What kind of remain do Remainers really want?

14 mins. to read
What kind of remain do Remainers really want?
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Britain is undergoing a constitutional crisis engineered by forces which want to reverse Brexit. Remainers argue that no one voted for no-deal. But exactly what kind of remain did Remainers vote for? Victor Hill inquires.

A constitutional crisis

In the wee hours of Tuesday morning (10 September) Parliament was prorogued with a flourish of histrionics – MPs chaining themselves to the Speaker’s chair, waving placards and with much wailing a gnashing of teeth. Actually, Parliament is almost always prorogued in September and normally reconvenes in mid-October so as to facilitate the party conference season – one of the set-piece traditions of British political life.

Admittedly, this is the longest prorogation since 1945, being nearly five weeks in length – but it is only five working days longer than that of last year. Also admittedly, it comes as the clock ticks relentlessly down to 23:00 on 31 October. Then, all things being equal, the UK will leave the European Union by default without a deal if no such deal has already been ratified by parliament – something which this morning seems possible though still improbable, despite the Prime Minister’s perennial optimism.

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On 11 September, three judges at the Inner House, the supreme civil court in Scotland, ruled that the prorogation was unlawful – despite the Court of Session in Edinburgh having ruled that it was lawful the week before. There was a suggestion that the Prime Minister had misled Her Majesty the Queen as to the true purpose of the prorogation.

This only added to Mr Johnson’s woes. In the one-week frantic session of Parliament which began on 03 September the allied forces of Remain (which now includes virtually all the Labour Party minus John Mann MP and Kate Hoey MP), and abetted by a partisan Speaker, forced the Prime Minister to seek an extension to Britain’s departure from the European Union if no-deal was forthcoming at the EU summit scheduled for 17 October. Parliament also prevented the Prime Minister (twice) from holding an immediate general election which he would, no doubt, have regarded as a mandate for no-deal had he won it. They were able to do this thanks to the constitutional abomination that is the Fixed Term Parliaments Act (2011) – a measure pushed through for their own short-term convenience by Messrs Cameron and Clegg.

There is the little matter that Mr Johnson might not win an election, however, despite a bounce in the polls in the Tories’ favour of late. Any election fought before Britain’s departure from the EU would be a four-way race, the outcome of which is impossible to predict. The Tories will by menaced by Mr Farage’s Brexit Party and the Remain vote will be split between Labour, the Liberal Democrats, the Greens and the nationalists.

Last weekend there was speculation that Mr Johnson might just disregard the Benn-Burt Act compelling him to extend the Brexit deadline further given that the PM said that he would rather die in a ditch than extend. (That was a reference, I think, to the fate of Julius Caesar.) But refusal to extend would put the Prime Minister in breach of the law – and some commentators speculated that he might then be subject to arrest by the constabulary. Clearly, the Brexit endgame, having already slipped from the sublime to the ridiculous has now become, frankly, bizarre. Even the finest constitutional theoreticians of our time – Lord Sumption, Professor Bogdanor, Lord Hennessy – have concluded that we are simply in uncharted waters.

But the key proposition of this manic Remainer Parliament – extend whether people or government wish otherwise – is entirely dependent on the kindness of strangers. I mean by that that the Europeans would have to agree to any extension – and the French have asserted that they might very well opt-out of the dizzying Brexit merry-go-round which ultimately is the legacy of the Rotten Parliament of 2017-19 rather than the current or former Prime Minister. And who could blame them?

On Thursday (12 September) more dire warnings about shortages of food and medicine in the event of no-deal surfaced prompting Opposition MPs to demand the immediate recall of Parliament. The Bank of England thinks that the UK economy would contract by 5.5 percent in the worst case no-deal, no-transition scenario. (That’s marginally less calamitous than their estimate last year of minus 8 percent – catastrophists, please note.) But the fact is that no-deal, however cathartic it might be for die-hard Brexiteers, would not be an end-point but a starting point. Any subsequent new trade deal with the EU would have to be ratified by 27 EU parliaments (plus some subnational assemblies) and would take years to resolve. The Brexit nightmare is just not going to go away anytime soon.

A ‘sobering’ economic backdrop

While life in the UK is dominated by the Brexit endgame it’s worth noting that the global economic backdrop is extremely sobering. World trade is contracting, the economy of the eurozone has stalled and, in the US, the economic stimulus initiated by President Trump has now run its course.

Chinese goods which are being shut out of the US market by Mr Trump’s trade war are being diverted to Europe. As the yuan devalues further – a result of Beijing’s counter-measures – so the effect on the European economy is deflationary. In response, on Thursday (12 September) the ECB cut its key interest rate from minus 0.4 percent to minus 0.5 percent and announced that it would resume QE in November at a rhythm of €20 billion per month. But these measures are unlikely to have the decisive impact that they had in 2011. The ECB has run out of road.

The prospect of a no-deal Brexit thus coincides with a looming recession in Europe. I am not going to get into the debate about whose economy would be hurt most by no-deal – Europe’s or the UK’s. For sure, supply chains would be interrupted on both sides of the Channel; car production in the UK would halt for at least a month (BMW (ETR:BMW) has said that workers at its Cowley Mini plant will have to take unpaid leave[i]); and sales of BMW and Mercedes cars will falter in their most important market outside Germany.

