Brexit responses that seem attractive now may not be best in the long run
It is not surprising that everyone I know voted Remain.
I’m a Scot living in Brussels. In my circle, the grieving over the loss of Britain’s European future has barely begun. All of our politics have been thrown into chaos.
The assumptions we stood on have been whipped away. New issues and unexpected questions occupy us. Everything has changed and no-one knows anything.
A good piece of advice is: do not make any decisions too soon after a loss. Yet we expect politicians to have answers to quell the uncertainty we feel in this post-referendum period. I urge caution. The solutions which seem most attractive now may not in reality be the best for Britain in the long run.
The first stage of grieving, they say, is denial. We hope to awaken from this nightmare and find that Britain’s position in the EU is restored. Parliament will act. Leavers will have buyers’ remorse. There will be a new referendum or a general election.
Sadly, denying reality does not change it.
Denial gives way to anger, the second stage of grieving. There are many targets at whom to direct anger: the leavers’ lies, the poor campaign, media moguls and unscrupulous politicians. To appease the anger party leaders must be sacrificed. Those who made the mess should be given the job of cleaning it up, whether or not they are the most capable of performing the task. Anger, however, is a poor guide to action.
The next stage is bargaining. Maybe if we do this then the fates will be kind to us. We can delay Article 50 and hope that something turns up. We could realign political movements to create a pro EU party or a pro EU alliance. We could let the reality of an economic shock shift opinion against leaving.
The last stage before acceptance is sometimes described as confusion.
In this stage there is a realisation that something fundamental has changed but all the complexities of the change are difficult to grasp. What does Britain outside the EU mean for policy on agriculture, science, competition, innovation, urban regeneration and regional development, tax rules and employment rights?
Given the complexity, the interactions and spillovers between these areas, being confused is perfectly rational. Recognising how little we know is the beginning of wisdom.
Hence my argument that we should not rush into decision. If EU membership is the best option then it is tempting to think that the closest to membership is the best alternative. We might assume that the Norway model is better than the Swiss model which is better than a trade deal or no deal. It would be rash to reach that conclusion without much more thought and analysis.
Membership of the EEA, for example, would mean accepting many EU policies with no say in policy-making. Even the most ardent Remainer agrees that many EU policies need major reform.
There are many issues to consider before deciding how Britain should position itself in Europe. I offer three out of many examples. They concern competition policy, public procurement and the free movement of capital.
The EU has a successful approach to competition policy which is capable of challenging anti-competitive behaviour by even the largest corporations. However, EU state aid rules can be an obstacle to providing support to major employers in difficulty or to using subsidies to promote industrial development. Would we want to continue to operate with these rules when we have no influence in shaping them?
Equally the EU approach to public procurement is based on sound principles of transparency and objectivity. We could agree that reciprocal access to each other’s public contracts is in Britain’s interest. Alternatively we could conclude that public purchasing power could support a more active industrial policy.
My last example concerns the financial services ‘passport’. This allows banks and other financial firms regulated in one member state to operate in any other without further regulatory scrutiny.
While this seemed like a good idea in the 1980s, since the crisis of 2007-2008 we understand better then need for stronger oversight of banks. Lobbyists for the financial sector claim that passporting is essential for the City. Should we believe them? These are the same lobbyists who oppose every attempt to make banking safer through more active regulation and requirements to hold bigger capital buffers.
Without passporting banks would face more regulatory scrutiny and would need to hold more capital. At present passporting allows undercapitalised Italian banks to offer their services in Britain without oversight by the Bank of England. We need to ask if there are risks to passporting we would be better off without.
If Britain had voted remain then each of these issues, and many others, would form part of a reform agenda. They would be technical issues of interest to policy specialists who take an interest in financial regulation, competition policy or industrial strategy.
In the changed circumstances of the leave vote they become important aspects of the most pressing issue of the next four years, namely how do we want to relate to the EU in future.
While still reeling from the shock of an unwelcome plebiscite we must begin to assess carefully many questions across many policy areas and to analyse the trade-offs between them. These are not decisions to rush.
Jos Gallacher represents Labour International on the National Policy Forum of the Labour Party.
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