Conversation with a Brexiteer

Thank for your explaining why you are in favour of No Deal Brexit. But I am afraid I am still rather confused. Many of your statements seem to be contradictory. Could you please explain to me how to reconcile them?

a. The EU will back down because No Deal Brexit is such an economic disaster
b. No Deal Brexit is not a problem at all

a. The EU is a danger to Parliamentary sovereignty in the UK which should be absolute
b. The UK Parliament should be ignored and bypassed if they want to stop No Deal Brexit

a. We need to be out of the customs union and reinstate our borders to control movement of people and goods
b. We do not need a border

a. The EU is a powerful superstate that will become increasingly integrated
b. The EU is fragile and will break apart

a. The EU has majority voting
b. The EU is a dual monarchy ruled by France-Germany

a. The EU is an Empire
b. The EU is a Federal state

a. It is terrible that the smaller countries are made to pay their debts – Germany should bail them out
b. It is terrible that the smaller countries will not pay their debts and will need to be bailed out

a. There is too much tax harmonisation in the EU
b. Some EU states have much higher tax burdens than others e.g. France is the highest and far higher than some others such as Ireland

a. The EU is undemocratic
b. Is it right that the UK PM is elected by Conservative party members only

a. The EU is undemocratic with no control by elected politicians
b. We should undermine the European Parliament as its elected politicians have too much power

I also have some questions for you

  1. You talk a lot about why you dislike the euro. Since the UK is not in the euro area and had a legal opt out, why is this relevant to Brexit?
  1. I get the sense that the central issue for you is that the EU is moving towards being a Federal state and that the UK will be forced to be a part of that. Apart from rhetoric of “ever closer union” could you tell me what steps the EU has made in the direction of a federal state in the past decade?It seems to me that this is a far from certain or even likely outcome and that there has been no movement in that direction in a long time. Could you please explain how the UK could be forced to be a member of this future federal state since we have an opt out on the euro and Schengen? Could you please explain why it is better to leave now when that outcome is a remote possibility rather than to wait?
  1. You point out that the EU is not perfect and seem to think that this is a winning argument for Brexit. You imply that our future state outside the EU will be much better. But you have not explained in any detail what the world after Brexit would look like. For example, we currently have Single Market access to 27 countries (45% of our exports) and trade deals with 70 other countries. Post Brexit we will have trade deals with countries accounting for a total of 5% of our exports. The other 95% will be on punitive WTO terms. But it is claimed that Brexit will improve our trade position. How is this not simply the Nirvana Fallacy? I.e. “comparing actual things with unrealistic, idealized alternatives”. https://en.wikipedia.org/wiki/Nirvana_fallacy
  1. Where do you want the border? If you want to be out of the Customs Union then that means you have a border for customs checks. They are essentially different phrases for the same thing. There are 2 logical places to have the border

a. Between NI and the Republic of Ireland which endangers peace
b. Down the Irish Sea which endangers the integrity of the UK

Which do you prefer?

  1. The economic consequences
  2. You mention that you think that the consequences so far have not been as bad as predicted. You only give one 2016 forecast (the most pessimistic) but an average of the main forecasters is actually surprisingly accurate i.e. that UK GDP is about 2% lower now than it would have been if we had voted Remain due to reduced confidence and investment.

For the forecasts the main hit to the economy is after Brexit actually happens with particularly bad and uncertain outcomes in a No Deal scenario.

Do you disagree with the negative economic impact of No Deal Brexit? Or simply view it as a price worth paying.

Brexit – The Endgame – Update

Last year I wrote some predictions about how Brexit negotiations would develop. This is a good time to see how they have held up.

https://appliedmacro.com/2018/11/13/brexit-the-endgame/

Everything has been spot on in the predictions so far and now we can reassess the rest.

Prediction 1

“We drop out of the EU into chaos”

I think useful to take another look at the key players in this drama and how they are likely to behave.

DUP:

View on Irish Border: Hard border between NI and Republic of Ireland.

