Is it time for Parliament to compromise and vote through May’s Brexit deal? Dimitri Zenghelis (LSE) argues that ‘no deal’ is not the only viable alternative to a deeply flawed deal. Yes, a second referendum would divide the country – but it is already divided. People are now in a better position to understand the choices on offer and many would like to be done with Brexit. Under May’s deal, negotiations will drag on for years.
As Parliament prepares to debate the agreement reached between Theresa May’s government and the European Union, it has become fashionable among supporters of the deal to point out that it is impossible to satisfy everyone and that the time has come to set aside our differences and realise that compromises must be made in the national interest. Most people now agree that ‘no deal’ will be the worst outcome. Business abhors uncertainty and this agreement provides a workable process with some certainty with regards continuity of trade with our major business partners and a transition period to sort out future arrangements.
Yet the withdrawal agreement is just that – a divorce agreement. Its focus is on the UK’s exit from a political and economic union. It does not resolve the issue of the UK’s future trading relationship with the EU. This is left for the transition period, a period over which the UK holds even fewer negotiating cards as it will have already left the Union. The option of a ‘no deal’ cliff edge will not have disappeared, it will have been merely sidestepped and pushed to the end of the transition (to hell with the backstop!). In the meantime the UK will abide by rules over which it will have little or no influence.
The negotiations over the eventual role of EU institutions and the returning of control of the UK’s borders depend on this next stage of negotiations. Greatly curtailing the power of EU institutions – such as the Commission and the European Court of Justice – from imposing laws on the UK is inconsistent with the terms of the backstop agreement and the aspiration to retain frictionless trade in goods with the EU. To bridge this gap we can expect years of negotiations and horse-trading. Yet by leaving the EU, the UK’s diminished influence on these institutions and their decisions is guaranteed.
So this deal is not optimal. But this is a divided country and, given the need for compromise, many argue that it is better than the alternatives. Yet if parliament fails to pass the current deal, ‘no deal’ is not the only alternative. In fact, one of the few things that unites a majority of parliamentarians is that a disorderly ‘no deal’ Brexit would be a disaster and must be prevented. Consequently, a suspension of the Article 50 process to allow time for a second referendum is becoming an increasingly likely outcome. What choices will be on the ballot remains to be determined, but the main choice should be between May’s deal or remaining in the EU.
With a second referendum now back in contention as a mainstream option, it is worth assessing the risks.
Firstly, holding another vote on the subject of the UK’s membership of the EU smacks of elite ‘remoaners’ unable to accept the results of the first referendum. It is, after all, widely acknowledged that the EU always asks people to vote again when they don’t like the answer. What next? people cry, best of three? Yet this critique doesn’t hold water. As a point of principle, if a referendum is held twice and yields the opposite result, this surely vindicates the decision to re-run the vote? It allows a full reflection of people’s view in light of new information. And there has been a lot of new information over the last two years of tortuous negotiation leading us where we are now. After all, people don’t have to change their vote the second time. A bunch of the most recent polls suggest that over 60 per cent of people across the UK now favour a ‘final say’ vote on the Brexit deal. The point is best summed up by former Brexit secretary and Leave proponent David Davis, who pointed out that “if a democracy cannot change its mind, it ceases to be a democracy”.
The second argument against a new vote is that if Remain win by anything other than a landslide, it will leave a deeply divided nation prone to civil strife. Certainly, there will be some immensely upset and incensed people who will feel that their vote has been ignored and their prize snatched away. A narrow victory for Remain will not provide a clear signal of the people’s will. But UK society is already divided. And many, even most, people are not frothing at the mouth Eurosceptics. A year ago, talk of another vote was strictly taboo. Now it is back on the table. Most want to get this out of the way and return politics to where it should be – focusing on housing, health, security, jobs and education. May’s talk of “getting on with the job” holds much appeal. But under her deal, ‘the job’ would have years to run as the real negotiations begin in earnest dominating the political agenda for half a decade or more. Instead of civil war, is it not equally possible that there will be a palpable sigh of relief as politics is no longer single tracked by one topic? Might it not just lead to a return to what we had before?
