GP – RN > ‘BreXit: not gonna happen’ WRONG: As We Are Honouring Article 50

Brexit: not gonna happen

Wednesday 12 October 2016

Yesterday, we saw The Times lead with a report that Cabinet Ministers are being warned that the Treasury could lose up to £66 billion a year in tax revenues under a “hard Brexit”.

This is according to leaked government papers, which suggest that GDP could fall by as much as 9.5 percent if Britain leaves the Single Market to rely on the WTO option – compared with if it stayed within the EU. The £66 billion drop is nearly a tenth of the £716 billion that the government is projected to collect in taxes this year, and is equivalent to 65 percent of the annual budget of NHS England.

Whether that is a credible estimate, though, I have no means of telling – having not seen the leaked papers. But, if the WTO option was ever to come to pass, the odds are that it could cost much more than a mere £66 billion annually.

However, barring accidents, there is no likelihood that we will ever see the WTO option in place. This is a unilateral option and, by committing us to Article 50 negotiations, and repatriation of the acquis Mrs May has already ruled it out. She is going for either a bilateral (Swiss-type) or multilateral (Efta-EEA) settlement.

Where the media and the many pundits who have retailed this story have got it wrong is that they have failed to appreciate the nature of the WTO option – defined by us as a scenario where, for whatever reason, the UK eschews any form of directly negotiated trading agreement with the EU and trades solely and exclusively within the framework set by the diverse WTO Agreements.

Its defining characteristic is that it is a unilateral option, so the moment the UK goes for a negotiated settlement, this cannot be – by definition – the WTO option. Therefore, whether it might cost £66 billion a year in lost tax – or even more – is largely irrelevant. It’s not going to happen.

If the media and others could step back from their frenzy, this would be so obvious that it would be barely worth a second’s though. This so-called “hard” Brexit is not on the table.

This underlines the other problem – the insistence on defining Brexit as a binary choice, as between “hard” and “soft”, when there were always those three options: unilateral, bilateral and multilateral.

An added complication here is that all sophisticated trade agreements are, in fact, hybrids. At their core is always the multilateral WTO settlement, to which bilateral agreements tend to be grafted on. But even if we go for the multilateral Efta-EEA option, this would have distinct bilateral elements – enough for Mrs May to call it a “bespoke” agreement, without stretching her credibility to breaking point.

But then, the further ramification is that none of the above (or anything we can negotiate inside two years) would deliver an acceptable outcome. So we are going to be looking for an interim option – a “transitional deal” for which, according to the Financial Times, most parties accept the need for a transitional deal but there is little agreement on the form.

So far, then, we have two elements of Flexcit already dropping into place – the repatriation of the acquis and an interim deal, so we only need – and now we hear that another element is being actively considered, with Newsnight suggesting that the UK Government may be prepared to continue paying billions to the EU, in order to retain Single Market and other rights.

All we need now is for the Government actively to consider the EEA and we have phase one of Flexcit in the bag, without even breaking sweat. And now with 115k downloads, clearly it is having some traction, even if the chatterati dare not speak its name. Next thing we might get is a Tory MEP in the Guardian talking about the Liechtenstein solution.

The one thing we’re never going to see, though, is an end to the ineffable stupidity of Tory commentators. The Party as a whole is living up to its reputation as the “stupid party“, a description which long pre-dated its “nasty” moniker.

Meanwhile, the media will go on bleating about a “hard” Brexit, even though the concept has no meaning – and never really one – simply because its people haven’t the brains, or the motivation, to stand back and take stock. With coprophagia the driver, the UK will be celebrating signing up to Efta in a ceremony on Oslo before the fourth estate wakes up to what is going on.