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Creating a Buzz about GDP

It’s hard to only pick five Brexit developments this week, but the biggest story was undoubtedly the leaking of the Government’s economic analysis of the impact of Brexit to Buzzfeed. The analysis suggested that UK GDP would be worse off under every possible scenario in which we leave the EU – from the relatively minor hit if we stay in the single market and customs union to a more severe impact from no deal – and a middling one with a comprehensive free trade agreement.

To no one’s surprise, Remainers jumped on the figures to support their own viewpoint, while Leavers continued to insist that the figures were either wrong or just didn’t matter. Quite a few commentators argued that Leave voters were more concerned about “values” or “community belonging” than the economic impact of Brexit, and that the analysis was hence unlikely to resonate with these voters. This is of course a false dichotomy – the state of the economy will impact on the state of communities around the country, and it’s unlikely that many people seeking to improve the state of communities will be happy if major local employers take a post-Brexit hit. But it does demonstrate that Remainers will need to do a better job of demonstrating local impacts if they want to make any real dent in public opinion – abstract GDP figures won’t do the job.

The Government has said that publishing the leaked documents in full would not be in the national interest but did not vote against Labour’s motion compelling them to do so. The Speaker of the House of Commons, John Bercow, has ordered that MPs should be allowed to see the analysis “urgently”, but it is not clear if or when they’ll be made available to the wider public.

A customised Customs Union?

In the wake of the leaked analysis, the Financial Times reported that Theresa’s May’s team is considering the merits of staying in “a” (not “the”) customs union after Brexit, covering goods but not services. This would limit the ability of the UK to strike its own trade deals with non-EU countries – but then the analysis referenced above suggests that this could be of limited value in replacing the losses stemming from leaving the customs union anyway. It would also surely make it much easier to find a solution to the Irish border issue and ensure that goods can continue to flow smoothly once the transition period ends.

Unusually, Theresa May’s spokesperson didn’t immediately deny the suggestion, indicating that it something that’s being seriously considered. While ministers like Philip Hammond and Greg Clark would be likely to support such a move, International Trade Secretary Liam Fox would be less impressed – some would say from a slightly self-interested point of view – although it’s worth noting that as the proposal only covers goods, he’d still be free to try and strike up new trade deals on services.

Ironically, this would make the Government’s Brexit stance “softer” than the Labour Party’s – it’ll be interesting to see whether Jeremy Corbyn and Keir Starmer shift their own position in response.

Is “Lexit” just a myth?

Meanwhile, the Brexit divisions within the Labour Party don’t show any sign of being healed just yet. The Labour Campaign for the Single Market launched a report this week on “Busting the Lexit Myths” – tackling left wing arguments for leaving the single markets on a range of issues including austerity, state aid rules, nationalisation, and workers’ rights.

The report was launched at an event in the House of Commons, at which the former firebrand Greek finance minister Yannis Varoufakis made a “very good leftist, Marxist argument” in favour of the single market which won praise from the more socially democratic Chuka Umunna.

But will it do much to shift Labour towards a softer Brexit? The New Statesman suggested last week that dissent from the likes of Umunna and other pro-Europeans such as Chris Leslie not only doesn’t move Corbyn’s position but may even entrench it further. It’s not clear yet if a more substantive analysis of the economic impacts of Brexit could yet cause a change of heart.

Many of the leader’s supporters are unimpressed with the argument that staying in the single market and customs union will deliver provide the economic stability needed to deliver the increases in public spending promised in Labour’s manifesto – often insisting that “austerity is a political choice” and hence Labour could choose to deliver them anyway, However the Shadow Chancellor himself has committed to balancing day-to-day spending (although not long-term investment) with the amount raised in taxes, which means that an economic downturn could place obstacles in the Party’s way. Labour was already criticised for failing to pledge to reverse welfare cuts in its manifesto - if an economic hit means lower tax revenues, then this might lead to some more difficult choices for a future Labour government.

The EU (Withdrawal) Bill begins its crawl through the House of Lords

As the debates about GDP and the customs union continued to rage, the EU (Withdrawal) Bill passed its first hurdle in the House of Lords in a fairly quiet fashion this week, as it received its second reading. One of the biggest areas of contention was the provisions that give ministers powers to use statutory instruments to amend legislation, reducing the ability of parliament to scrutinise the changes.

This followed on from the publication of the Constitution Committee’s report on the Bill earlier in the week on the Bill, which was highly critical of the new powers to amend primary legislation, claiming that this gave the Government “far greater latitude than is constitutionally acceptable”.

The concerns were acknowledged by DExEU Minister Lord Callanan, who said, “we have always said that we would listen to members of both houses” and highlighted that the Government “will bring forward proposals in due course following appropriate consultations” in this area. Could the Government be preparing to give some ground on this technical but important matter? The lack of government majority in the Lords provides peers with some ammunition for real mischief making, so some form of compromise wouldn’t be entirely unexpected.

Setting out the transition ground rules

The UK and the EU edged towards beginning the process of agreeing the rules for post-Brexit transitional arrangements this week, with the EU setting out its own position on the UK’s obligations after March 2019. None of these were a particular surprise – the EU team wants the UK to continue to follow EU rules, including new rules introduced between the UK leaving and the transition period coming to an end, without being involved in the decision-making process. They want the UK to continue to accept freedom of movement. And they want continued work to find a solution to the Irish border issue.

Will the UK accept these demands? David Davis has said that he’d like the UK to have a “right to object” to new laws passed during the transition period. However, Michel Barnier has only said the UK would be allowed to attend decision-making meetings on a "limited, exceptional, case by case basis." Meanwhile, Theresa May has suggested she’ll resist proposals to give residency rights to EU citizens who arrive in the UK during the transition period.

Clearly, these will be up for negotiation. But if history is any guide, then the EU will get more of what it wants than the UK will.

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