Resurgent support for UKIP and a split but functional Tory party may be far from ideal, but it would arguably be better for the British body politic than the status quo. The assumption that a Brexit reversal will wound national pride and result in insurgency and civil war may fit the anxieties of today, but it might seem rather quaint and old fashioned in two years’ time when people look back in relief and bemusement at the last three years.
Of course, Remain may not win a second referendum. People may vote Leave. Even if a second vote does not deliver an even more decisive victory for the leave campaign, as Nigel Farage recently argued, it would still provide a clearer signal than the last one. With two years of hard evidence to consider, it would be very hard now to argue now that people were misled by lies on the side of a bus, protesting against David Cameron’s austerity, or ignorant of how complex leaving would be. No longer will it be possible to trot out the hackneyed assertion that “nobody voted to be poorer”. A second vote would provide something far closer to a mandate than the first vote, which was so obviously flawed (abstracting from issues of electoral fraud, few people with a life in 2016 knew the difference between a customs union and the single market, nor had any desire to – the same cannot be said today). If people vote Leave again, then Parliament can then pull together to try and make Brexit a success, or limit its failure, as people see fit. That is not possible currently.
Staying in the EU after all the tears, sweat and division of the last few years will be far from perfect. But perfect is not on the menu. The question is whether staying in the EU is better or worse than the alternatives? The last two years provide a backdrop against which to answer this. Change requires leadership. But when it came to steering us through Brexit, leadership was in short supply. Those championing Brexit, including the Prime Minister and those in power, were never honest about where the negotiations would lead. If they had, the current much-derided deal would come as no surprise. Regardless of the 2016 referendum result, nobody voted for this deal. Perhaps it is time they got a chance?
This post represents the views of the author and not those of the Brexit blog, nor the LSE.
Don’t disagree with the article at all. Problem is that there is no good brexit outcome, and trying to mitigate the downsides of leaving the EU is just damage limitation. To achieve the best we can achieve outside the EU will take many years of negotiation, with good will on both sides. It would then end up as being EEA/Efta with a customs and VAT agreement or something very much like that.
Staying in would be better, but how do we achieve such an outcome? Not just would such an outcome be acceptable to the people, but how can the UK steer itself back into the EU?
A second (third, actually) referendum is a huge gamble and will certainly be a divisive, not a unifying proposition. It could also bring another vote to leave, and this time leave with no deal.
For me the only possibility is a national government, where all the parties work together with a fact finding commission and decide a way forward. Referendums are not the answer, single party governments are not the answer – this is too important for politics as usual. If the EU saw that the UK was finally acting responsibly to address this mess, they would likely cut us the slack to do so by extending the article 50 period or rescinding it (dependent the outcome of the court case before the ECJ).
Correct on previous post: in last sentence it would be UK decision to extend or rescind article 50, not EU extending or rescinding but agreeing to the UK extending or rescinding it.
“What choices will be on the ballot remains to be determined, but the main choice should be between May’s deal or remaining in the EU.”
So are the the Remainers abandoning the pretence that they want a ‘People’s Vote’ or is it that their hatred for Hard Brexiteers is so great that they no longer consider them to be people?
– the tyranny of the minority.
As a distant but fascinated foreigner may I offer a suggestion to the quandary of a second referendum?
If I understand correctly:
– A second vote on Brexit/Remain/May Deal is perceived as an unacceptable do-over, with people legitimately wondering if there will be multiple votes till the populace is forced to the “right” answer.
– No second vote is unacceptable to Remainers who rightly point to irregularities and misinformation that pervaded the first vote, as well as the clarity brought by subsequent events.
My suggestion: Why not have a vote on whether or not to have another vote?
This removes the issue of “do-over” as this is not a vote on Brexit per se but a meta-vote. A “Yes” majority would democratically pave the way to a new referendum, superseding the previous referendum. And a “No” majority would leave the previous vote standing.
Offered with no hint of mockery or irony ….
@Raju: “Why not have a vote on whether or not to have another vote?”. It’s been done. They called it the “2017 General Election”: The Liberal Democrats, for example, promised a second referendum. They lost. 🙂
I could see some merit in a second vote where the options are to accept May’s deal or not. I don’t like May’s deal but I recognise that many people in the country may not be strongly for Remain nor Hard Brexit and might see the middle option as an appropriate compromise. Such a vote could be held without compromising the ‘once in a generation’ promise since it would be a clarification of the last referendum rather than overturning it.