The UK buys €400 billion of European goods each year. But the UK could survive the economic shock by letting rip with government spending (something that has already started with Mr Sajid’s Autumn Statement); while Europe, outside Germany, has very little scope for fiscal stimulus.

Brexit has already hit the German economy even before it has happened as German exports have become less competitive due to a falling pound. In Q2 2019 German exports to the UK were down 21 percent year-on-year. That is the biggest fall since the financial crisis.

Ambrose Evans-Pritchard thinks that the EU is now drifting into an economic and geostrategic crisis[ii]. German manufacturing is in free fall. The unlikely Italian coalition government has combusted under the kinetic forces of mutual antipathy. It is likely to be superseded sometime soon with an in-your-face populist government under Signor Salvini which will make Hungary’s Viktor Orbán look like a girl’s blouse liberal. The eurozone bond markets, which bizarrely exhibit negative bond yields at a time when default risk is increasing, are clearly pricing in a deflation-powered slump akin to that of the 1930s.

All change at the ECB

From 01 November, in Christine Lagarde, the ECB will have an old-fashioned Eurocrat at the helm who believes in the integration of Europe by top-down governance. Unlike the outgoing ECB President Mario Draghi, Madame Lagarde is neither an economist nor a former banker.

The irony is that as Signor Draghi hands over the reins he finds himself in a very similar position to when he took over seven years ago, vowing to do whatever it takes to keep the monetary union intact. And the fundamental flaw in the eurozone has only become more apparent over that period: the euro is too expensive a currency for the southern members and too cheap for the northern ones given their widely differing levels of productivity.

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There is very little that Madame Lagarde can do about this with monetary policy alone. The solution for European economists like Yannis Varoufakis would be to initiate massive fiscal transfers from the north to the south. But the Germans, who believe in balanced budgets and financial self-help, will not consent to this. This would also require a degree of “harmonisation” of fiscal policy throughout the eurozone.

Madame Lagarde recently told MEPs that the ECB should continue to be “inventive” and to show “agility”. (It sounds more convincing in French.) Her own track record does not inspire confidence. As Minister of Finance she bequeathed France a massive deficit. While at the IMF she inflicted a ruinous recession on Greece, the economy of which contracted by 30 percent. And the 2018 bailout of Argentina has plunged the country into chaos that may yet result in the greatest default of all time.

Meanwhile, Yves Mersch, an ECB board member described Facebook’s new digital currency, Libra, as “beguiling and treacherous”. He told a conference in Frankfurt that the digital currency could undermine the ECB’s monetary policy by affecting the liquidity position of eurozone banks. This was in contrast to Bank of England Governor Mark Carney who said that Libra should be considered with “an open mind”. No doubt we shall be hearing more on this in due course.

A Remainer Establishment

Throughout the referendum campaign and since then, enthusiasts for Remain have consistently emphasised the short-term costs of leaving the EU but have failed to analyse the current state of the EU and its likely future evolution.

Some Remainers seem to think that the EU is a model of good governance – Archbishop Welby even believes that it is the finest thing to have happened in human history since the fall of the Roman Empire. But, to be fair, other Remainers admit that the EU is flawed and that it is in need of reform. Indeed, there is a new slogan in currency – remain and reform. (In contrast, most Brexiteers believe that the EU is fundamentally incapable of reform. Look how far Mr Cameron got.)

As Sir John Redwood MP wrote this week[iii] one rarely meets a Remainer who defends the Common Fisheries Policy. Not to mention the fiscal harmonisation that naturally follows on from European monetary union. This includes the drift towards common taxation given the proposals for EU-wide VAT, company tax rules and the Maastricht budget rules which arise out of the Stability and Growth Pact (1998). Moreover, they don’t seem to have much to say about the direction of travel of the EU and what tensions might result in the future as a consequence of continued British membership.

We know that the central tenet of the European mandarinate is that of ever closer union. That means that the main aim of the EU is to create a monetary, social, economic and political union. That implies that if the UK were to remain a member state of the EU, at some point we would most likely be coerced into joining the euro. It is clear that, over time, the monetary union will require the transfer of finance from the richer countries to the poorer countries in the eurozone. That will be facilitated by a bigger and more wide-ranging EU budget. A new EU Ministry of Finance – something that the French have desired for some time – will have powers both over taxation and expenditure.

Furthermore, even since 2016, the EU has accelerated plans to adopt a defence and security identity. Why can’t Remainers bring themselves to admit that if we stay in at some point our world-class aircraft carriers will be placed under European command? And, as John Redwood asks, how far can the UK allow defence industrial integration to go before it is no longer an independent nation for defence purposes?

No doubt the Sir John Majors of this world would continue to advocate an ongoing opt-out strategy. Sir John’s major triumph was to secure opt-outs for Britain in the Treaty of Maastricht (1992) by terms of which we were exempted from monetary union and from the social chapter. (The Blair government reversed the latter opt-out.) But it is not realistic to imagine that Britain could opt-out of a European tax regime and still remain a full member of the EU. If there were some kind of associate membership status available, I can see that that would be worth consideration. But it is simply not on offer. The French and others have consistently said that there will be no two-speed Europe: either a country is IN or it is OUT.

