Leave aside for the moment who you’d like to see as next PM. Leave aside as well who you think would make a good PM. Meaning that we can put aside Boris’ ability to do detail, Gove’s to rally the troops and all that. Think for a moment solely about Brexit policy, the existential question being faced currently. Gove’s idea of waiting until – or up until if necessary – late 2020 to gain a deal is taking all of the pain and getting none of the gain.
For what kills economies is uncertainty.
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Michael Gove tells Cabinet ministers he is prepared to delay Brexit until late 2020[/perfectpullquote]No, that’s a really bad idea:
[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Michael Gove has told Cabinet ministers he is prepared to delay Brexit until late 2020 rather than leave without a deal on October 31, The Telegraph has learned. The Environment Secretary has told colleagues that a no-deal Brexit in October risks triggering a General Election that will put Jeremy Corbyn in Downing Street. His position puts him directly at odds with other Brexiteer leadership candidates including Boris Johnson, the former foreign secretary, who have committed to leaving on time with or without a deal. [/perfectpullquote]Note that it’s a really bad idea even if you think that Brexit shouldn’t happen at all. The uncertainty over the when and what terms is so damaging that it’s better we make the decision now, whatever that decision is.
In the theory, the largest variable by far in GDP is business investment. In turn this is driven by Keynes’ animal spirits of businessmen. It is uncertainty about the future which kills such investment. Note that uncertainty is different from probability. It’s not that we think there’s a 50/50 chance of our new investment working. It’s that we don’t and can’t know what the environment it’ll be working in is. So we can’t even calculate the risks.
We don’t know if we’re leaving – we’re pretty sure we will be in name but little more than that- we don’t know the terms and we don’t know when. So, most investment will be put on hold until we know more.
And, yes, large falls in business investment are quite enough to cause a recession all on their lonesome.
We’v even got a practical example here. British Steel went bust because of Brexit. Buyers didn’t know whether their orders would need to pay import tariffs or not upon delivery in x months time. It was impossible to gain a firm and fixed price. Therefore they went and ordered elsewhere. B Steel goes bust through lack of orders. The lack of orders being a result of simple uncertainty.
Whatever the Brexit outcome would have been better than that. Some customs union, single market, whatever deal, no tariffs, all is good. Hard exit to WTO, tariffs. Oh my. But WTO terms is a significant change in the terms of trade for the country as a whole. Sterling will fall. A fall in sterling prices B Steel back into the market – a bit to a lot at least – against those tariffs. In an uncertain world sterling has only fallen a bit.
It’s uncertainty that kills a business, an economy.
Sure, I’m hugely biased here, I don’t think we should ever have joined the EU, I don’t think anyone ever should have done. I’m adamant that we should leave and that so should everyone else.
But leave all that aside. Delaying the whether Brexit, the terms of Brexit, to late 2020 is the worst of all worlds. It’s the worst policy on the subject possible. Whatever the decision actually is we should do it now. I think hard and to WTO – you may disagree. But we still need to be doing whatever it is right now before the economy crumbles under that uncertainty.
The language we use matters - it provides clarity to our own thoughts and enables…
It is now generally acknowledged that the structure of the NHS needs to be overhauled…
In the film Apollo 13, a loss of oxygen causes the crew to start inadvertently…
There's an idea out there which seems intuitive but then so many ideas do seem…
When we think about the darkly opaque goals of modern central bankers as they relate…
As the papers recently filled with the distressing images of desperate souls looking to escape…
View Comments
Gove's suggestion of a delay most certainly perpetuates uncertainty yet it also makes it much more unlikely that the UK will ever leave. Just as kicking a can down the road risks damaging the can, booting Brexit into the future risks no Brexit at all.
The present Commission maintain that they will not change the Withdrawal Agreement (WA), so if they remain true to their word the UK leaves, either under the terms of the WA or without being bound by its terms, inaccurately defined as a "No Deal" Brexit, on 31st October. To prevent this Gove would have to ask for and be granted yet another extension by the Council of Ministers, before the new Commission comes into being in November.
Will Macron play ball? Probably, despite expressing sentiments to the contrary he is a federalist through and through, rocking the EU boat is not his style. Less Anglophobic countries such as Hungary, Poland and Italy are desperate for the UK to remain in the EU, seeing the UK, probably incorrectly, as an ally against the Franco-German axis. So Gove would most likely be granted an extension and the UK parliament would almost certainly agree to a Statutory Instrument allowing it. Gove would then have to restart negotiations.
Whilst it is true that our new Commissars will not have nailed their colours so intransigently to the mast of the WA, they are without doubt going to be federalists, regardless of the new make up of the European Parliament. Gove must then be gambling that he could reach an agreement with the new Commission that Westminster would acquiesce to.
The new Commission may very well be open to the idea of revising the WA, but are more likely to favour offering only more onerous terms and an even softer Brexit. The Irish backstop might be abandoned as a sop to the likes of the ERG so as to allow for a majority in the House of Commons but this will not solve a major EU concern and will likely have strings attached.
If the UK does actually leave the EU the Republic of Ireland will not be able to join Schengen unless a hard border, such as the one between Hungary and Ukraine, is put in place between the north and south of Ireland. Such a border would overturn provisions in the Common Travel Area and Good Friday Agreement and then is not easily possible, but from the EU's perspective the major drawback of a lack of hard border would necessitate abandoning a key plank of EU policy, a union without borders.
Eire's hard border with the EU is from the EU's perspective temporary, as are the borders with Croatia, Romania, Bulgaria and Cyprus. The policy is that all member states will be in the Schengen zone by 2025.
The idea of the Republic of Ireland not being fully integrated and in alignment with all other member states is an anathema to Brussels, that much is certain, whether of not Gove has the capacity to solve this conundrum is as uncertain as whether or not Mr. Gove is genuinely committed to a real Brexit.
In considering an extension it seems more certain than not that Gove is not the right man for the job.
Kicking the can down the road is the standard EU response to tricky problems (i.e. problems that are not soluble within the context of the grand projet of 'ever closer union'). Observe their response to the difficulties inevitably arising from the fundamentally flawed eurozone. The Germans have been kicking the can down the road at half a trillion € a kick. Inevitably, they will run out of road (or lose the can, but perhaps the metaphor is being stretched, here) but, with luck, that may become someone else's problem.
Luck will indeed be required and with luck Gove won't be PM and Brexit won't be kicked into the long grass, down the road or anywhere at all, except into the back of the net of leaving the European Union.