If May’s deal is rejected then at least it narrow things down to one of two options, which would be a step forward.
“As a point of principle, if a referendum is held twice and yields the opposite result, this surely vindicates the decision to re-run the vote?”
The Government spent £9.3 million putting a leaflet through everyone’s door stating that this is ‘A once in a generation vote’. If Remain had attained the majority in the first referendum, it is absolutely certain that there would not have been a second referendum under any circumstances within a generation. So what is being advocated here is asymmetric democracy. But there is no such thing as asymmetric democracy. There is full democracy or none.
Effectively, an implementation of asymmetric democracy you would be invitation to those who disagree with the outcome to attain their objectives by non-democratic means such as a civil disobedience and perhaps violence. Such people may express views that I disagree with (for example extreme racism) but I would defend their right to express themselves non-democratically. Once the social contract has been broken, people can no longer be expected to conform to democratic norms.
Teejay, did you just invent that term,” asymmetric democracy?” I’m impressed, it really seems like it might mean something.
For my money, democracy means many different things to many different people, just as brexit does. You can’t really call a referendum on the final brexit deal un-democratic, so invent a term that sounds like it is undemocratic. There, job done.
I don’t really support another (third actually) referendum, but I don’t support any form of brexit. If a majority of people agree with me, we shouldn’t have brexit now that we know what it actually is. So what do I do that fulfils democracy which I do believe in? That’s why there has to be some other way to deal with this conundrum.
Teejay did not invent the word “asymmetric”. I think it is a reasonable word to use to describe a situation where the anti-EEC’s who lost in 1975 had to wait 41 years for another referendum, while the Remainers get a second chance after only 3. Yes, things have not turned out with Brexit as some of the Brexiteers predicted. But then a lot of changes happened with the EEC/EC/EU after 1974 which weren’t exactly as promised by the “Yes” campaign back then, and I didn’t hear many of those who are now Remainers campaigning for a “People’s Vote” to rerun the 1975 referendum.
Asymmetric does not really do justice to describe the sheer mendacity of they who would argue for a second (third) referendum before the June 2016 referendum is even implemented. Many people have gor confused by the barrage of falsity against the Establishment narrative which is like a dance of a thousand veils. They are trying to pull the wool over people’s eyes.
The deal was absolutely clear in the wording of the June 2016 referendum. Absolutely unambiguous. Both Cameron and May as well as Parliament put the seal on the deal as voted on in the referendum.
There is no further deal to be voted on. May’s performance is a travesty of parliamentary democracy in the British tradition, or any tradition.
“Teejay, did you just invent that term,” asymmetric democracy?”
Yes I did.
“You can’t really call a referendum on the final brexit deal un-democratic, so invent a term that sounds like it is undemocratic.”
It isn’t just a term, it is concept that is described by the term. The basic question is this.
If Remain had won the referendum there is no chance that we would now talking of a new referendum however popular the Leave option had subsequently become. Given this, how can you justify the call for a second referendum based upon a possible slim margin in favour of Remain? Asymmetric democracy is a meaningful and useful shorthand to describe this concept but it is the concept that you need to address not its name.
If we are going to indulge in such nit picking ideas that you bring up in your concept of “asymmetric democracy”, then we have to take on our whole system of parliamentary democracy.
It is “asymmetric democracy” that our governments are formed by parties that did not receive a majority of the popular votes.
It is “asymmetric democracy” that only 34% of the eligible electorate voted for leaving the EU.
It is “asymmetric democracy” that the Prime Minister (an unelected position) decided the exact meaning of a binary choice in the referendum by herself, aided by non-elected politics advisors, without reference to her cabinet or Parliament. Where was the democratic choice for leaving the single market, customs union, Freedom of Movement etc?
You application of this concept opens up a can of worms that questions any democratic decision made by our government.
It’s a fair point. But what underlies the assymetry is that a leave vote is a vote for change. If several years on, that change yet to be delivered or defined, but lots more information has come to light, there is a case for another vote. Had remain won the first ballot, this would have been a vote for carrying on with the status quo. The likelyhood of significant new information coming to light would have been slim if you are merely carrying on with what you’ve had for 40 years. So I think the case for another vote would have been slim. Contrast that with the chaos we face now?
