Brexit: Ruling class divisions entrenched as negotiations begin

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The split in the Conservative Party which brought about the EU referendum has become an open wound since Brexit negotiations began in June. The ‘hard’ Brexiters in control of the government are not prepared to entertain talk of a transitional period after the March 2019 deadline that would push back the end of free movement and withdrawal from the Customs Union and Single Market. They harbour fantasies of an independent British imperialism that is simply no longer possible. Barnaby Philips reports.

The Brexit debacle is a manifestation of the deepening capitalist crisis and intensifying inter-imperialist rivalries. British imperialism’s relative decline1 forced its ruling class to make a decision it did not wish to make: become a junior partner of US imperialism or forge an imperialist bloc with Europe. With the US facing its own acute crisis under the presidency of Donald Trump, it is easy to see why much of the ruling class is determined to secure a ‘soft’ Brexit that would retain access to the Single Market and the Customs Union.

While the German economy and the Eurozone are growing at their fastest rates since 2011, Britain has seen what the Office for National Statistics called a ‘notable slowdown’, with 0.3% GDP growth in the second quarter of 2017 following 0.2% in the first quarter, the lowest in any corresponding period for two years. The trade deficit in goods also widened by more than £1bn to £11.9bn in May. Chancellor Philip Hammond was quick to blame Brexit, saying that the sharp fall in the pound following the referendum result and ensuing uncertainty had pushed up inflation and affected consumer and business confidence.

Hammond and the pro-Europe wing of the Tory Party regret the outcome of the referendum. He wants Britain to remain in the Customs Union and openly advocates a transitional ‘couple of years’ beyond the March 2019 deadline after Britain officially leaves the EU to phase in new arrangements. Hammond made himself even less popular with the majority of Tory MPs when he ordered the Treasury to write to the Department of International Trade (DIT), led by Brexit diehard Liam Fox, to reject its argument that the UK should prioritise trade deals outside of the EU.

For the Brexiters this smacks of treason, and Hammond has been the target of several leaks from the Cabinet. An anonymous source quoted on the front page of The Telegraph (16 July) accused Hammond of deliberately ‘frustrating’ the process. ‘What’s really going on is the establishment, the Treasury, is trying to fuck it up,’ the unnamed minister told the paper. Another unnamed source told The Sun (17 July) that the leaks had come from allies of Michael Gove, recently brought back into the Cabinet as Environment Secretary, reportedly at the behest of media mogul Rupert Murdoch. One Conservative source quoted in the Financial Times (15 July) fears the party ‘will collapse into civil war’ and hand power to Labour. Differences and confusion were on display again on 27 July when Home Secretary Amber Rudd moved to reassure employers that Brexit would not affect employers’ access to cheap foreign labour, before Immigration Minister Brandon Lewis responded to stress that free movement would end in March 2019.

According to reports, a number of Tory MPs want Theresa May replaced ‘by Christmas’, with 15 having prepared a no confidence letter (The Guardian 22 July). May has warned her colleagues that ‘it’s me or Jeremy Corbyn’ because a leadership challenge would almost certainly trigger another general election. Senior members of the 1922 committee of backbench Conservative MPs have, according to the Financial Times (14 July) ‘made it clear to May that she has a duty to country and party to stay on as Prime Minister to see through Brexit, which is due to take effect in March 2019.’ But rumours abound of plots to replace her, with David Davis leading a poll among members but without overwhelming support.

‘Indefinite delay’

Hammond would be the likely choice of the Confederation of British Industry. Representing 190,000 businesses, it is lobbying for an ‘indefinite delay’ in Britain’s departure from the Single Market and Customs Union. Rain Newton-Smith, the CBI’s chief economist, said the proposal was for ‘essentially operating on the same rules we have now, almost like a rollover’.

Brexit is clearly not in the interests of major corporations or the City of London, which is fighting to retain its dominant position as the financial centre of European imperialism. Amid rising tensions they appear to have given up on the possibility of a second referendum, but may well be counting on the huge complexity of negotiations to result in a ‘Brexit in name only’ strategy. According to BBC Newsnight’s Nicholas Watt (5 July), some Whitehall sources believe ‘there is a strong chance Brexit may not actually happen’.

Brexit Secretary David Davis does not share the view that Brexit will be bad for business. ‘If American banks want to relocate to Paris or Frankfurt good luck to them,’ he told a parliamentary select committee, arrogantly implying that London would remain the best place for multinationals and conglomerates to operate from.

To cling on to her position as Prime Minister, May is siding with Davis, Fox and Gove, to the chagrin of business lobbyists who have been told to express their concerns only in private meetings rather than through public campaigns. According to the Financial Times, ‘officials have made clear that any critical statements in the media about immigration, trade, or the rights of EU residents will be punished with an immediate cessation of access’.