View on economic impact of No Deal: Do not care

Aims: They are ultra right wing conservatives who want to isolate the North from the influence of the Republic of Ireland and ideally the rest of the modern world.

Potential for compromise or shift in position: none.

ERG:

View on Irish Border: Do not care. Hard border between NI and Republic of Ireland or border down the Irish Sea are both fine. Ireland does not matter at all.

View on economic impact of No Deal: Do not care.

Potential for compromise or shift in position: none

Boris Johnson:

View on Irish Border: does not care. But needs support of DUP for now.

View on economic impact of No Deal: does not care but would like to find someone else to blame

Potential for compromise: Unlikely given the stance of DUP and ERG.

Aim: Stay in power.

Jeremy Corbyn:

View on Irish Border: Border in the Irish Sea and move towards a united Ireland.

View on economic impact of No Deal: Would prefer not but not the highest priority issue.

Aims: Become Prime Minister. The ideal scenario is to have a No Deal Brexit that the Tories are blamed for which not only leads to Brexit but also a General Election which he wins. Use that power to make a deal with EU and advance plans for a socialist utopia away from the constraints of being inside the EU.

The rest

View on Irish Border: No hard border between NI and Republic of Ireland.

View on economic impact of No Deal: A disaster to be avoided.

Aims: Get another delay but without any clear united plan for what do with the delay. There is fragmented dissent from the ardent Remainers to people who want a Brexit with a deal.

EU

View on Irish Border: No hard border between NI and Republic of Ireland.

View on economic impact of No Deal: It’s terrible but they cannot avoid it.

Potential for compromise or shift in position: none. The simplest way to understand this is that the UK does not have a negotiating position. The UK has yet to come up with a proposal for the Irish border and so even if the EU “blinked” they have nothing to actually agree to. Even if the EU completely agreed to throw Ireland (a small member state) under the bus, the UK has no proposal that they could be confident would pass Parliament.

How does this play out before October 31st?

My read of the next few weeks is that Johnson will pretend to negotiate with the EU but in a way which is designed to lead to No Deal as he has no potential for getting the DUP or ERG to agree to a deal. His route to a victory in the coming General Election is to make the Brexit Party irrelevant by taking all their policies and have the opposition split. Corbyn being the most unpopular leader ever with less than 20% of the electorate with a favourable opinion vs 70% with an unfavourable opinion is the reason this strategy can work.

What can stop No Deal?

  1. Parliament finds a way to stop it. This requires a lot more unified opposition than currently exists. Corbyn is doing a good job of trying to impede the No Deal opposition movement by making his elevation to Prime Minister a requirement. Demanding that a Brexiteer leads the Remainer resistance to Brexit is a good way to ensure its failure.
  2. Johnson just before Oct 31st gives Parliament one last chance to pass the Withdrawal Agreement which they do to prevent No Deal. Possible but seems unlikely.

No Deal is rising significantly and is currently by far the most likely option.

Will it be chaos? Yes – I am not going to bore you with the long list of fiascos that will appear that we already know about. It is the unanticipated problems that are often the worst. A good analogy for it is the failure of Lehman in 2008. It was well anticipated and for about 2 weeks caused relatively minor disruption and market issues. It was only a little later that the repercussions of a direct break in the heart of a complex system become clearer. Brexit is similar as the UK and EU economies are deeply entwined meaning that a dramatic break is reckless in the extreme.

Screenshot_32

The US equity market was roughly unchanged in value a full 2 weeks after the Lehman bankruptcy and it was only in the 2 months following that we saw a further 38% fall. This is a perfect counterexample to anyone who says that the market is good at pricing in known events. The market failed to price Lehman a full 2 weeks AFTER it happened because people did not understand it. I think that Brexit is similarly poorly understood.

Prediction 2

“After a week of chaos, we go back to the EU and take whatever terms they offer us.”

After October 31st the game changes significantly. The EU is likely to wait for the UK to come back and agree the key features of the Withdrawal Agreement. The question is how long the UK takes to do this. The faster we do this the less damaging the economic consequences of No Deal.