“Contrast that with the chaos we face now?”
The issue is that the chaos is largely to do with Remain not respecting the previous democratic vote and undermining the Brexit negotiations. So what you are suggesting is that the Remain side should be rewarded for their intransigence. It wouldn’t bode well for the future of democracy in the UK, if in future everyone works on the basis that any democratic vote can be reversed by subterfuge.
“Had remain won the first ballot, this would have been a vote for carrying on with the status quo. ”
No it wouldn’t!
Personally, I voted for Milliband in the 2015 election. I thought he was a plonker but I thought a Labour government was a better outcome than holding a referendum on an issue where the country was totally divided. My preference was to remain in the EU until and unless there was a clearly majority for leaving. In the referendum I voted against the stupid idea that we should unconditionally remain in the EU for another 40 years. So actually you are wrong. A vote for Remain would not have been a vote for the status quo. The status quo was on-going conditional membership of the EU. It was not unconditional membership for the next 40 years. There is now no way of going back to the status quo.
Unfortunately, the act of holding a referendum has frozen opinions. Before that, there was an on-going drift towards leaving the EU. (If the drift was the other way then clearly Cameron would have had no reason for calling a referendum.) In effect, Cameron wished to lock us in the EU before the moment had passed. No one objected to the idea that the referendum result would hold for a generation before the vote was held. Now the race has been run. You can’t go back to the bookmaker and say that you didn’t mean to bet on that horse and please could you have your money back. That is not how things work.
It’s a fair point. But what underlies the assymetry is that a leave vote is a vote for change. If several years on, that change yet to be delivered or defined, but lots more information has come to light, there is a case for another vote. Had remain won the first ballot, this would have been a vote for carrying on with the status quo. The likelyhood of significant new information coming to light would have been slim if you are merely carrying on with what you’ve had for 40 years. So I think the case for another vote would have been hard to make. But you are right, we can’t keep voting for ever. So it’s a matter of judgement. Where do you cut off? In this case, I think there is a rationale for all the reasons I give.
Is Teejay seriously suggesting that those who voted Leave in June 2016 had any real idea what the simple choice they were given would mean, assailed as they were with “have cake and eat it” assurances?
There is a small minority in this country whose antipathy to the EU is so strong that they simply want out no matter what it would do to many people’s jobs or Northern Ireland or anything else. The greater number who voted Leave must now be feeling concern at the reality now emerging. They deserve the opportunity to think again in the light of that reality.
Suppose the advocates for Remaining through a second referendum get their way, what then? My guess is that Remain would win by about 55-45 (though that is not at all certain) but on a much lower turn-out than in 2016. (Because a lot of people who were motivated to vote by the “once in a generation” promise in 2016 will be less interested in a “think again” vote.) If anyone thinks this would solve the European issue in British politics I think they are deluded.
To be fair the author of the article does try to address this point. “Instead of civil war, is it not equally possible that there will be palpable sight of relief as politics is no longer single tracked by one topic? Might it not just lead to a return to what we had before?” Well civil war, in the sense of shooting on the streets and armed barricades in front of the BBC, is fortunately rather unlikely. But the Brexit issue is not going to go away like that. We can be sure that anything bad that happens in the UK for the next 20 years would be blamed on the UK being shackled to the EU and on the quislings who renaged on the 2016 referendum (not my words, but words I think would be used. In the UK they like WW2 metaphors.)
Also I wonder what the EU27 would think of the UK rejoining at this stage? I can’t read their minds, but I should think one thing they will very much want to avoid is that every couple of years, some country triggers article 50, brings about 23 months of painful negotiations, and then thinks better of it. My guess is that even if the UK is let back in, the EU27 would want to make very sure that the UK is punished enough to stop anyone else trying it on, or threatening to. They are also fed up to the back teeth of Brexit negotiations.
In my opinion (and I hope it is humble), the only way to deal with Brexit now is to go through with it, doing what the hard Brexiteers want. If this all goes pear-shaped, then it will be time to seek a democratic mandate to rejoin. But a referendum now would not settle anything.
