Sunday, 15 January 2017

Flexcit is dead


At the start of a new year, it is common to reflect on the events of the last year and look ahead to the coming year. So I thought I'd reflect on my own experience of the 2016 EU Referendum and how my views have developed over the last year.

In January 2016, I was a relatively new supporter of Flexcit, the self-styled “definitive” Brexit plan, which proposed a phased exit from the EU via EFTA EEA, on the basis that (i) Article 50's 2 years timescale is not enough time to reach a comprehensive exit settlement (ii) remaining in the Single Market for an interim period removed economic risk from exit.

Leave.EU

At the start of 2016, Leave.EU briefly flirted with Flexcit. The response was overwhelmingly negative from the primarily UKIP supporting Leave.EU membership. "No to EU Freedom of Movement, EU Laws & EU contributions" was the common refrain. This was a bruising encounter, but ultimately one I found instructive. The issues of Freedom of Movement, EU laws, EU contributions were totemic because they represent to many people the most obvious ways in which the power to govern ourselves has been diminished.

Leave.EU also hired polling experts from America, who advised that Labour voters would be key to a Leave victory. I suspect this also contributed to Leave.EU's change of heart on Flexcit. But I have to say that the Referendum results from Labour heartlands and the accuracy of Leave.EU's final poll prediction (52-48 for Leave) suggests Leave.EU's pollsters were on the money.

Vote Leave

Vote Leave won the designation for Leave and campaigned under the theme of "take back control" – a simple phrase to cover self-government, sovereignty and democratic control. The issues raised by Leave.EU's membership also appeared during the campaign:

Freedom of Movement. Whatever your views on immigration, it is unarguable that the UK government has ceded power regarding EU immigration. The majority of UK public opinion favours "controlled" immigration, with no discrimination against non-EU citizens and no automatic right to benefits - impossible as an EU member state.

EU Laws. Tabloid tales of barmy Brussels regulations are legend but in truth are usually gross misrepresentation - as was the case with Boris and the Banana regulations (which actually come from UNECE and apply to exporter, not retailers). However, this issue touched a deeper nerve with greater public awareness that we no longer controlled the making of UK law:
- Many trade and technical standards are now international in source. But while countries around the world (USA, Japan, Canada, Australia etc.) implement these standards into their national regulations, the UK has ceded regulatory control to the EU Commission.
- The legal tradition of this country based on common law, habeas corpus, magna carta and "permissive law" (all is permitted unless explicitly prohibited) is being overtaken by EU law based on an inquisitorial, "prohibitive" (all is prohibited unless explicitly allowed) continental legal system.

EU payments. The "£350m per week" claim generated much controversy amid claims of lies and deception. In fact the £350m per week figure is the correct GROSS figure. The NET figure is reduced by the UK rebate and CAP / regional funding, as was frequently pointed out amid huge media attention (which of course was the whole point of the exercise!). Although £10bn per year NET payments is a tiny amount of Government spending, it is still a huge sum of money to most voters - and how that money is spent is not in our control.

Remain Campaign

As expected, the Government / Remain campaign focused on economic risk and the single market. Little attempt was made to make a virtue of membership of a European Political Union. Despite lauding the single market, the Remain campaign dismissed the EFTA EEA option as terrible - “still pay and no say”. Many Remain campaigners claimed that it would simply not be an option - exiting EU would mean exiting EEA as well.

Crucially, in mid-April, Michael Gove said in a speech for Vote Leave that the UK would leave the Single Market. As confirmed by Ameet Gill (David Cameron's director of strategy), Remain seized on this and “spent the next three months trying to hang that round Leave’s neck” - exemplified by statements from David Cameron and George Osborne.

Referendum Result

The Remain campaign have complained that Vote Leave's campaign was based on instinct over intellect and “lies” citing the £350m figure (as discussed above). Yet the Remain campaign was based on an appeal to “fear” and ludicrous statistics (£10 back for every £1 we put in?). Dominic Cummings has written a long but exteremely interesting blog on the Referendum Campaign in the context of our dysfunctional politics and political media and he also explores how political debate might be improved. Put simply, Vote Leave's direct appeal for self-government, to “take back control” was necessary and effective.

Despite some media attention for the interim EFTA EEA option in the last few weeks of the campaign, I find it difficult to argue or believe we had any impact on the Referendum result. It seems to me that those who valued the Single Market and economic certainty over sovereignty and self-government voted Remain – including some who were attracted to the idea of an EFTA EEA option. Conversely those who prioritised self-government and sovereignty voted Leave – including some who favoured the interim EFTA EAA option and understood there was no guarantee of this route being taken.

Nor do I believe that a Leave campaign based solely on Flexcit would have won. Many Leave voters would simply not have been motivated to vote for “Brexit-lite” - especially Labour supporters and the significant numbers of Leave voters who never normally vote. Reluctant Remain voters cowed by Project Fear would probably conclude “Brexit-lite” did not offer sufficient gains to make the risk worthwhile.

Ultimately, the main Leave and Remain campaigns boiled the Referendum choice down to “take back control” versus “don't take the risk”. Although the margin of victory for Leave was narrow, it was significant in triumphing against the status quo and much of the establishment. First and foremost the Referendum provides a mandate for the UK to become a sovereign, self-governing nation. Secondary to that will be pursuit of the best trading terms.