How the Deal could be done quickly

There is a quick election and there is a clear majority for a party. Whichever party wins can use the chaos to explain why they had to agree the Deal and find some way to blame everyone else for it. This is very easy if the next PM is not Johnson. A possible way for Johnson to make a deal could be to change the backstop to one in which the customs border is in the Irish Sea, as long he does not need the support of the DUP. Then GB can be out of the customs union, and NI stays within Customs Union and Single Market. The EU are happy that the Good Friday Agreement is still in force although it does raise all sorts of new very difficult issues now that the DUP will feel utterly betrayed. This is the end of the UK in practical terms but the Conservative and Unionist Party do not seem to really mind that and Corbyn will be in favour too.

How it can take longer

Political paralysis continues despite growing economic damage. The main activity of politicians becomes finding ways to blame others for the chaos and suggest ways forward to give them power. The Remainers will likely stay split as some will want to do a deal quickly and others will want to find a path back to EU membership. The Brexit true believers will not have their faith dented by reality being nothing like their predictions and will continue to claim that these are “speed bumps” and that it is all for the best in the long term.

One of the big barriers to peace treaties is that it is common that the people who sign them are condemned as traitors and the people who just criticised from the sidelines claim a moral superiority and eventually political power. There are many examples such as the fate of Michael Collins in 1922 or the German “stab in the back” myth that they only lost World War I due to the traitors who made peace. It is a concern to me that the fiasco of No Deal does not lead to the demise of the far right but could perversely further bolster it as Farage/Johnson rail against the traitorous people who “colluded” with the EU to deprive the UK of its glorious independent future.

Can it go on forever?

It seems unlikely. With no withdrawal agreement there is no trade deal with the EU (half of UK exports). No trade deal with the EU in practice means no significant trade deal with anyone else as everyone needs to wait until they see the trade deal with the EU. The practical implications of the UK in a world without trade deals with anyone are economically severe and not supported by anything close to a majority of the UK. The US under Trump will attempt to keep the UK split from the EU and under its control, however I can see very little they can offer in practice that compares with an EU trade deal.

Will the EU give in? This seems very unlikely

  1. The economic consequences for the EU are far less than they are for the UK and so there is every reason for them to expect the UK to fold first. https://appliedmacro.com/2017/05/05/who-loses-more-from-brexit-the-uk-or-eu/
  2. The UK does not actually have a viable proposal for the EU to agree to. The current stance of both a border and not a border simultaneously just makes no sense. https://appliedmacro.com/2017/05/02/brexit-and-ireland/

I stand by the predictions for the next stage too. The one thing I would change is that I now think we are not as smart as the Greeks and will take a lot longer than a week to turn around and ask for a Deal.

Prediction 3

“We call Brexit a triumph”

Is there any doubt in this one?

Jo Swinson for PM in 2019?

One of the plausible paths, in the Brexit chaos, is we end up with a general election in the autumn.

Boris may simply attempt to get a mandate for No Deal (or some other fantastical invention) on the strength of his personal brand or he may lose a vote of no confidence for trying to force No Deal through. If just a couple more Tory MPs were to resign the whip, it is not even clear he has a majority in the Commons and, in that case, the Queen may not have a basis to make him PM and an election would again be inevitable.

 

Would anyone win a majority? How many seats would each party get?

This could be one of the hardest elections to predict. The four main parties in England (Con, Lab, L-D and Brexit) each polling evenly with around a quarter of the vote, tells us very little about how they would perform in an election in a first past the post system.

If their votes are spread evenly across many constituencies as the Lib-Dems often are, then they can end up with lots of votes and very few MPs. If their votes are more concentrated in fewer constituencies, they can end up with far fewer votes but lots of MPs, like the SNP in Scotland.