”My guess is that Remain would win by about 55-45 (though that is not at all certain) but on a much lower turn-out than in 2016. (Because a lot of people who were motivated to vote by the “once in a generation” promise in 2016 will be less interested in a “think again” vote.)”
I would expect it to be much closer than that for three reasons. If you ask people to ‘think again’ then it is marginal Remain voters who are likely not to bother to vote a second time rather than marginal Leave voters. In any case, some marginal remain voters will regard the first vote as definitive and a second vote as anti-democratic. Finally, Leave haven’t seriously tried to argue their case to date since they do not wish to budge from the position that the vote was final and therefore not open to discussion. So in any campaign the Leave side can put new points forward whereas Remain can only regurgitate the stale ideas that have peddled for the last two years. For example, there has been no discussion of what our future might be if we rejoined the EU with diminished status.
Of course, the outcome could be even more inconclusive than before. Suppose there was a three way vote with Remain, negotiated treaty or Hard Brexit under a single transferable vote. Suppose there was a significant majority for Leave in the first round. Suppose in the second round that the negotiated treaty option was eliminated but second preferences resulted in a marginal Remain majority. We would have the situation where Leave substantially won the first round and Remain marginally won the second. That would be more divisive than ever.
@Teejay: “I would expect it to be much closer than that for three reasons.” You may be right. The fundamental problem the Remain campaign had in 2016 was, in my opinion, that there were hardly any enthusiastic Europeans in British politics. This hasn’t really changed. A lot of Remainers are remain-and-reformers, where reform means taking powers away from Brussels. But that’s not the kind of message that is going to meet much encouragement with the EU27, especially not from a penitent UK. And If you think the EU is a hard sell on the streets of Grimsby, try doing it when you have to sell Macron’s or Olaf Scholz’s plans for deeper financial integration as well.
“Is Teejay seriously suggesting that those who voted Leave in June 2016 had any real idea what the simple choice they were given would mean, assailed as they were with “have cake and eat it” assurances?”
The worst assumption that Leave made before the referendum was the assumption that if they won, then the country would work together to get the best possible terms for Brexit. Of course that didn’t happen so now we have no idea what we could have achieved had the country pulled together.
Just think. Remainers might now have been in a position where they could say that they had tried their hardest to support Brexit but given where we are now they would like a discussion on the way forward. Of course they are in no position to say that because they subverted the negotiations. Macron said on more than one occasion that the EU shouldn’t give any concessions because that would reduce the chance of a second referendum.
To me leaving was not solely about democracy, but now it is. If we remain in the EU now, then it means that we are giving carte blanche to George Soros, Tony Blair, Alistair Campbell and the like to cherry pick our democrat votes and suppress those which they don’t like. Not only would we be ruled by an autocrat elite in Brussels but we would be pushed around by the elite here. If we are left with a choice of Hard Brexit or Remain, then I will choose true democracy whether that means economic hardship or not.
Teejay, you are redefining democracy again. If there were a three way vote with single transferable vote, and remain won because the number of first and second preference votes were a majority, it would be conclusive. Just because the largest number of short of a majority people vote to leave in a three way vote wouldn’t make the choice inconclusive or undemocratic.
I also cannot see why you you say that the Leave side would have new points to put forward, but Remain would only have the same tired old arguments to regurgitate. If anything, I’d say it is exactly the opposite.
Also, what about the criminal activities in the the Leave campaigns during the 2016 referendum? If any side should take to the streets in protest to a referendum, it would be remainders who were the victims of crimes.
“Try doing it when you have to sell Macron’s or Olaf Scholz’s plans for deeper financial integration as well.”
Yes, you have understood well the third point I was making. The Remain side has had an easy ride because the Brexiteers have not put any counter points because that don’t wish to concede that Brexit is open for discussion. Come a new referendum and Leave would be able to launch their own Project Fear based on our diminished status on reentry to the EU and our weakened ability to resist further integration.
It surprises me how little impact Remain has had on public opinion over the last two years given the lack of counter arguments. Leave have left the pitch, but Remain have failed to score a goal. If the Leave were to resume the pitch and start kicking back then Remain would stand little chance, however much they might appeal to the ref.
@Alias, Teejay etc.