We still don’t know what would be the consequences for the UK if there were another financial or banking crisis in the eurozone – something which I believe is very likely to occur over the medium-term. A report by the Jacques Delors Institute warned that the eurozone could not survive another financial crisis without some kind of fiscal union involving common taxation and the pooling of sovereign debt.

Then there is the creeping encroachment of the European Court of Justice on the British legal system. The more regulations and directives there are so the more we are governed by the EU institutions and the less scope our Parliament has for independent law-making. Once the EU passes a directive or regulation it has the power in that area to override national parliaments. For example, in the recent past the EU has taken over the regulation of social media – with Facebook (NASDAQ:FB) most prominently in its sights. This means effectively that there is nothing the UK Parliament can do in this domain except to follow the EU framework, for better or for worse.

I suspect that a key element in Remainer thinking is a fear and loathing of America – especially in view of the Trump presidency. They calculate that the UK will be drawn into America’s orbit, post-Brexit. (Although the natural relationship would be with the four countries which have HM The Queen as their Head of State and identical judicial systems plus a common culture: namely, CANZUK.)

The USA has a fundamentally different regulatory structure to that of the EU. Therefore the Europeans have sought to punish Britain for leaving their sphere of influence. But it didn’t have to be like that. The two key EU and eurozone powers – Germany and France – might have concluded that, given the increasing centripetal forces within the eurozone, there could have been an amicable separation with Britain outside but on cordial terms. Instead, the European elite, as represented by Monsieur Verhofstadt, have talked about turning Britain into “a colony” of the EU.

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To be fair to our sensible German friends, they understand this issue well. Former EU Commissioner, Günter Verheugen, said: “Brussels has taught us a lesson in how one should notdeal with a member state that wants to leave”. The IFO Institut in Munich accused the EU of playing a very dangerous game which would eventually push Britain further away. If the Germans had been in control of the Brexit negotiations the outcome might have been different.

This all underlines a fundamental theme that I have been advancing in these pages for more than three years. Brexit is much less related to the differences between Britain and Germany in the first half of the 20thcentury and much more to do with our one-thousand-year war with the French. I suspect that the Chinese, with their profound historical perspective, understand that very well. But the breathless elitist Remainers just don’t get it.

If the united forces of Remain get their way and succeed in keeping Britain in the in the EU against the will of the people, we would be received back not as the prodigal son but as an escaped prisoner. The British rebate would go (the French have always deeply resented it). We would have to acquiesce to ever-closer regulatory alignment, eventually membership of the euro and an EU Army which will in time displace NATO and therefore fundamentally alter our relationship with the United States for good with massive geopolitical consequences.

Is that what Remainers voted for?

[i]See: https://www.theguardian.com/business/2019/sep/10/mini-workers-face-two-weeks-unpaid-leave-in-event-of-no-deal-brexit

[ii]As Britain looks across the pond, Brussels is drifting into a crisis.

[iii]John Redwood’s Diary, Monday 09 September 2019. Available at: http://johnredwoodsdiary.com/2019/09/09/what-kind-of-remain-did-remain-voters-vote-for/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+JohnRedwoodsDiary+%28John+Redwood%27s+Diary%29

Comments (5)

  • Kiers says:

    ….I think remainers want a “Remain” where Mifid-2 is fully implemented removing dark pool shenanigans from financial markets, and where OECD BEPS anti-tax-avoidance rules are fully effective against shell companies and MNCs alike in Isle of Man, Jersey, Guernsey, etc etc.

  • Michael Broom Smith says:

    “But the key proposition of this manic Remainer Parliament….”

    Nice to know you are writing this article from a balance point of view.

  • Lawman says:

    Mr Hill makes an essential point overlooked in the Remain/ Leave debate. The EU must integrate further; since the Euro was founded, economists have said you must have fiscal union as well. In that sense we should wish EU members well and hope that the inevitable changes work. If Britain now Remains, entirely reasonably they will expect the UK to adopt the Euro and co-operate in the integration.

    Instead the debate was greatly concerned with immigration: while the UK has failed to provide public facilities for an increasing population, people overlook that (1) EU immigrants fill necessary jobs, while (2) for years we have had a larger number of non-EU immigrants, who – with important exceptions – do not contribute so much to our economy.

    As such the obvious compromise – whether you are Leaver or Remainer – has been ignored: join EFTA, at least as a medium term solution. It preserves the free trade, removes the objectionable ECJ, and can be implemented very quickly.

  • Simon Phillips says:

    To be fair, it’s a perspective that is difficult to argue with.

  • Mr Michael F Broom-Smith says:

    I really don’t know why I read Mr Hill’s columns, it must be the masochist in me. Like listening to the Today Programme (I went cold turkey on that a while a go!). but any way to answer his question:

    “ What kind of remain do Remainers really want?”

    The one we have now, that is up until 31st January 2020.

    It is very simple and that is the one the majority of the UK population want as well.

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