Let’s start with the following assumptions and then think of some scenarios:

  1. Current opinion polls show Brexit, Lib Dem, Conservatives and Labour all with similar levels of support.

  1. Current polls on voting intentions show that almost half of Conservative voters intend to vote Brexit party, and almost half of Labour voters intend to switch to Lib Dem or Green

Attempting to factor in the first-past-the-post system, if we look at every constituency individually and try to project these shifting preferences, the landscape of elected MP changes dramatically. The result of this is nicely outlined in this post https://sluggerotoole.com/2019/06/02/general-election-seat-forecasts-are-no-longer-useful/

Pretty stunning results! Not a single Conservative MP in the next Parliament!

 

Peterborough by-election results

Usefully there has been a recent by-election so we can judge how this model performed.

A real first-past-the-post, 3-way marginal thriller with Labour, Brexit and Con all on numbers of votes and Labour just winning and claiming it as an important victory.

 


Possible conclusions….

  • Does this mean that Labour will do much better in a general election than the polls suggest?
  • Is polling data is meaningless and is a general election impossible to predict?

I do not think either of these are true. If we were to add an extra filter, then the results differ from the model in a very predictable way. The filter is that Peterborough is a strong Leave constituency.

I think it is sensible to say that in Leave areas, Labour’s “nuanced” Brexit stance will help its vote hold up better than the model suggests and as a result, the Lib Dems and Greens do worse. Conversely, the simple arithmetic implies that, in Remain areas, they will lose more votes to the Remain parties. The result of both these hypotheses will be the Lib Dem vote will be far less uniform that a simple model suggests.

For example in Battersea, Labour has a large majority but an 88% Remain vote. These are likely the type of voters for whom Labour’s “nuance” looks pro-Brexit. This makes for a seat that could swing from safe Labour to Lib Dem.

In this scenario, the Lib Dems win far more seats. The simple model suggests the Lib Dems are in with a chance on 558 seats; adding a material swing for Leave/Remain, then they could win perhaps half of those, and lose the other half by larger margins. London could easily become a Lib Dem stronghold in the way the SNP takes so many Scottish seats.

Another possible boost for the Lib Dems is tactical voting as we may have seen in the European elections. The polling intentions suggest a large number of Labour voters switch to Green. Some of those may be willing to vote Lib Dem if they believe that candidate has a viable chance of winning the seat. In a race with such tight margins, a small shift here could make a massive difference to total seat count.

The post quoted above says that forecasting MPs is a “fool’s errand”, and so these are best seen as projections and scenarios rather than forecasts. But on current polling, we could easily see the Lib Dems as the largest party, followed by Brexit Party, with the Conservatives and Labour both relegated to small fringe parties, even adjusting for first-past-the-post.

Reactions

The Conservatives would likely react by emulating the Brexit party even more. Whether they succeed or not does not matter. The Conservatives will either be replaced by the Brexit party or become it.

Labour could face up to this fiasco by retreating further into ideological purity; the British Communist Party takeover of the Labour party will be completed and Labour becomes a fringe group. Or they could replace Corbyn with a centrist Remainer, aiming to recapture young, progressive voters. The first step of course would be to form a coalition with the Lib Dems to stop Brexit.

Maybe the media is covering the wrong leadership campaign if they want to examine the next Prime Minister…

Jo Swinson in Number 10 by Christmas?

What is No Deal Brexit?

I have not written about Brexit recently, as unfortunately all this turmoil has been very predictable and leaves me nothing to add. But there are a couple of areas where I have found the reporting confusing and wanted to lay out my thoughts.

What is the “Will of the People” now?

This is still a mess and there is no outcome which will not leave large part of the country feeling alienated and angry. My read on the polls is that the exact phrasing of the question makes a big difference to the answer, meaning that all sides can take something to support their case.

YouGov do some of the better polling:  https://bit.ly/2HYOlQr

It is striking that every outcome still has a net negative opinion set against it. You could make a case, from the above, that the debate should be between soft Brexit and Remain. But asking the question slightly differently could end up with rather different interpretations. This is often made worse by the fact that despite all the tribal anger, many people’s views are remarkably soft or inconsistent. In this situation, context and framing can make all the difference to the outcome. For example, there are many who think No Deal is a bad outcome but prefer it to an extension, perhaps because they believe (falsely) this will bring an end to Brexit argument rather than form the start of even worse ones.