May says that she wants ‘tariff-free trade’ with ‘as frictionless a border as possible’, but continues to claim that ‘no deal is better than a bad deal’.2 As Martin Wolf has pointed out in the Financial Times, the notion of ‘no deal’ is an ‘absurdity’. After Brexit the UK will lose more than 750 international agreements that must be replaced via complex negotiations – with the EU and third parties – triggering a ‘legal void in key parts of Britain’s external commercial relations’ and a ‘bureaucratic vortex sapping energy and resources’ (30 May). Many third-party countries want to know the outcome of EU-UK talks before making their own commitments and will take the opportunity to secure better terms at Britain’s expense. The scope and logistics of the process ahead are enormous and so too is the potential for conflict. ‘A shift to trading on WTO terms is not what a “no deal” might mean,’ explains Wolf. ‘Trading after Brexit requires a great many deals on new administrative procedures governing certification of regulatory standards, customs processes and so forth. Trade requires not only such deals, but changes in procedures that would make them work, post-Brexit. So deals will not only have to be reached, but they must be done well before March 2019. In fact, it is hard to see how trade would continue to flow if these deals were not done by the summer of 2018.’

Meanwhile, Dr Patrick Gomes, the head of the African, Caribbean and Pacific group of nations, has ruled out a free trade deal with the UK until at least six years after Brexit and taken a sideswipe at the idea of a new British trade empire. He condemned ‘reactionary’ Whitehall talk of a second era of British colonialism – dubbed ‘Empire 2.0’ – and poured scorn on the government’s trade strategy.

In another potential blow to May and her band of Brexiters, German Chancellor Angela Merkel reportedly convinced US President Donald Trump to put the EU ahead of Britain in the queue for trade deals without so much as a public hand-holding session (The Times 22 April). Having praised Brexit, Trump has realised that it could affect employment in the US. However, such inter-imperialist alliances exist on shaky grounds. In an election campaign speech on 28 May, Merkel – boosted by the victory of France’s pro-Europe Emmanuel Macron – said that Germany could ‘no longer fully rely’ on Britain and the US. Trump has since claimed he is working on a ‘major’ trade deal with Britain.

Labour also divided

Labour is hardly more united on Brexit than the Tories. Leader Jeremy Corbyn has asserted that there is no choice for the UK but to leave the Single Market and end freedom of movement, committing Labour to even tighter racist immigration controls. He says the party has yet to decide its position on customs arrangements.

The dominant right wing of the party, anxious to impress its corporate paymasters, to keep up the flow of cheap foreign labour and to preserve the City of London, is keen for the UK to stay in the Customs Union and the Single Market. Shadow Chancellor John McDonnell and Shadow Home Secretary Diane Abbott have moved to say that Labour has ruled nothing out. But Shadow International Trade Secretary Barry Gardiner says that a Norwegian-style agreement would be a ‘disaster’ and turn the UK into a ‘vassal state’ paying money to Brussels without any say over rules or agreements.

Europe’s upper hand

The arrogant behaviour of Brexit Secretary Davis at the negotiating table has tried the patience of Michel Barnier, the EU’s chief Brexit negotiator, who says Britain is yet to ‘face up to the facts’. Warning that ‘time flies’, he said that the ‘transition period began on 29 March 2017’, indicating that the EU wants the situation resolved as quickly as possible.

However talks have already faltered over a number of points, especially with regard to citizens’ rights in the EU. Britain has accused the EU of pursuing ‘judicial imperialism’ for its insistence that the European Court of Justice should oversee any agreement. The EU wants its citizens working in Britain to keep their right to send money to children of theirs outside Britain, but the Tory negotiating team wants, at least, to limit this to children born before Brexit. While the EU has offered to allow the 1.2 million British citizens living in Europe continued freedom of movement, this depends on the UK making a reciprocal offer for the three million EU citizens living in Britain. Britons abroad and EU nationals in Britain alike are being used by the Tories as bargaining chips.

The EU has also presented Britain with a reported €60bn-€65bn ‘divorce’ bill. Two days after Foreign Secretary Boris Johnson said it could ‘go whistle’ for the money, a written answer to a parliamentary question revealed that the government has agreed to meet its ‘obligations’ by reaching a ‘fair settlement’. This showed, as the Financial Times put it, that ‘the story of the Brexit negotiations will be one of the UK giving way on each contested point’.

The problems for British capitalism continue to mount. Food policy experts have warned that the country is ‘sleepwalking’ into a post-Brexit future of insecure, unsafe and increasingly expensive food supplies. There are similar fears that the NHS will have to pay more for medication and patients will wait longer for treatment. Bank of America has become the latest bank to announce the relocation of some of its operations, to Dublin, and British manufacturers say they are approaching a ‘tipping point’ where the lack of certainty over the direction of Brexit negotiations will force them to make ‘painful cuts whatever the outcome’. The list goes on.

In the conditions of deepening economic crisis, the outcome of the referendum could only have negative consequences for the working class.3 But the ruling class is profoundly divided.

Fight Racism! Fight Imperialism! 259 August/September 2017


1. See ‘Britain: parasitic and decaying capitalism’ FRFI 194 December 2006/January 2007

2. See ‘Brexit: Britain could crash out of Europe with no Plan B’ FRFI 256 April/May 2017

3. See ‘EU referendum: The position of communists’ FRFI 251 June/July 2016