Remain campaigners claim there is no mandate for a “hard” Brexit. But it seems to me that in the context of the campaign there is no mandate to stay in the Single Market, certainly not at the cost of sovereignty. The EU are implacably opposed to reforming the Single Market to accommodate Britain's desire for full self-government, so the inevitable conclusion is that Britain must leave the Single Market.


Beyond the Referendum

So having campaigned for an EFTA EEA interim option, was I disappointed by the Referendum campaign? Am I now worried about the prospect of a "hard" Brexit? In short, am I now a candidate for "Bregret" ? My answer is: No – absolutely not ! Like most, if not all "Liberal Brexiteers", I voted Leave because my priority was self-government and sovereignty.

While I had developed some queries over elements of Flexcit approaching the Referendum (I thought the conformity assessment issue had been overplayed),  I still thought the EFTA EEA interim provided the most likely and safest Brexit scenario. Having continued, to read, question and investigate, I find I have lots more issues and queries regarding Flexcit. I will go into more details in subsequent blog posts, but here is an overview :
- Political and legal considerations. Public support for the EEA option is unlikely, nor can it be guaranteed that EFTA / EU consent will be forthcoming or can be circumvented.
- Single Market Regulations. The UK will remain subject to the EEA acquis (~26% of all EU laws, ~70% of EU Directives). The claims that these regulations are simply handed down from international organisations do not stand up to detailed scrutiny.
- ECJ rulings. The EFTA EEA states fall under the jurisdiction of the EFTA Court, but the key EEA principle of homogeneity also applies to the courts and ECJ rulings also apply via the EFTA Court.
- Interim becomes permanent. Once the UK is safely parked in the EEA, there will be no incentive for the EU to negotiate. The UK will have lost all leverage available on exit and will also have signalled an unwillingness to contemplate leaving the Single Market. Longer term, there is a high risk that the EU will impose an “Associate Membership” on EFTA EEA states.
- Flexcit is not an interim EEA option. Since the referendum, Dr North has clarified Flexcit as meaning the UK stays in the EEA for 20+ years and argues the case for Single Market reform. The argument appears to amount to: “We must leave the EU, it won't reform. We must stay in the Single Market for 20+ years and persuade the EU to reform”.
- Customs Union issues. The EEA option does not provide an “off the shelf” solution. There are many trading issues associated with leaving the EU that EEA will not address, including customs operations and agriculture / fisheries. Consequently, the EEA option may not meet the 2 year Article 50 deadline.
- WTO & Conformity Assessment. The problems associated with conformity assessment and the risk of an “operation stack” scenario have been exaggerated. Negotiating an MRA (Mutual Recognition Agreement) should be straightforward. The WTO option is sub-optimal (for both EU and UK) but does not mean “all trade will literally grind to a halt” (to quote Anna Soubry).

Perhaps the final nail in the coffin is the intransigence of Remainers who now see the Single Market / EFTA EEA as a platform for staying in or rejoining the EU. They reinforce this strategy with Project Fear Mk II, but, we should be sceptical of the hype regarding the Single Market:
- As Andrew Lilico notes, in 2012 the EU Commission estimated that since its inception, the Single Market had added just 2% to GDP averaged across EU member states (with the UK's gains probably less).
- The All Party Parliamentary Group (APPG) in 2013 concluded there still is no "single market in services".
- Numerous commentators suggest anxiety over the Financial Services Passport is overdone, with one even stating "The City needs the EU like a fish needs a bicycle".

Polling by YouGov suggests 68% support for getting on with Brexit, with a Canadian style Free Trade agreement the most popular choice.  There is no good reason why the UK and the EU cannot agree a mutually beneficial trading arrangement outside the Customs Union and Single Market. Alternatives to EEA have been highlighted to provide transitional trade arrangements pending a final dealThe facts and the politics are moving away from Remainers and Flexcit - both of whom want to stay in the Single Market indefinitely. Flexcit (short for flexible response and continuous development) has shown itself inflexible in responding to changed circumstances.

Conclusions

What a year 2016 was. I've certainly learnt a lot and my thinking has evolved considerably from a year ago. Far from suffering "Bregret", I am very confident about our future outside the EU. To sum up my current views in a simple phrase: "Flexcit is dead. Long-live Brexit!"

5 comments:

  1. I have only just discovered this blog. What a fascinating and insightful post!

    As a complete layman (who had read all the monologues) I became increasingly disillusioned with Flexcit over the course of last year, but nevertheless I continued to worry that anything other than Flexcit would be a disaster for the UK. My opinions on Brexit hardened considerably after the referendum (due to the behaviour of Remainers and their clear intent to sabotage, dilute, ignore, or overturn the decision) and this made Flexcit even less appealing to me. It is therefore good to know that there are potentially other solutions; ones that won't leave us vulnerable to being coerced into rejoining the EU at a later date.

    I shall be closely following this blog from now on.

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    1. Thank you. I'll try not to disappoint !

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    2. I hope to provide some more detail in future blogs, but I did write a blog on Con 4 Lib which provides an outline of my thinking: http://con4lib.com/clean-brexit-we-may-need-a-transitional-arrangement-but-the-eea-is-not-the-answer/

      I can also recommend reading Roland Smith who has just written a blog post on May's speech: https://medium.com/@WhiteWednesday/what-mrs-may-said-99c7a7b78def#.tj94o2tx6

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  2. Good sense and a pleasure to read.

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