No Deal – ending place or pathway?

No Deal is by far the most popular option for Leave voters, supported by 70% of them. I think its popularity arises because it exactly represents the absence of any decision on the tricky key points of Brexit, thus allowing people to continue to deny the trade-offs and difficult decisions that need to be made. All the Brexit outcomes fail to deliver on the promises of the Leave campaign and so supporting any of the deals means admitting that the Leave promises were not true. In this regard, given that No Deal delivers nothing at all, it cleverly holds out the promise of magical endings and the continuation of the dream.

It is generally agreed that the initial stage after No Deal will be economically damaging. Opinions vary widely on how bad it will be, which is reasonable given this type of economic shock is rarely seen. I would expect it to be at least as damaging as the 2008 financial crisis, others think it will not be so bad which justifies their support. I do not want to go over this debate as what I find more interesting is where we are heading. It is always publicly discussed as though No Deal is a decision and thus an end point for Brexit, but it is, in fact, just the beginning of a whole new process.

Global Britain?

A key point to No Deal seems to be that it means the UK can make independent trade policy and strike new deals. As an aside I see this as one of the many disadvantages, as the UK would get far worse trade deals as a stand-alone country than it currently has as part of the EU, but to some at least it’s a truly British, bad deal as opposed to a EU good deal. To illustrate how these trade negotiations might go, I think useful to pick an example.

We can start with by far our largest trading partner, the EU, which accounts for approaching half of all our exports and so would be the deal we most urgently need. The EU has already laid out their preconditions for trade talks. Funnily enough, they are almost identical to the Withdrawal Agreement (May’s deal):

  • Irish border
  • Money
  • Citizen rights
  • but without the offer of a transition arrangement.

I would expect the UK to refuse this initially. The No Deal true believers will never change their mind, believing that we can live without any sort of formal trade deal with the EU, although from the above polling they are at most 25% of the population. Even now, 50% already see No Deal as a bad outcome and when reality strikes, I would expect that number to rise rapidly. Once public opinion shifts, then I expect us to agree to the EU’s terms. No Deal becomes a painful, chaotic and humiliating path to May’s deal. This is the same route that Greece took in 2015 and, along with a last-minute deal, has been my main prediction for Brexit.

No Deal Planning

This video describes the current process. It is “all about confidence”
The quote at 2.41-43 perhaps the best summary.

https://www.youtube.com/watch?v=Y–i9lNqLjM


Remain

Where my view has changed the most is on prospects for Remain. I outlined before I thought it required too many independently unlikely things to happen. But quite a few have.
Most importantly:

  • Brexiteers absolutely refuse to vote for Brexit. Consistently and in large numbers.
  • May is an extraordinary person, rivalled perhaps only by Corbyn in her obstinacy, and has alienated everyone from her deal while refusing to countenance any other outcome
  • Opinion polls are shifting towards Referendum and Remain
  • The Labour party is manoeuvring itself around Corbyn, its Brexiteer leader.

The part of the polls I find most compelling is the trend towards Remain https://pollofpolls.eu/GB/23/post-brexit-eu-membership-polls

These polls are volatile, but I think that the move from the high point of Leave, the 2017 General Election, to the current lead for Remain, is very clear. It certainly looks shaky to claim that Leave is the “Will of the People”.

What is more interesting is what has driven the change in the polls over the past 3 years. It is not really from those who voted now changing their minds; once people state a view in public, they rarely change it, no matter what the fresh evidence.

What seems to matter more is demographics, tied to the fact that in the original referendum by far the best predictor of vote was the person’s age. What’s especially interesting is that we have not seen Remain voters switch to Leave as they get older the way that young Labour voters turn into middle-aged Conservatives. This suggests a voting pattern attached to a generational cohort, whereby beliefs are built around the notions of identity and culture which different generations feel differently.

