Back to the Future

Back to the Future

Alan Hill 26/09/2017 Brexit
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The U.K. Political Landscape is heading for an earthquake. The politicization of Brexit which has turned the entire process into a party-political issue could bring about the “hard Brexit” that the Government appears to be trying to avoid.

Last week’s speech by Theresa May to EU leaders in Florence seemed to appeal to the EU’s negotiators but the more hard-line leaders like Macron and Merkel want more. This was reflected in Michel Barnier’s comments at the resumption of talks where he backtracked a little on his welcoming comments in the immediate aftermath of the speech to something more “hard-line” yesterday.

There is a clear fundamental difference between the two sides as to what constitutes a proposal. It looks as if the EU want a number on a piece of paper to say this, in total, is how much the U.K. will pay in total to the EU budget after 31st March 2019. Of course, David Davis is avoiding trying to provide with every sinew since that will open a huge “can of worms” domestically for him, his boss and the Government.

Even members of the Cabinet cannot agree a figure. This whole matter of the three conditions to be met before discussion can take place over the second phase can start. The EU is standing by its requirement and the U.K. is prevaricating for all it’s worth.

When David Cameron originally mooted a referendum on membership of the EU as a manifesto pledge for the 2015 election, he consider a few things but he didn’t consider the most basic and critical issue; which is would the vote be leave or remain, so convinced was he that the remainers would win. In true modern Parliamentary style, all he considered was his own re-election and the election of his Party to Government. Both were achieved but at an enormous cost to the Country.

 

His folding in the face of a Brexit onslaught from UKIP meant that he backed himself into a corner and it was only the weakness of Labour and the pathetic performance of the Liberals as coalition partners that saw him win. His betrayal of the country by accepting the deal (if there was such a thing) meant that he threw the country to the lions with the get out clause that he could Simply walk away if it didn’t work. If he had considered the alternative to his personal view on the referendum he could have told Brussels what he wanted, in reasonable terms, and then told them what the alternative was.

The BBC website, at the time, provided a clear report on what Cameron wanted, what he was offered and what was in the final deal. The detail is here

It is Party Conference Season in the U.K. and this has kicked off this week with the Labour Party, the main opposition to the Government meeting in Brighton.

  

Labour has slipped back lose to its unelectable period in the 80’s/90’s where they promised a huge increase in public spending, re-nationalisation of utilities and transport, the scrapping of private contracts (this was even a strong part of Tony Blair’s manifesto) and an immediate £500 million bailout for the National Health Service.

There are several questions that are needing to be answered:

  1. Why has Brexit been turned into a Party-Political matter where whips make MP’s vote in accordance with their Party’s wishes.?
  2. Is it too late for a Brexit Commission to be formed that could take over the negotiations following a strong mandate from the whole of Parliament?
  3. Could the EU simply grow tired of waiting for the concrete proposals and simply create a “hard Brexit” of their own?
  4. What can the Government do to either speed the process or at least create an environment that will satisfy all sides?
  5. If there is an election before year end, can Labour garner sufficient young voters to win without prevailing in Scotland? It is a political truism that Labour cannot win an election unless it carries Scotland.
  6. Could there be a second referendum and what would bring that about (without the Liberals joining a coalition)?

The first two questions seem to meld together. Parliament should become one homogenous group for the sake of Brexit but the trouble with locking 600+ MP’s in a room is that you would get 600+ policies!

 

Parliament could appoint a “Brexit Commission” which could be given a mandate approved in a free vote to negotiate within certain parameters. The negotiation would then be handled by a leave leaning group of non-politicians who wouldn’t be chastised when they answered the three conditions.

In a practical and “grown-up manner”, the EU could easily refuse to meet until they get “black and white” answers to their requirements. There is no requirement for the EU to negotiate. They could simply say “refer to the Lisbon Treaty. It may not be pretty but it would be effective.

A cynic would say that the Government can’t do anything to speed up the process they would probably be right otherwise they would have done it already.

Again, the final two questions require only one answer; A General election would be close and the current prediction is for labour to win most seats but not an overall majority. By then they could have a remain agenda and call for another referendum but that is possibly a wish too far.

The final question is will the U.K. ever actually leave the EU? Let’s wait and see!

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Alan Hill

Markets Guru

Alan is an award-winning market commentator, providing bespoke content delivery for all aspects of the FX Industry. He has been working in the financial services industry for over 30 years and has a wealth of experience across banks in Europe, North America and the Middle East. A former trader, Alan holds a bachelor of business administration in Politics and Economics from the Mark Hall School.

   

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