Brexit: Britain will end up in the Customs Union

This blog has been wrong about a lot of things. Especially the Labour Party. But one area where my record has been very strong, in spite of standing outside the conventional wisdom, is Brexit. This is encouraging me to be recklessly brave in making my next prediction: Britain will stay in the EU Customs Union, even if it will take another two years or more before that becomes apparent.

Before the vote last year, I was always worried that the Leavers would win. I felt that my most persuasive argument for Remain was not that Britain would be better off in the long run outside the Union (though I did think that), but that the process of extraction would dominate British politics for so long that progress on any other of the county’s pressing issues would be halted. And thus it has proved. Poverty is growing, and Alan Milburn, the government’s (Labour) adviser blames it on the Brexit effect. The government may riposte that “absolute” poverty is still on the way down, but that claim looks very doubtful; “relative” poverty is clearly getting worse, after decades of progress. Poverty is a subject I will return to – I am working my way through a very challenging study from the Webb Foundation, which will require a degree of reflection. But Brexit is throwing up urgent problems in almost every area of government policy. And where it doesn’t, there is the indirect issue of distraction.

After the vote my first comment was that a long transitional period would be essential. A further prediction was that Northern Ireland would be the “surprise” issue that could derail the whole process, and it was the most important thing to get sorted out. This is now nearly consensus. , but at the time people were obsessing about whether Brexit would be soft or hard. The answer was in fact clear: soft in the short term, and then we’ll see once we’ve all understood it a bit better.

More recently there seemed to be an impasse between the British position that we should proceed to trade talks with the EU now, and the EU position that the “divorce” questions be settled first. I suggested that the British would win out in the end. And so it is proving. It suits the British commentariat to say that it is the British that are caving in, but in fact it is the EU side that has moved substantively; they are having to settle for some reassuring words. The mystery was why it took Britain so long get there; the answer to that was maybe that a bit of theatre suited both sides. There is a snag, though; just when it all looked settled, the Northern Irish Democratic Unionists (the DUP) torpedoed it. That was my Irish caveat – and, I should add, I understand Irish politics, north and south, even less than the Labour Party. Still, this looks more like a glitch than a full stop – a result from the Prime Minister Theresa May’s debilitating introversion that had left the DUP out rather than talking them to death – which is now what she will have to do. All that is required for the moment is a dose of fudge. The DUP may well create some real trouble later on, but now does not look the right moment.

I had drafted a blog a month ago saying that I thought the talks were on track to succeed in moving to the next step, just when everybody was saying it looked hopeless. I didn’t post it because it was ended in a whimper. So what? Where was it all going? I now think I have the answer.

The firstly, I think Brexit will happen. Many Lib Dem friends hold on to the hope that the seeming chaos of the negotiating process, and the absence of any clear vision of the long term, means that the whole thing will collapse. But the negotiating machinery in Britain and the rest of the EU is in place, and officialdom has got used to the idea. It will happen, it may just not make as much difference, in the short run, as people thought. The way politicians deal with hard problems (I nearly wrote “modern politicians” but this is surely as old as the hills) is to string things out. The expression is “to kick the can down the road”. You decide as little as possible for now, so that reality has more time to sink in, and hardened positions can soften. The consequences of this approach are not well understood by the commentariat. They talk as though you negotiate treaties as if you were buying or selling a house, which is the biggest thing that most of these people have had to negotiate for themselves. We are for ever hearing about this or that strengthening a negotiating position, and in particular how threatening to walk out makes you stronger. But it is nothing like selling a house. It is infinitely more complex; you have to live with, and do more deals with, your counterparty afterwards; and you can’t simply choose to sell your house to somebody else. You have to keep the engine running, to switch the metaphor.

So complete collapse is unlikely, and Brexit nearly inevitable. Reversal would cause more problems (in the short term at least) than it would solve. Besides, the political conditions for it do not exist. There has been no seismic shift in British opinion, even if polling shows Remainers edging ahead. The Conservatives desperately want to hang on to power to keep Labour out, and keeping to the legal form of Brexit is essential to keep the party together. Labour would like to create trouble for the Conservatives, but do not want to be put on the spot. The desertion of Brexit supporting working class voters from Labour could torpedo their hopes of winning the next election. And power, for the Labour leadership, is much more important than Brexit.

But time is short. The priority now is to get that transitional deal up and running. Though the idea is to make as little difference as possible to current arrangements, beyond a few bits of carefully chosen and powerful symbolism, it will be hard enough. There will be no time to sort out the ultimate destination. Hard Brexiteers will continue to babble away about complete independence; the more pragmatic people will keep arguing for this or that aspect of the status quo. The truth is that the British governing class, and still less the public, have not understood the options properly, and not decided between them. And that is not surprising, given how big and complex it all is. We have to kick the can down the road. (Alas I had hoped to resist clichés in this blog, but I need to finish this piece).

So the process will drag on. Perhaps even the British people will be allowed a say in the process. Another referendum looks very unlikely – and probably not desirable. Trying to reduce everything down to “yes” or “no” has proved very unsatisfactory. But a general election during the transition process is another matter. An election is not due until 2022, which would be three years into the process, by which time many decisions will have been taken. But once the current government has delivered formal Brexit in 2019, it may find it hard to hang on. Brexiteers seem desperate to avoid any popular participation in the decision-making process, however – a role reversal from before the referendum. But the government’s minority status, and its lacklustre leadership, will make it hard to hang on.

But where will we end up? A divided nation will at some point be desperate for a compromise, and one that makes the Irish border more workable. It is in fact quite clear what that compromise is: membership of the Customs Union. If it is good enough for a prickly and independent Turkey, why can’t it be good enough for a prickly and independent United Kingdom? The government has ruled it out. But the whole process has been one of options being ruled out and then being ruled back in again. Brexiteers have a vision of Britain being a free-trading beacon, showing the rest of the world how it is done – and that would mean standing outside the Customs Union. But the British public are not interested in that vision; and, besides, the rest of the world has moved on. The massive expansion of world trade is coming to an end (except maybe within Asia and between Asia and Africa).

It may take a general election before before the British ruling elite reconciles itself to staying in the EU Customs Union. But I think that day will come.