Every year, there are 750,000 new 18-year olds who can vote, and unfortunately over 500,000 deaths (92% of those over 50). In the cohort view above, over time a switch will occur from a small Leave majority to a ever greater Remain majority. This means that the longer that Brexit is delayed, the more likely it is that the polls continue to drift towards Remain and we end up with a new Referendum.

The Conservative Party as the party of Brexit, faces a long-term crisis even if it manages to survive the current debacle as younger voters may forever find them toxic. The Labour Party has a long-term opportunity to embrace Remain and align themselves with the future majority of the electorate.

What does May’s Deal lead to?

If the UK Parliament were to pass the Brexit withdrawal agreement, the UK would leave the EU in an orderly fashion, but the future relationship would remain largely undecided. For once, I agree with Corbyn that this is “Blind Brexit”. I also think that hardline Brexiteers have a point that the backstop should not be seen as a remote possibility – it is the default – and if we have learned one thing from this 2-year debacle, it is that there are no alternative ideas on the Irish border that would work! The reason Rees-Mogg’s group has never come up with a suggestion for the Irish border is because a solution does not exist and without a solution we end up in the backstop.

How to achieve having the UK outside the customs union

No Deal!
It is not clear to me how much of the support for this option rests upon the delusion that the UK can achieve it by playing chicken with the EU, which ultimately would lead to a No Deal scenario. Although this would cause an economic crash, it would be possible to reconstruct the economy outside the EU framework achieving the political goal for the UK to have a separate identity from the EU. By this stage however, we cannot decide what the UK is comprised of e.g. does it include N Ireland? Scotland? England is separated and that is the goal.

How to achieve No Deal?

  1. Make it the default option – tick
  2. Sabotage any attempts to make a deal – tick (Special mention for Davis and Raab)

This is a clear minority view for both Parliament and the electorate but retains real power because it is the default option and the paralysis of the political opposition to implement a change in policy.

The vote for the Brady amendment last night is a victory for this group and it further continues their traditional path of making demands that are both impossible and vague. “Alternative arrangements” without any suggestion of what they might be is frankly genius if the goal is to not make any progress.

How to achieve Leave but have the UK inside the customs union

Vote for May’s deal, and default option thereafter is that UK is inside customs union (via backstop)

Given the intractability of the Irish border issue, the likely way out of the backstop is a negotiated permanent membership of the customs union. The details of the arrangement need to be decided and are politically contentious. If the soft Brexiteers can gain a mandate through public support, there is no reason we could not end up with a Norway like status.

This is the option that likely has a parliamentary majority. But this is also the route that was voted down by a record margin!

The way to make sense of this contradiction is that this deal has the misfortune to be advocated by a PM who is both deeply partisan and incompetent. She has turned Brexit in to a party-political battle designed to appease her right-wing ultras which makes support from Labour MPs very difficult. We also have a similarly narrow-minded opposition leader who would prefer the No Deal option anyway, especially if he can blame it on the Tories. The dynamics are dominated by the Tories only listening to their own members and Labour ignoring theirs.

How to achieve Remain?

I see no credible path to this. Irrespective of whether Remain would win the popular vote I cannot see how a parliamentary majority could be formed to call a referendum. Perhaps a combination of

  1. Labour adopt as party policy
  2. Labour win no-confidence vote and there is a General Election
  3. Labour win the election
  4. Get referendum legislation passed with Remain as an option
  5. Remain win the referendum
  6. Remain win the next referendum (this issue is not going away)

That is quite a long list of independently unlikely things.

The way forward

A recent precedent for how implacable face-offs can be resolved is to look at Trump vs Pelosi on the funding of the wall. The issue was not decided by power or logic. It came down to the opinion polls – once it became clear that Trump and the GOP were being blamed for the shutdown they found a way to end it.

For Brexit we do not yet have any movement in the polls. Hardline Brexiteers and Remainers are still fighting for their preferred outcome. Neither have any interest in compromise.

