantageous trading position with the world’s largest free trading bloc.  Many voters are likely to come to see this as a bad deal.  Yet it is hard to see any other kind of deal given the parliamentary arithmetic.  Even with its deal with the DUP, which gives it an effective 13 vote majority in Parliament, the Government could struggle to win votes on Brexit bills because of the divisions on its own side.  It may need to rely at times on support from opposition MPs, and that suggests it will be forced to compromise in the negotiations.

The Government has already conceded the principle of the sequencing of the negotiations. More concessions are likely on the status of EU nationals, the size of Britain’s divorce bill payment, and the status of the Irish border.  This is before the negotiations for a trade agreement have even begun.  Since hardly anyone apart from a few Panglossian Brexiteers think a free trade deal can be agreed quickly, all the focus has moved to the transitional arrangements which will be necessary after Britain has formally left the EU, until the trade deal can be agreed.  Such transitional arrangements will keep freedom of movement, budget contributions and European Court jurisdiction much as they are at present in return for Britain’s access to the customs union and single market.  David Davis accepts the need for a transition period but thinks it will be no more than 1-2 years.  But it will need to be as long as negotiating a trade deal which does the least possible damage to jobs and growth takes.  Britain’s negotiating position looks weak, and has clearly become weaker since the election.

It is considerations like these that are fueling doubts among some Remainers and Leavers that Britain will ever really leave the EU. Nigel Farage is getting ready to shout ‘Betrayal’, and roar back at the head of a reborn UKIP.  The populist genie that has been unleashed by Brexit is however moving in unpredictable ways.  The economy is weakening, as shown by the latest figures for inflation, growth and real wages, even though employment continues to be high.  Austerity is now widely rejected across the political spectrum.  The Coalition Government originally promised to eliminate the deficit altogether within one Parliament by 2015.  They failed and the Conservatives then promised to redouble their efforts in the next Parliament.  But now it is accepted that both deficit and debt will have to rise again.  The people are tired of austerity.  Even John Redwood agrees.  The political initiative has been ceded to Labour, who campaigned in the election on a manifesto which promised to reverse spending cuts across every part of government.  The Grenfell Tower fire has made austerity even more unpopular, and is rapidly becoming a symbol for years of underspending and deregulation.

Taking back control, whether of the economy, of public utilities, of housing, or of the NHS, has become Labour’s slogan. As Juliet Samuel has pointed out, the nirvana of Singapore capitalism which many leaders of Brexit though within their grasp, has been snatched away by a sudden populist surge to the Left.  The Conservatives have been left uncertain how to respond.  Some of the fury and energy which the Brexit campaign unleashed against the establishment is now being directed against austerity and the new Brexit establishment and its media mouthpieces.  Labour is riding this new populist wave in British politics.  Its own position on Brexit is cleverly triangulated as Matt Bolton has shown.  The manifesto backed leaving the single market and ending free movement, at the same time promising a deal that puts the economy and living standards first.  This ‘jobs first’ Brexit is hard to distinguish from the Government’s position, but it appears to have worked with the very different components of Labour’s coalition.  The manifesto also declares that Labour is pro-trade and pro-global Britain, but commits Labour to a position which is bound to be worse for the UK than staying within the single market.  The old Bennite emphasis on sovereignty is once more at work, connecting the Labour Left to the Tory Right as it did in the 1970s.  These inconsistencies along with Labour’s many unfunded spending commitments would be put to the test if Labour finds itself in Government in the next five years.  But for the moment ‘jobs first’ Brexit and an end to austerity are the slogans of the hour.

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