‘A vote to Leave is a vote to Leave’. This is true, but spare a thought for what happens then.
The Leave campaign is adamant that ‘leaving’ is all very simple. It has announced a programme of six bills that after a Leave vote would separate Britain from the EU: repealing the 1972 European Communities Act; ending the jurisdiction of the European Court of Justice over UK courts; ending the free movement rights of EU citizens to work in the UK – and so on. At the same time they claim they would have negotiated a free trade deal with our EU partners by 2020.
Such a course would pitch Britain into limbo – a state of ill-defined legal and economic uncertainty that would be the most serious act of self-inflicted damage to our economy since the imposition of the three day week in December 1973. For no business could be certain that the laws that govern their conduct of business, which over four decades have been substantially shaped by EU regulations, directives and court judgements, would still have legal effect – if not today, then at some point in the next months, the next year or the for the foreseeable future.
This legal and economic uncertainty would lead to a weakening (the more tabloid presenter of this argument would say ‘collapse’) of private investment in the UK. It would be a grave deterrent to new overseas investment. More generally, it would cause foreigners to hesitate before purchasing UK assets, which is the only way Britain has been able to finance the substantial trade deficit which for a generation, up to now, the financial markets have allowed Britain to sustain.
This limbo-like uncertainty would also create an environment in which firms that have the flexibility to shift their activities to the continent and the legal certainties of the single market would certainly consider doing so. Indeed, were they not to contemplate such a move of business out of the UK, boards would be failing in their duties to act in their shareholders’ interests. Risk management is a central corporate concern: the logic of Brexit is that any British-based company whose business is mainly in the European single market would, in the event of a Leave vote, substantially reduce business risk by relocating out of Britain to the continent.
Of course, from the Brexit perspective, the best way to minimise the damage this state of limbo would unleash on the British economy would be to ensure a quick UK exit. Unfortunately the only likely prospect is of a painful and prolonged state of limbo before we reach the permanent purgatory of Brexit – that is the loss of long term growth potential which virtually all economic experts believe to be inevitable as a result of Brexit.
The limbo would be prolonged for two reasons: the reaction of our EU partners to a Leave vote and the ideological divisions and internal contradictions among those who favour Brexit about the nature of Britain’s new long-term relationship with the EU.
Our EU partners do not want us to leave and there will be much genuine sadness at our parting. But sadness will not lead to any more special favours for the UK. No EU political leader will contemplate enhancing the ‘special status’ they have already conceded to the UK. To do so would only be to encourage the populist forces at home, which a Brexit would energise, to campaign for their country to follow the British example. The EU has many faults and needs much reform. But the truth is that the anti-European populism that is sweeping across the continent as well as the UK is a consequence of unscrupulous (and worse) populists seeking to blame the existence of the EU for our wider inability as European societies, including Britain, to find an adequate response to the structural tensions and gross injustices resulting from globalisation.
For these reasons our EU partners will treat a Brexit Britain with politeness but firmness. They will say no discussions, and no deal with the UK unless you follow the terms of treaties your government has signed and your sovereign parliament has ratified. Article 50 of the Lisbon treaty provides a clear process for any member state wishing to withdraw. You must invoke Article 50 for those exit negotiations to begin. Any prior UK legislation revoking your obligations under the EU treaties would be a breach of your legal obligations as a member state and open you up to the possibility of legal sanctions. We, the 27 EU member states, will follow the provisions of the treaties to the letter.
A Brexit British government that refused to pursue this course would therefore put itself in a worse state of uncertain limbo than if it immediately invoked Article 50. Assuming that the British government then saw sense, the EU 27 – without Britain – would draw up a negotiating mandate for the commission to conduct the negotiations for British withdrawal. The European council – without Britain present – has then to approve that mandate. Brexiteers seem to assume that Germany would dictate the terms of such a mandate: the fact is that every member state will ensure that it caters for their own special interests. Article 50 sets a two-year deadline for negotiations which can be extended, but any single member state can veto such an extension. If Britain does not accept what is on offer after two years, it could be then be ‘out’ and trading with the EU simply on the minimalist basis of its World Trade Organisation membership.
In my judgement the EU negotiating mandate will make clear that there can be no continued access for the UK to the single market on the present basis, unless Britain continues to meet its existing treaty obligations on free movement and contribute to the EU budget. On this central point the EU will never yield. Yet stopping EU immigration and diverting our EU contributions to the NHS will be the populist basis on which the Leavers would have won the referendum. They will be hoist by their own populist petard. The irony is that the hyper-globalisers, who for quarter of a century have made their central critique of the EU that its regulatory and bureaucratic burdens ‘hold Britain back’, would have won the vote on the basis of a protectionist anti-elite populism.
Given the French and German elections taking place in May and September next year, there will be no significant progress on negotiation until the end of 2017. That guarantees a minimum 18 months of legal limbo for starters. But once negotiations were seriously joined, a Brexit government would have to face a fundamental contradiction in the Brexit position.
In the referendum campaign the Brexiteers have shown themselves to be confused and contradictory on the central issue of access to the single market. On the one hand they argue Britain will no longer be part of the single market and free ‘to take back control’. On the other hand they say a favourable free trade agreement with the EU will be easy to negotiate because we already comply with the single market’s regulatory obligations. Out of one side of their mouth they want to set a bonfire to EU bureaucracy and regulation that in their ideological view will be a huge boost to British enterprise (though at great cost in my view to social rights and environmental standards). Out of the other side of their mouth, they claim a favourable free trade deal with the EU can easily be negotiated. Yet regulation is the core of modern trade deals: how much Brexit Britain would be prepared to accept EU regulation would determine how much market access our businesses would obtain.
Is the Brexiteer aim to secure a better deal than Norway has got through the EEA, while trying to ditch or minimise the obligations to free movement and budgetary contributions? Or is it to set Britain on a wholly different economic course as a totally deregulated economy free to compete anywhere in world markets? The Brexiteers cannot answer that question because they will never agree among themselves.
This fundamental contradiction in their position makes a much longer state of legal and economic limbo more likely. Even if, as is likely, within weeks of a Leave vote we would have a new Brexit government with a new prime minister, which may be reinforced by a general election victory within six to nine months, it is very unlikely that a majority in either House of Parliament could be found for a credible Leave option.
Vote Leave has no practical alternative to Britain’s present membership of the EU. As Nye Bevan once said of unilateral nuclear disarmament, a Leave vote would send a British prime minister ‘naked into the conference chamber’. It would be ‘an emotional spasm’. If we vote Leave on 23 June, let us brace ourselves for a long period of legal and economic limbo which will do incalculable damage to the British economy and the lives of working people.
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Roger Liddle is a member of the House of Lords and co-chair of the Policy Network thinktank
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