What we need is for the silent middle to form a view. The people who are just completely sick of Brexit and want to move on. Then the moderate MPs will follow them.

Brexit – The Will of the People

In this post, I would like to move away from discussion of the rights and wrongs of Brexit but instead concentrate on what outcome people currently prefer. What would be the democratic solution?


Condorcet Paradox

This is a useful part of economic theory that does not get enough attention when discussing democracy. It may seem a little dry but please bear with me because it is very important.

A central concept in economics is preferences:

  • I prefer Apples to Bananas (A > B)
  • I prefer Bananas to Carrots (B > C)

Given this, you would also expect that:

  • I also prefer Apples to Carrots (A > C)

This is called having “transitive” preferences and is a key part of what economists mean for behaviour to be “rational”.

The Condorcet Paradox (https://en.wikipedia.org/wiki/Condorcet_paradox) shows that even if individuals within a group have transitive preferences, the group as measured by majority preference may not have.

In the example above

  • A majority of people in a group may prefer Apples to Bananas
  • A majority of people also prefer Bananas to Carrots
  • However, a majority of people prefer Carrots to Apples

It is entirely possible and logical, even though its it rather counter-intuitive.

Application to Brexit

In Brexit terms, I would have transitive preferences:

  • I Prefer Remain to May’s Deal (R > M)
  • I prefer May’s Deal to No Deal (M > N)

and completely consistently:

  • I also prefer Remain to No Deal (R > N)

For the main groups within the population, let’s imagine 1st, 2nd and 3rd preferences for the various outcomes in the below table:

In my imagined universe:

  • Remainers – would prefer May’s Deal to No Deal
  • May-Dealers – would prefer No Deal to Remain
  • No-Dealers – would prefer Remain to May’s Deal
    It may seem an odd choice but, for example, this is Dominic Raab’s expressed view.
    It seems for some, defeat is emotionally more acceptable than compromise.

Now let’s have a contest and see who wins if we ran a Referendum on each pair of outcomes:

In this case, the overall population makes these choices:

  • Remain is preferred to May’s Deal
  • May’s deal is preferred to No Deal

You may think therefore that Remain is preferred to No Deal but this is not the case. Actually:

  • No Deal is preferred to Remain

In this imagined case, there is no overall preferred outcome.

What do people actually prefer?

Polling data in the UK is consistent with this problem. Support for the three options is pretty evenly split, and even taking into account second preference, we are no clearer. Each head-to-head matches would be too close to call contests.

How is this relevant?

If means the UK, as a whole, DOES NOT HAVE A PREFERENCE and therefore there is no single “democratic” correct answer. Representative democracy, with parties and elections, has been our way of dealing with issues like this. Having a referendum on an issue with more than 2 possible answers just leads to nonsense, just as happened in the initial Brexit referendum.

Identity politics vs Pragmatism

The Brexit ultras who want No Deal can be seen as being driven by identity politics. This means that national identity is overwhelmingly important compared to economics. If you are a Remainer for whom Brexit is a matter of identity politics then for you then wanting a referendum is very logical. That is the only feasible route to Remain and anything other than Remain is a loss.

For economic pragmatists supporting a referendum is very dangerous. Remain is by far the best outcome but No Deal Brexit is catastrophically worse than any deal and avoiding a catastrophe is the most important thing.

For political pragmatists supporting a referendum is very dangerous. The result will be close and will not close the issue. There will not be any clearer sense of legitimacy for the outcome and after another 6-month campaign our divisions will be even more entrenched.

Should we have another Referendum?

As an ardent Remainer, you would think that I support another Referendum. But I do not.
Partly given the logic above, I do not think Referenda are consistent with our democratic system and thus a sensible way to resolve a complex issue like this. But also more pragmatically, I think Remain may struggle to win again and there is a good chance No Deal is the eventual winner; or even if Remain were to win, it would not be by a sufficient margin to close the debate.

