Iain Macwhirter: The cheerleaders for stupid Brexit lead us over the cliff

WHAT’S the worst that could happen? Most of us who voted in Scotland to remain in the European Union are looking to 2017 with a mixture of bewilderment and trepidation. Many still can’t quite believe that Britain will actually leave the EU, so much has it become a fixture of our adult lives.

However, there is another side to Brexit we will be hearing more of in the New Year. The “positive” Brexiters are getting their act together, following, we are led to believe, the Queen and the King (Mervyn, that is, the former governor of the Bank of England who says Britain should be more “self-confident” about the opportunities of leaving the EU).

But it isn’t just on the political Right. The former SNP minister, Alex Neil, and the former Scottish Labour leadership contender, Neil Findlay, penned an epistle calling on Scottish politicians to accept that the EU didn’t deserve the respect it has had on the Left and to seize the opportunities of greater powers for Holyrood. The BBC presenter, Andrew Marr, has called on Remainers to “stop moaning” and grasp the opportunities of “taking back control”. I don’t agree with them but it is important to listen to what they say, if only to look for ways of mitigating the damage from leaving the EU.

The core of Marr’s “optimist’s guide to Brexit”, in the left-leaning New Statesman is that leaving the EU allows Britain to pursue an independent industrial policy for the first time in 40 years. We’ve been complaining about how the UK has lost its manufacturing base and had become a service economy built on a parasitic financial sector in London. Well, here’s the chance to reverse it.

Marr claims that, under EU rules, the British state has had its hands tied: “Some of the measures the Left would like to take to support the steel industry or engineering … are made impossible, not by British Conservatives but by EU regulations on competitiveness and state funding.” Rail nationalisation, for example, becomes a practical proposition only free from EU laws.

It isn’t the case that the EU is against nationalisation as such; the German and French rail systems are in state hands. Abellio, which manages the ScotRail franchise, is part of the Dutch state-owned rail service. What is being proposed in Brussels is that state monopolies should increasingly be opened up to competition.

EU competition rules make direct state support for the steel industry much more difficult. State subsidies to loss making industries are outlawed in Brussels, unless there is an overwhelming case on grounds of national economic security. This is why it was okay for Britain to bail out the banks but not steel, a circumstance that annoyed trades unionists who believe there is one rule for financiers and another for manufacturers.

Would leaving the EU lead to an industrial renaissance? This argument is difficult to stand up. Leaving the European single market will cause a significant rupture in trading relations for Britain’s manufacturing and hi-tech industries that will take many years and even decades to restore. Contrary to popular belief, we still do manufacturing in Britain. We export more cars than in the 1970s. Mostly they are made in plants owned by foreign companies like like Nissan that based themselves in Britain to gain access to the EU single market. The UK Government is desperately trying to buy off companies like Nissan by promising to keep them, effectively, in the single market after Brexit.

The pharmaceuticals industry and the City of London are also being given promises that they will not lose their privileges in the single market. This “sectoral” approach makes a nonsense of leaving the EU. It is also profoundly objectionable to Scotland. The Scottish economy benefits from being in the single market but it is not being given any such assurances that it will be protected.

Britain is better at thinking about manufacturing than manufacturing itself. We are strong on high-end technical services, design and engineering. However, whether it is designing parts for jet aircraft or a new robotic arm, Britain needs to be part of a bigger supply chain and most of that is in Europe. Think of Airbus.

The idea that Brexit will open up the world to British exports is an old-fashioned, even mercantilist, idea. There’s nothing stopping us trading with the rest of the world if we want to compete with countries paying 50p an hour. But Britain is a high-wage, high-value economy and most of that value is in the 500 million-strong EU market, the biggest and most lucrative trading block in the world. Some 80 per cent of the UK economy is services. Leaving the single market, which is unique in the world in being a free-trade area in services as well as physical exports, is an act of stupendous folly that will damage Britain, and Scotland most of all, for decades.

Of course, the EU has many faults and is in dire need of reform. The EU response to the financial crisis was to bail out the banks with public money and then impoverish weaker European countries by a ruinous and self-defeating austerity. The EU pursued essentially depression economics, forcing an entire generation onto the scrap heap with youth unemployment at 40 per cent in many countries. It is only now rediscovering not just the moral virtues but also the economic necessity of Keynesian. Small countries like Scotland are right to be apprehensive about the EU. The Scottish fishing industry was, arguably, sacrificed needlessly on the alter of EU integration. Countries like Iceland and Norway wisely stood apart but they weren’t stupid enough not to see the advantages of the single market and have paid to be a part of it as part of the European Free Trade Association and the European Economic Area.

This is the problem with Brexit. As Marr says “the reality is that Britain is out of the single market and the customs union” but this was never inevitable. It would be quite possible, as many Brexiters suggested before the referendum, to remain in the single market and leave the EU. Indeed, since Britain had not joined the euro and could devalue its currency to gain trading advantages, being in the single market was a tremendous deal.

It is not Brexit that is the problem but the form of it. There must be 50 ways to leave the EU. But the fixation with the stupidest form of Brexit, one preoccupied solely with cutting immigration, is causing huge damage to the British and Scottish economies. The Prime Minister and her Brexiters have belatedly recognised this by calling for a transition phase, an “implementation period” after Brexit in 2019 of Britain remaining in the single market for a decade or so.

The cliff edge is looming, the Brexiters have lost the plot and there’s still time to halt the madness in Parliament. It is most disappointing that liberals like Marr have chosen this moment to become cheerleaders for stupid Brexit. He should know better.

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