Three points –
1. This thread is mainly a to-and-fro about views of democratic propriety and which group might be triumphant or disappointed. What about the unquestionable severely damaging effects a “no deal” brexit with no transition period would have – affecting most heavily those who are most vulnerable in our community? If you have any doubt on this, read the measured article in the current issue of the Economist. And bear in mind that the deal on the table and “no deal” are almost certain to be the only alternatives in the absence of a “people’s vote”.
2. You do not have to agree with the false assertions that the EU will suffer from brexit more than the UK to accept that the EU will be damaged by it. I have no doubt that withdrawing Article 50 and staying in the EU at existing terms – including the rebate on contributions and staying out of the euro – is still available.
3. Part of the much-maligned “reform package” brought back by Cameron before the referendum was an assurance that the UK would be able to retain the benefits of full EU membership while being absolved from any future “ever closer union” provisions. This is what Macron meant by his “concentric circles” proposals. The more one thinks of the package available within the EU as against the mess currently before us the more one thinks at the very least our electorate deserves to be asked what they now think of what is emerging.
@Denis: “You do not have to agree with the false assertions that the EU will suffer from brexit more than the UK to accept that the EU will be damaged by it. I have no doubt that withdrawing Article 50 and staying in the EU at existing terms – including the rebate on contributions and staying out of the euro – is still available.” I think you are making the same mistake that many Brexiteers made in assuming that because German car makers, and other manufacturers in the EU, would certainly not want trading barriers between the EU and the UK – which is true, they would be putting unstoppable pressure on the EU to do a trade deal with the UK on the UK’s terms – which isn’t. The reason this argument doesn’t work is that the EU (or rather, the many decision-makers within it) are not just worried about the relationship with the EU, but the whole European project. I think it would be disastrous for the European project if members who were temporarily disatisfied (as many of them are) could invoke Article 50, test the water outside, and then come back in with no negative consequences 23 months afterwards. Imagine an EU like this, it would be in a permanent state of chaos.
And what about the effect on those who are currently arguing for deeper integration within the EU. (And frankly I think they have a point. If crises like the Greek debt crisis are to be stopped from happening again, there will have to be more controls on national governments.) How would it look when the PM tells the French that the UK wants to come back in, but will veto further integration?
As for the Cameron “reform package”, I think it was made fairly clear just after the referendum that from the EU side, it was dead. I don’t see any hope that it could be revived.
“As for the Cameron “reform package”, I think it was made fairly clear just after the referendum that from the EU side, it was dead.” For example, officially in the following statement:
“As agreed, the “New Settlement for the United Kingdom within the European Union”, reached at the European Council on 18-19 February 2016, will now not take effect and ceases to exist. There will be no renegotiation.”
You might hope that the EU will change its mind on this, but so far it has been remarkably consistent.
” What about the unquestionable severely damaging effects a “no deal” brexit with no transition period would have”
Sorry but it isn’t unquestionable.
The short term forecast for the economy from the Treasury was entirely wrong. Why should we believe the long term forecast?
They stated the following with no conditionality or caveats.
“The analysis in this document comes to a clear central conclusion: a vote to leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000.”
You can read the predictions of the Treasury for GDP for 2016 Q3 to 20-18 Q2 under a Leave vote. They bear absolutely no relation to what happened. They also predicted that house prices would fall by between 10% and 18% and unemployment would increase by between 520,000 and 820,000. We now have record employment. Nowhere did they say that things could be better than their predictions but they did say that it could be worse. The Treasury have since said that their models hadn’t taken account of the delay to Article 50 but that doesn’t make any sense. Elsewhere in their report they say that any delay would only make things worse.
The bottom line is that 90% of economists supported the Treasury forecasts that were wrong. Now the same economists are telling us that Hard Brexit would be an economic disaster.
Ironically, many of the car companies who are telling us that they would leave the UK in the event of a Hard Brexit shouldn’t by rights be here. They are the same companies who said they would leave unless we adopted the Euro!
The exaggerated prediction of the immediate malign effects of a leave vote in the referendum must not be used to assume every judgement made by the Treasury is bound to be incorrect. As I see it the Treasury assumed that international financiers would take a highly negative view of the prospects for the UK economy. Indeed sterling fell bý about 15% and investment has lagged BUT the effects were moderated by a judgement that the highly reputable UK would find a way to ward off the worst damage. In other words they bought into the “have cake and eat it” theory to some extent. Now we are getting into the reality phase and only the crumbs of the imaginary cake remain on the table. A very different scenario.