Brexit – What happens next?

This is the question I am most often asked and also the hardest one to answer.
I will try to provide a framework for the many overlapping threads:

The possible outcomes

  1. No Deal (Chaos Brexit)
    It is often said that there is no majority in Parliament for this, however there is also no majority for anything else. The key point is that, if nothing happens, on March 29th, the UK leaves the EU with No Deal, and there must be an Act of Parliament to stop it. It is the default option and, as such, this chaotic outcome should not be underestimated.

To avoid it, one of the other outcomes needs to find a way to a majority.

  1. May’s Deal
    This option will have be voted on in Parliament and is universally expected to fail.
    The fundamental problem is that this deal spells out that Brexit is clearly worse than Remain and clearly worse than Fantasy Brexit.But to be fair any Brexit deal would have the same problem.
  1. Remain
    With the news today that Labour may be attempting to form a coherent policy on Brexit, this option has gained a glimmer of a realistic chance.

Non-possible outcomes

  1. “Fantasy” or “Have cake and eat it” Brexit

Given that it would require more compromise from the EU, the EU is never going to offer anything like this and will not allow any renegotiation for this purpose.

  1. Delay Brexit while we work out what to do

A delay would need the unanimous agreement of all 27 EU countries, so it seems rather unlikely for them to do so.

 

If the options are so simple, why is it all so complicated?

The simplest answer is that this situation is unprecedented so there is no clear procedure to follow.
Here are some of the wild cards:

  • Vote of No Confidence in May.
    This requires letters from 48 Tory MPs. However, they have not managed it yet, and may never get there. Even if they manage to get enough to trigger a vote, it is likely that May would win and then she could not be challenged for another year, her position strengthened. But if May lost, then we head to a new leadership election which is a lengthy process, pretty much running down the clock to Mar 29th. This is why only the most hardline Chaos Brexiteers champion such a route.
  • Vote of No Confidence in the government.
    It is highly likely that Labour will call for one after May loses the vote on her deal (and probably if she lost a vote of No Confidence within the Tory party), but it unclear if they expect to win it. If they did and forced a general election, it would be fascinating to see what the manifestos would say. With May as leader, it seems likely she would stand on a platform of her deal. Do Brexiteer rebels have to honour the manifesto pledge? Note there is no time to replace her with another leader before an election!

There is another important reason this is so complex. A lot of UK politicians do not understand the EU because they have never tried to. They really believe the EU can be forced to renegotiate. Talking to politically engaged people here, I get the sense that they are so engrossed in Westminster and party politics, they miss the point by assuming that important decisions are made here in the UK, without considering the viewpoint of our negotiating partner. I have previously used the example of Greece; if you misunderstand the EU then you play chicken and lose. Unfortunately, political journalists seem to have the same issue. They are obsessed with covering domestic political gossip here in the UK and so the coverage focuses on Westminster intrigue and the related confusion, whilst simultaneously missing the issues that are relevant.

  • Another Referendum?
    I think that a large majority of MPs and the electorate do not want this, but it still may happen if Parliament cannot agree any deal. The important issue here would be what question is asked. One aspect of this that I have not seen discussed is that the EU would have to agree to a 6-month delay to Brexit to allow this to happen. Therefore, the EU would have to agree with the question posed; if the vote was between Remain and May’s Deal, they might agree; if No Deal were one of the options, I do not see why they would do this. 

 

My personal forecast

I still think that the most likely outcome is that something close to May’s deal is agreed.
Perhaps losing the first vote will actually help her bring the rebels into line?

  1. Voting pattern could resemble the TARP votes in the US in 2008
    i.e. the politicians want to make a statement that they hate the deal before reality strikes and they have to vote for it the second time
  2. Labour officially endorse a new referendum which brings the Brexiteers into line
  3. May renegotiates a softer Brexit (recent EFTA talk) and gets enough Labour MPs to support
  4. We crash out of the EU, have chaos for a short period and then ask the EU if we can have the deal please and they allow it.