Wednesday, June 22, 2016

Brexit: who would take the decisions, and what would they want to do next?

After Brexit, we will...

Sound familiar? There do seem to be a lot of promises flying around, and also a lot of unsubstantiated suggestions. Had another leaflet this morning saying the mythical £350 million per week paid to the EU could (notice the word carefully) be spent on the NHS. Of course, by putting that figure on his bus, Boris Johnson forgot his beloved Mrs Thatcher's rebate, let alone the money that flows back to farms, Universities, deprived areas of the UK, research and development, etc. If all went well, there would be less than half of that in practise. And it's worth noting that Johnson, Gove, Duncan-Smith and Farage have all made proposals in the past that undermine the core principles of the NHS.

Ok you've heard all that a hundred times, so I'll stop there. But before you switch off, note that it isn't a promise to spend more on the NHS, and that much money wouldn't be available anyway, even if everything went really well. A lot of commitments have been made by the brexit team, but they haven't come from anyone who currently hold the relevant office to put them into practise, so are they worth anything?

That prompted a few questions, so here they are:

1) After a Brexit, who will be in charge?

I've seen a lot of promises from politicians on both sides of the argument. The difference is that if brexit won, it is assumed David Cameron would stand down soon after. Everything would then be in limbo while the Conservative Party has a leadership election. The smart money is on Boris Johnson winning in such an instance, but that's not guaranteed. If he did, he would then have to manage a divided party and a generally 'remain' parliament in order to proceed with leaving the EU.

2) Who would be the new Chancellor of the Exchequer? They and the new PM would have to navigate the complex process of exit, and handle the budgetary consequences.

If Article 50 is activated, Britain has 2 years to negotiate its exit. At the end of that, the aforementioned EU payments to farms, fishing, etc would need to end. We wouldn't necessarily need a crisis budget, but we'd need a Budget to reallocate money to those areas, which will gobble up a large part of the EU subs we gain by no longer being a member. There are also payments to the private sector in research grants, so a decision would be needed about honouring them or not.

That money would then need to be distributed, so that means setting up a UK process for claims, assessment, grant-making, appeals, etc. In other words we would need a bureaucracy of our own, which costs additional money to set up and run. Would the new Prime Minister and Chancellor have sufficient political will to ensure that is done, and done quickly? The alternative is hardship in rural and fishing communities, and a shrinking of research in universities and companies.

Meanwhile, market conditions may mean the tax take is down, spending is rising and the room to make the grants is more restricted.

3) What would the negotiating position of the UK be for future trade relationships?

A lot has been written about the deals that Norway and Switzerland have with the EU. It's well documented elsewhere that a similar deal for the UK would require a fee (using up more of the money reallocated from EU subs) and freedom of movement. The 'Leave' campaign has put a lot of emphasis on the cost of the EU and the problems of free movement, so it would be weird if they suddenly embraced a deal that addressed neither of their key concerns, and left us with no say as to how the single market worked. So what would the UK be pitching for? The answers have tended to be a selection of suggestions, rather than a specific plan. That doesn't inspire confidence.

Remaining in the EU has its uncertainties, but we have a reasonable idea what they are. Furthermore, we could always revisit the question of our continuing membership at a future date if significant questions couldn't be resolved through the usual negotiating processes.

Leaving has a finality about it. And it also carries more profound uncertainties. Our future will be in the hands of a yet unknown Prime Minister and Chancellor, working with an unknown budget, under unknown market conditions, taking an unknown proposal for a trade deal, with unknown conditions about fees and movement of people.

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