The strategy is perfectly clear. In fact, it has even been written down and elucidated on broadcast media for us.
Jolyon Maugham QC (who is seeking to bring a case in the Irish courts questioning the revocability of triggering Article 50) and other hold-out Remainers are now looking to prevent Brexit by making Britain’s negotiating position as weak as possible. They are actively willing economic hardship to overturn the referendum result.
Maugham, one of those who opines that the “people didn’t know what they were voting for”, has been perfectly transparent on both his blog and on TV about this. First he was a major advocate of the Gina Miller case to insist on Parliamentary power to begin Article 50 proceedings. With a Parliamentary majority having been Remainers, it was hoped this would either deliver extensive delay such that any economic downturn would provide excuse for Article 50 never be triggered, or else legitimise a second “approval” referendum on the result of negotiations versus the status quo.
Despite that victory, the political appetite for defying the public vote looks since to have largely evaporated. This is especially so since Theresa May outmanoeuvred Parliament into accepting her timetable to trigger Article 50 in March. So now second legal proceedings are to be launched through the Irish courts, with Maugham’s stated hope that the European Court of Justice will rule that Article 50 is not a one-way irrevocable process.
Such a result would mean we would not be legally bound to leave the EU at the end of the two year period, potentially enabling the political class or public to change their minds about any UK-EU deal. Either a perceived “bad deal” in itself or an overdue cyclical economic downturn could be used as an excuse for a second vote, with Maugham suggesting that this would be welcome – allowing people to assess “what Brexit has meant”.
This is disingenuous in the extreme. Anyone can see that this approach actually increases the likelihood of negotiations collapsing. If the EU knows in advance that we would be having a second vote or could think again, it would have an incentive to threaten the introduction of damaging tariffs to encourage Britain to stick with what it knows. Project Fear Mark II would be launched, and the WTO fall-back option would be relentlessly attacked.
Furthermore, in the short term, chucking another referendum into the mix would merely act to heighten policy uncertainty again, something which all economists who have studied the work of Nicholas Bloom recognise can have real effects on investment, but which (so far at least) seems to have been overstated with respect to having voted to leave.
The potential upsides of Brexit come in the form of a more expansive free trade policy (ideally unilateral free trade), regulatory reform, agricultural and fisheries reform, fewer gross contributions to the EU Budget and the opportunity for the Eurozone to harmonise more easily. These require a Clean Brexit – and exiting both the Single Market and customs union. By definition, the positive outcomes we could get from Brexit can only be realised when they are actually tried – making Maugham’s claim that another vote pre-exiting would enable us to assess the results of Brexit utterly bizarre.
In fact, the main thing that any downturn at that stage would show would be the heightening of uncertainty caused by this very delaying process. The short-term impact of Brexit, as the Treasury modeled albeit in a very biased way during the campaign, is a reflection of uncertainty about future arrangements, expectations of the likely policy framework and the costs of any short-term transition.
Even I thought that a vote to leave would come with a short-term hit to growth due to the second and third effects. But thus far all major macroeconomic variables have been robust, as my Economist for Brexit colleague Patrick Minford correctly forecast. This actually suggests that economic actors (consumers and investors) do not expect leaving the EU to have a significant negative long-term effect on the economy, given what they have heard so far.
What really would harm the economy unnecessarily would be continued delay in formulating policy and realising the upsides outlined above. But that is the path being actively pursued by those who cannot accept the result and who patronisingly believe they know better than both the voting public as well as current economic actors.