Brexit Desperation grows

David Davis now Brexist minister Britain taking control of our borders
David Davis, now Brexit minister: Britain 'taking control of our borders'.

On 17 January, Prime Minister Theresa May finally announced the government’s plan for taking Britain out of the European Union. It amounted to a fantasy vision of a ‘truly global’ and independent Britain. Having confirmed that Britain would leave the Single Market, May has been left to plead for tariff-free access to it from an EU that responded by saying a new trade deal ‘necessarily must be inferior to membership’. The contradictions thrown up by Brexit have put Britain and the EU on an inevitable collision course and both sides are likely to suffer dire economic consequences from the fallout. Barnaby Philips reports.

May set out the parameters for the exit plan in a televised speech that will come back to haunt her. Compelled by the split in the Conservative Party and the desire to placate the majority of its members, she confirmed Britain would ‘take back control of our borders’ by ending the free movement of EU labour. That was a red line for the EU which meant the Single Market would always have to be sacrificed, something the usurped pro-EU wing of the party still refuses to accept. Unsurprisingly, given her brutal record on deportations as Home Secretary, May has given no unilateral guarantee that EU nationals settled in the UK will be allowed to stay.

Britain will also leave the Customs Union and the European Court of Justice. However, despite insisting that ‘we will not hang on to bits of the EU’, May wants to reach an unspecified ‘customs agreement’ or even ‘associate membership’ – an impossible demand because the EU will not allow Britain special treatment for fear of motivating other EU members to leave. Only sectoral customs agreements would be negotiable, but despite being told time and again that they would take years to complete, May is opposed to the ‘permanent political purgatory’ of a transitional deal. Instead she wants to embark on the illusory hope of negotiating both Britain’s exit and a new trading relationship within two years, accepting only a phased process of implementation beyond that point.

Another flashpoint at the negotiating table will be Britain’s future financial contributions to the EU. May said these would be ‘appropriate’ but reduced from the ‘vast’ amounts paid presently. The EU is also demanding an eye-watering ‘exit fee’ of some €40–€60bn. Both sides wish to continue to co-operate on Europe’s security.

May again claimed in her speech that the government would not restore ‘the borders of the past’ between the north and south of Ireland, but is still unable to say how the Common Travel Area could be as open as it is now once it becomes an external EU frontier. Scotland poses another constitutional issue. Scotland First Minister Nicola Sturgeon reacted to confirmation of the ‘economically catastrophic’ decision to quit the Single Market by saying that a second Scottish independence referendum is now ‘more likely’. Whether the government can hold the UK together remains to be seen.

Commercial war

Having set out her impossible demands, May made the arrogant claim that ‘no deal would be better than a bad deal’ with Britain’s biggest trading partner. That may well have to be put to the test. It would mean having to accept expensive World Trade Organisation (WTO) tariffs – 10% on cars, up to 12% on items of clothing, and 40–50% on meat.

The results would be devastating for the British economy. May was warned by the Society of Motor Manufacturers and Traders that ‘we must, at all costs, avoid a reversion to WTO tariffs, which would threaten the viability of the industry’. Japanese car manufacturer Toyota said it is now considering ‘how to survive in the UK’ and Nissan, having agreed a secretive deal to stay and invest in Britain after the referendum result, said it would now have to reconsider its plans. The agriculture industry, which exports 72% of its products to the EU, expressed similar concern. May’s speech was barely finished before HSBC announced that 1,000 jobs would move to Paris – 20% of its London business – and the investment bank UBS said the only question was ‘how many’ of its bankers would move to Frankfurt or Spain. HSBC chairman Douglas Flint said the effect of such departures could be like ‘pulling one small piece out of a Jenga tower’.

In a desperate bid to preserve foreign investment and the City of London’s status as the financial centre of Europe, May threatened to wage a commercial war. If the EU erected ‘punitive’ barriers to the Single Market, she said, Britain would be forced to set ‘the competitive tax rates and policies that would attract the world’s best companies and biggest investors’, turning Britain into ‘a low-tax Singapore of the West’, as the Financial Times put it (18 January). In reality, the City of London, British imperialism’s parasitic financial arm, is already the centre of a secret network of tax havens* based on Overseas Territories such as the Virgin Islands. Some of the biggest corporations operating in Britain already pay no Corporation Tax and those that do will see it cut to 17% in 2020, the same rate that currently exists in Singapore. Slashing it again would further damage tax revenues, making the impossible task of eliminating the £76bn annual deficit even more difficult. According to the Financial Times, ‘each one percentage point reduction costs the Exchequer roughly £2bn a year’. Retaliation would also be likely. Senior EU figures believe ‘safeguards against fiscal or social dumping’ must now be a demand at the negotiating table.

EU collapse possible

Bank of England governor Mark Carney has told MPs that while Brexit threatens London’s financial supremacy in Europe, the risks it poses to the financial stability of the EU are even greater. Carney described the UK as Europe’s ‘investment banker’, saying that its financial services sector provides 75% of foreign exchange trading for the EU and supports half of all lending. He said a sharp break in that liquidity and capacity support could be detrimental to the EU’s financial stability. Alex Braz-ier, the executive director for financial stability at the Bank of England, said that the UK exports £26bn of financial services to the EU, and imports £3bn.

While Carney was acting to strengthen Britain’s hand at the negotiating table, it is true that France and Germany’s plans to forge a European imperialist bloc to rival US imperialism have been dealt a major blow by Britain’s split. The sudden disintegration of the EU would become a possibility if the National Front’s Marine Le Pen were to win the French presidency in May. While she has backed away from promising a ‘Frexit’ in public, she has probably only done so for electoral expediency. As such, Brexit hardliners looking to forge new free trade deals are probably rooting for her fascist party, without any sense of what it could entail – the collapse of the EU could plunge global capitalism into total chaos. Germany will fight to hold it together, but the outgoing president of the European parliament, Martin Schulz, admitted the EU is ‘treading water’ in the face of ascending right-wing nationalist protectionism. ‘The Viktor Orbán [president of Hungary] generation says “we have to defend the interests of our country against Europe” – as if they were being attacked by Brussels,’ said Schulz.

Corbyn spares May

The Supreme Court presented May with one more obstacle when it ruled on 24 January that the decision to trigger Article 50 – which she planned to do with executive power at the end of March to begin the two-year process of leaving the EU – must gain parliamentary approval. To her relief, Labour leader Jeremy Corbyn has imposed a three-line whip on his MPs to back the motion on Article 50, something he chickened out of doing when parliament voted to bomb Syria in December 2015. With up to 20 Conservative MPs ready to rebel, Corbyn spared the government the prospect of total disarray by ensuring its slender 12-seat majority would not, for now, become an issue. He imposed the whip despite originally backing calls from his MPs to propose an amendment to Brexit legislation to stop May from taking Britain out of the Single Market. The SNP wanted 50 amendments and the Lib Dems said they would only vote for Article 50 if the government puts the final deal to a referendum. Delusion and self-denial in the House of Commons appear to be contagious. May did concede to publishing a detailed White Paper of her plans without saying when it would be available to scrutinise. The pro-EU Conservative MPs who stood up in parliament to demand one are obviously still determined to make May’s life as difficult as possible.

The splits opening up within the ruling class are clearly very deep, reflecting the seriousness of a crisis created by capitalism’s inability to overcome worldwide stagnant growth. It is the working class who will suffer the consequences as political fallouts turn to social disaster. A strong communist movement is urgently needed to lead the necessary fightback.         

* ‘The murky world of tax havens’ in FRFI 221 June/July 2011

Fight Racism! Fight Imperialism! 255 February/March 2017