“As I see it the Treasury assumed that international financiers would take a highly negative view of the prospects for the UK economy. ”
I have experience in maths modelling, statistics and systems engineering but not economics. My judgement is that there was a fundamental flaw in the mathematical model. Immediately, I saw the forecasts I couldn’t believe them. There is general agreement among economists that when Britain crashed out of the ERM the resulting devaluation gave a boost to the economy, but the Treasury forecasts didn’t seem to take any account of that. As it was things panned out exactly as I expected. The loss in confidence was partially if not fully offset by the devaluation boost.
“The exaggerated prediction of the immediate malign effects of a leave vote in the referendum must not be used to assume every judgement made by the Treasury is bound to be incorrect.”
The question is why are you and I both having to speculate why the model was wrong? Why haven’t they undertaken a ‘lessons learnt’ exercise and told us clearly what went wrong. Why haven’t they told us that they now have an amended model where if now they feed in retrospectively the 2016 conditions they can correctly predict what happened?
When the Met had their ‘Michael Fish’ moment and failed to predict the 1987 Great Storm, they stripped down their models and started again. The Treasury blunder was at least as bad but they have done nothing as far as we know.
At the end of the day the Treasury bombed out big time. They have given no indication that they have a fundamental understanding of what went wrong. If the model produced flawed estimates last time and it hasn’t been properly overhauled then the default assumption is that it will continue to produce flawed estimates going forward.
The imponderable here is how people would have voted if the Treasury had correctly predicted the aftermath of a Leave Vote.
As I put my ballot paper in the box I though “I hope my judgement is right, if not I am putting 500,000 or more on the dole”.
Suppose the Treasury had correctly forecast that under a Leave vote we would get record employment, steady house prices and no recession in the immediate aftermath. It is conceivable that the margin of the Leave vote would have been sufficient that the country would have fully accepted the result. Under those circumstances we could have shown a united front in negotiating a deal and that could have produced one of two outcomes. Either we would have got a better deal or we would get the same deal but the Remain side would now hold the high ground when requesting a rethink. Basically, the Treasury failure has damaged both sides of the divide.
“There is general agreement among economists that when Britain crashed out of the ERM the resulting devaluation gave a boost to the economy, but the Treasury forecasts didn’t seem to take any account of that.”
Just looked through the new Government forecast document. A word search shows that the new document contains neither the of the words ‘devaluation’ nor ‘sterling’. They are making the same mistake again.
The newly published Government report on the economic effects of Brexit tells us in the first sentence everything that we need to know about the Government’s previous capability to forecast.
“As the UK leaves the European Union it does so with strong economic fundamentals. The economy is growing, unemployment is low and real wages are rising.”
Implicit in the article is the view that the power of the Commission and Council need to be curtailed (Dimitri sees the inability of the UK to affect this during the transition period as a weakness). I’d be very keen to hear his, or anyone elses view on exactly how this can be done from inside given the current electoral landscape across the member states and the diffuse power structures of the EU.
The likes of Chris Bickerton & Lee Jones think it’s impossiblle (and I happen to agree) – what do you say Dimitri?
Excellent piece by my colleague John Nugée here: http://laburnum-consulting.co.uk/mps-head-towards-showdown. He writes:
“Last week the EU stated for the first time that they were open to extending the transition “if necessary”; this was presented as a great concession to reality and a conciliatory gesture towards the UK but since the terms of the transition period are so heavily slanted in their favour, it is entirely in their interest for it to continue as long as possible.
“And the fact that it will not be in the UK’s interest will be of no consequence at all for the EU, as the UK will by then be a third party for whom they will have no duty of care whatsoever.
“Seasoned trade negotiators talk of 10 years to agree and ratify any trade agreement, especially one as complex and large as the one the UK will seek. We would say that this is quite possibly a minimum – indeed we see no reason for the EU to prefer a formal trade agreement to the terms that May has negotiated for the transition period, which could in theory continue indefinitely.
“And the EU has form for spinning things out…”