IRISH SUNDAY BUSINESS POST: Brexiteers Have Reasons To Be Cheerful About Life Outside The EU

Brexit is “a historic mistake” and the costs of the leaving the European Union will be “substantial” and “very unpalatable”, said Former Prime Minister Sir John Major last week. “Come off it sunshine!” was Boris Johnson’s reply.

“It’s most important, as we set out on this journey, to be positive about the outcome,” said Britain’s mop-haired Foreign Secretary. The UK has a “fantastic future” outside the EU, Johnson argued, telling Major to stop “moaning and droning”.

Brexit – and Trump, obviously – continue to dominate the UK’s newspapers and airwaves. Little else has broken through over the last week, except fallout from the Oscar’s envelope fiasco and sport of course. There’s been scant national coverage, for instance, of the build-up to this weekend’s crucial Northern Ireland assembly elections, amidst the Brexit/Trump media obsession.

The Brexiteers are increasingly upbeat about the UK’s economic prospects. “Some of us dismissed forecasts of calamity ahead of the EU referendum,” Johnson crowed last week, mocking Major for backing Remain. Since last June’s shock vote, the UK has indeed chugged along quite nicely, with 2016 growth outstripping America and the Eurozone, and Wednesday’s Budget statement likely to include further growth upgrades for this year and next.

Even without the tax cuts and deregulation which some say will follow Brexit, big technology firms are still piling in. Apple, Google and Facebook have unveiled plans for further expansion, consolidating the UK as Europe’s main tech hub. No-one serious still insists Brexit will harm London’s position as a global financial capital – with many now saying the opposite.

Innovation giant Dyson unveiled plans for a new Wiltshire “campus” last week, employing thousands more engineers and scientists, as Boeing announced Britain will host its first European factory. A weaker pound, meanwhile, is boosting manufacturing, with the latest PMI survey data confirming a sustained post-referendum expansion.

Last week’s big Brexit news, though, was from Westminster, as the government suffered its first Parliamentary defeat over the Article 50 bill. Prime Minister Theresa May insisted her plan to trigger Brexit before end of March “remains unchanged”, despite the House of Lords passing an amendment forcing the government to guarantee residency rights of all EU citizens now living in the UK.

May is “confident” the measure will be voted down when the bill returns to the House of Commons later this month, and she’s probably right. Many Labour MPs are petrified that perceived “Brexit blockers” will be punished in their party’s heartland northern seats which swung last summer’s vote to leave.

Yet I still think the government is making a strategic mistake. Don’t get me wrong – I voted to leave the EU. More than that, at the turn of the year, along with fellow economist Gerard Lyons, I wrote a paper called “Clean Brexit” – calling for the UK, ahead of our formal exit negotiation, to rule out membership of both the single market and the EU’s customs union. This policy was adopted wholesale in May’s subsequent “Priorities of Brexit” speech in late January. So, in my view, her policy so far is broadly correct.

But the UK government should now guarantee the residency rights of the 3m or so EU citizens in the UK, even before the same rights are granted to their 1.2m British counterparts living in the EU. The Prime Minister should have done this months ago, as some of us argued. With the House of Lords now forcing the issue, a unilateral guarantee will be seen as a climb-down. But it’s still worth doing.

Rather than whipping Tory MPs to vote down the Lords amendment, May should grant EU nationals living in the UK before last June’s referendum the right to stay. The workers themselves, as well as the businesses employing them, deserve no less. The EU, which has also dragged its heels, turning down May’s earlier offers of a mutual guarantee, will eventually be forced to reciprocate – not least as many EU-based Brits are relatively wealthy retirees with big local spending power.

A unilateral guarantee now, ahead of what are likely to be testy Brexit negotiations, would allow the UK to adopt the moral high ground, demonstrating it wants to be neighbourly and constructive. It could help May on the domestic front, too. For having been defeated in the Lords once, another opposition amendment could be passed this Tuesday – calling for Parliament to have an effective “binding vote” on the eventual EU exit terms. That would seriously cramp the UK’s style during the two-year negotiation once Article 50 has been triggered, incentivizing Brussels to impose massively onerous terms, not least on the UK’s “final payment” – in the hope that Parliamentary rebels then gain public support to scupper Brexit entirely.

May should say she’ll adopt their Lordships’ policy on EU citizens’ rights, if the “binding vote” amendment is dropped – which is anyway a posturing attempt to stop Brexit by embittered Remain-backers. Whatever happens, expect high drama at Westminster this week – and not a lot of coverage out of the UK about much else.

The Republic of Ireland, of course, is a special case. If the residency rights of EU citizens living in the UK are almost certain to be granted, one way or the other, those of 350,000 UK-based Irish nationals are surely beyond doubt. “The family ties and bonds of affection uniting our two countries mean there will always be a special relationship between us,” May declared in her January speech, stating that “maintaining the Common Travel Area with the Republic of Ireland” is “an important priority”.

The lack of formal borders dates back to the formation of the Irish Free State in 1922, long before the EU was even thought of. Governments in both Dublin and London – to say nothing of the vast majority of voters in both countries – adamantly want a continuation of our long-standing free-trade-free-movement status quo. While there are complications, of course, not least relating to the Northern Ireland border, there is enormous public will for common sense to prevail. Yet the fly in the ointment is the EU. For if the UK and Ireland have completely open borders, Brussels may argue, why not the UK and France?

Brexit poses a deep quandary for the Irish government. Should it negotiate directly with Britain, as Irish voters increasingly seem to want, given the vital trade links and blood-ties at stake. Or should it outsource the future of an ancient bi-lateral relationship to a remote organization dominated by far more powerful countries which, when it comes to negotiating with a large economy like Britain, will have far bigger fish to fry.

After meeting the Taoiseach in Brussels last week, Michel Barnier, the European Commission’s lead negotiator, said he wanted to “intensify the already close engagement with Ireland over the coming weeks”, as the UK triggers Article 50. Is that wise? Any attempt by the EU to get between Britain and Ireland, to use our instinctive need and desire to travel between and trade with one another as a bargaining chip, could easily backfire. That would amount, as Sir John Major might say, to “a historic mistake”.

Liam Halligan writes a weekly column in The Sunday Telegraph @liamhalligan

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