Nick Hargrave is a former Downing Street special Adviser who worked under both David Cameron and Theresa May. He now works for Portland, the communications consultancy.
The economic consequences of ‘no deal’ on Brexit have been well rehearsed over the last few weeks. But the political consequences have received less attention. They are worth examining in parallel given that the prospect of ‘no deal’ has materially risen following the domestic reception for the UK’s negotiating position.
One level of political consequence I am referring to is the Conservative Party’s electoral fortunes, where the impact would probably be severe. But I also mean a wider erosion of trust in moderate politics and politicians, which is already very fragile – and the rise instead in demagogues on both ends of the political spectrum.
This is an argument worth making again and again – and then again. To suggest that established democratic countries should move towards authoritarianism and the cult of personality – left wing, right wing or a chaotic combination of the two – ignores the lessons of history. The approach is wrong in principle and delivers diminishing returns over time. But the appeal is real and a danger to be reckoned with.
In recent days, I have read opinion pieces from Hard-Brexit-supporting Conservative MPs suggesting that the dislocation inherent in ‘no deal’ would only be short-term and is therefore a price worth paying.
The price could be higher than they think.
On economic terms first, I would humbly suggest the Hard Brexit analysis is sugar-coating it. Apocalyptic predictions do no-one any favours in this debate. But if we leave the European Union without any sort of deal then the economy uncertainty would be unprecedented.
We would need to agree a new legal framework for aviation in short order with temperatures running hot on all sides, or some planes could not fly to and from EU countries. It would be hard to waive full physical customs checks at our ports. There would be no automatic protection for European citizens working here and British citizens working in EU countries. It would be more cumbersome to share data between the UK and EU27.
The apocalypse maybe not but certainly a profound economic shock.
Defaulting formally and immediately to World Trade Organisation terms would minimise the uncertainty a little. But almost every regulatory affairs department will tell you that this would still mean material dislocation compared to before – especially given the window in which we are operating.
The advocates of ‘no deal’ are right, I think, that any such scenario would be relatively brief. The material consequences laid out above would compel UK and EU politicians to go back to the negotiating table after 29th March to try and find a more comprehensive agreement. However, I cannot see how the UK’s negotiating position would be improved in this eventuality – and there is no guarantee that economic confidence would return immediately after the shock was over.
There are other plausible – perhaps more likely – chains of events connected to ‘no deal’. We might not crash out on 29th March 2019, but there could still be a period of time in the run-up where ‘no deal’ is the assumed probability.
For example, the Withdrawal Agreement could be voted down in Parliament at some point between October and January. At that point, ‘no deal’ becomes the default assumption among businesses large and small – and all those connected to the functioning of the economy. A deal might go on to be eventually cobbled together in stoppage time – with an extension of Article 50, a second referendum or a general election all possible staging posts. But in the intervening period, the dislocation will be the material consideration in public debate.
But this isn’t really my point. No matter how short or lengthy the economic uncertainty caused by ‘no deal’ or the prospect thereof, I suspect the political consequences will be long lasting.
On the surface, some might point to polling suggesting that a decent portion of the electorate already seem comfortable with the idea of leaving without a deal in place. A poll for YouGov at the weekend showed that on a transferable vote basis, leaving without a deal acquired 46 per cent of first and second preference votes if a three-way referendum were to be run on the options of Remain, Chequers Compromise or No Deal.
But such a reading would be a mistake. For a start, a majority of the electorate would not choose ‘no deal’ and I think would have a pretty emotionally violent reaction if it ever became a realistic possibility.
More importantly, underlying the numbers from supporters of ‘no deal’ is a sense that it is still a theoretical outcome with no consequences being practically felt. There is also a likely ingrained emotion that anti-Brexit politicians are scaremongering about the effects like they did with ‘Project Fear’ in 2016.
Should the material economic effects be felt immediately after 29th March 2019 – or begin to cascade in the months before – then attitudes on the desirability of ‘no deal’ may shift.
Remember that on referendum day, according to a large sample poll conducted by Lord Ashcroft, 69 per cent of Leave voters agreed with the statement ‘the decision we make in the referendum might make us a bit better or worse off as a country, but there probably isn’t that much in it either way’.
Most Leave voters were not voting with the belief that there would be a profound economic dislocation as a result of their vote.
You are kidding yourself, though, if you believe that committed Leave voters will renounce their beliefs on leaving the EU should we reach this proverbial-hitting-the-fan outcome. Instead, with values on the nation-state ingrained so deep, you are more likely to see an almighty roar directed at the Government that they have failed to realise the bright new future that was promised in the referendum campaign. Promises which, as I argued last week, were defined and set in stone by the Prime Minister’s unrealistic early definition of how Brexit could be practically delivered.
The roar will not just come from committed Leave voters, though. Remain voters – and those who hovered in the middle – will also feel a potentially guttural contempt for politicians who have put their economic security and that of their children at risk.
I have a growing fear that ‘no deal’ – real, or the near threat of early next year – could be Black Wednesday many times over in terms of setting political perceptions. The events of 16th September 1992 were short-lived and very few people were materially harmed in the long term by its consequences. However, for a few hours on that fateful day there was genuine panic in the constituencies of the United Kingdom that interest rates of 15 per cent would be the norm and home repossessions and mortgage defaults were possible.
The Conservative Party lost its reputation for economic competence on Black Wednesday and did not recover it properly until the era-defining financial crisis of 2008-09 put paid to Labour’s.
Things only need to be scary for a few hours to set political reputations for several years. You might imagine what will happen if the economic consequences are materially felt rather than just heard knocking on the door.
Against this backdrop, it is easier to see what the reaction of the British people might be to the Government and Conservative MPs who allowed things to drift into this position. The most resonant refrain that can be used against politicians like Jeremy Corbyn and Nigel Farage is that they talk a good game but would be ineffective and potentially dangerous if given the seals of power. That accusation will carry a lot less weight if moderate politicians have demonstrated an inability to govern effectively.
Whenever the next election is – and do not discount the possibility that the Prime Minister might have no option but to call one if Parliament is logjammed with the clock ticking to exit day – there is a risk that voters express their anger at no deal through the ballot. Corbyn’s Labour is obviously politicking at the moment, but oppositions rarely get the blame, especially the current one which is not led by an establishment figure. You can also see the argument that Farage would run, through whatever party he leads at the next election.
Once Parliament comes back for the autumn, it is incumbent on Conservative MPs to realise this reality and act responsibly for the good of the party – and, much more importantly, for the future of the country. It is time to have the courage to compromise. And do not misunderstand me: this applies equally to the European Commission and the 27 member states. We are the ones who have decided to leave but then again leaving is unprecedented and Britain is a fundamental part of the European economy. Dogmatic intransigence on either side is clearly not sensible.
When thinking about Brexit, I often return to the words of the Irish historian Roy Foster. One of his central premises is that history is about unforeseen futures rather than manifest destinies. History is at its most valuable when you put yourself in the shoes of what people were thinking at the time and tracing how that churn of motivations affected the story of nations – rather than accepting a grand narrative from the start.
So I suspect the hagiographers of any future Prime Minister Corbyn or Prime Minister Farage will be wrong. If they do ever cross the threshold to Downing Street, it will be very little to do with the attractiveness and depth of their own ideas. It will be far more to do with a catalogue of strategic mistakes from dogmatic Conservative MPs and unbendable European leaders – both acting in expectation of a future that never materialised. And in doing so ushered in an age of politics that we used to think was below Britain, historically one of the most sensible and mature democracies in the free world.