Decisive Brexit Referendum: What Happens Next? Part 1: UK Politics



40649817 - power struggle between the uk and europe the black map of europe has been deposited with the flags of britain and europe

[See Part 2 Here]

Thursday, 23 June 2016, will go down in history as the United Kingdom’s own Independence Day. American readers will hopefully appreciate the irony.

The take-home message is that people in the UK lost confidence in a complacent and corrupt European Union (EU) elite that wouldn’t listen to them and was dragging them against their will towards ever closer integration.

There is a deeper message too. Virtually the entire establishment, inside and outside the UK, were telling the UK electorate that they had no choice but to vote “Remain.” Inside the UK, the government, the major political parties, the majority of MPs, the Treasury, the Bank of England, the big economic research institutions, almost the entire UK economics profession, and most Big Business CEOs were all telling them to Remain. Outside the UK, almost every world leader from Barack Obama on down, every central bank governor, every major international institution, Goldman Sachs and Paul Krugman were repeating the same message. They did everything possible to scare the voters: the world would end if they had the effrontery to vote “Leave.”

The bloody-minded Brits then gave them all the V sign.

Above all, the Brexit vote reflects a phenomenon we are witnessing across much of the Western world: a repudiation of the ruling elites that are failing to deliver. It is the same phenomenon that is reflected in the United States by the rise of Donald Trump.

We can also think of the result as a bad case of “Bastards’ Revenge.” Back in 1993 the then-Prime Minister, the extreme Europhile John Major, voiced his anger against Euroskeptic Tory MPs who were giving him a hard time. Not realizing that the conversation was still being taped, Major opened up to a reporter and gave vent to his real feelings: these colleagues were “bastards”, he said. He wished they would just shut up and do what they were told. It was very embarrassing when his comments then leaked out.

It was clear by that point that there was open war in the Conservative Party over Europe. This long civil war is now drawing to a close: the decisive Brexit vote means that the “bastards” have won.

Brexit signals not just the UK leaving the EU, but something much wider: it signals the beginning of the unraveling of the EU itself.

In this initial blog posting, I would like to consider its ramifications for the future of UK politics, which should hopefully give Americans a taste for the breathtaking changes now set in motion.

Within minutes of the result, one could hear the sound of knives being sharpened within the Labour Party: angry recriminations have always been a Labour speciality. The Labour Remainers—although I should now describe them as Remainders—were quick to turn on their leader Jeremy Corbyn to accuse him of having lost the Referendum by his half-hearted and only occasional utterances in support of Remain. Had he campaigned with some enthusiasm, the comrades insist, Remain might have won.

I don’t think so myself: such claims overrate his influence. But let me spring to his defense on this occasion: Jeremy was honest about his misgivings and he was the only leader of any major political party (if one conventionally but unfairly excludes the United Kingdom Independence Party, UKIP) to get even close to the popular mood.

All the others—David Cameron for the Tories, Timothy Farron for the Liberal Democrats and Nicola Sturgeon for the Scottish Nationalists—were on another planet.

We should bear in mind that in the 2015 general election, UKIP came third nationally with 12.6% of the vote, the Liberal Democrats got 7.9%, the Scottish National Party 4.7% and the Greens 3.8%. Yet the conventional narrative is that UKIP was some unrepresentative fringe party. It is not. It speaks to a constituency that feels its concerns are being dismissed and therein lies the real issue. Understanding these concerns is the key to understanding the Brexit vote.

Let me repeat: it was precisely the fact that the political elite was completely out of touch with the electorate that fueled the anti-establishment anger that led to vote Leave and will doubtless have plenty of seismic after-shocks. Some of us have been trying to tell them this for years, decades even, and they never did get it. The Brexit vote is a wake-up call that even they can’t ignore any more.

My advice to the Tories is to go easy on the Corbynistas and throw them the occasional bone or two to help them along. If Jeremy survives the backstabbing from his comrades and is still the Labour leader by 2020, he would be a major electoral asset, albeit not to his own party.

Then there is our soon to be ex-Prime Minister David Cameron. It has been obvious for some time that the referendum would be his undoing, whatever the outcome of the vote. To be fair to him, he was repeatedly undermined by the European partners on whom he was relying to help him make the Remain case. He repeatedly reassured us that Britain had a strong voice in Europe, but the major European governments pulled the rug from under him by imposing Jean-Claude Juncker as EU President, a candidate he had desperately tried to block. Then Cameron promised the UK electorate that he would bring home a Treaty change that reflected Britain’s (or more precisely, his own) concerns for reform. He didn’t get it. All he got was a Memorandum of Understanding—not even a hard promise, let alone a binding Treaty—that the UK would be allowed to implement some minor change to the child benefits payable to EU workers with children abroad: they barely threw him a sausage.

A big mistake, but very helpful to the Leave campaign. Cameron’s and the UK’s powerlessness within the EU couldn’t have been more plainly demonstrated. All those involved were oblivious to how this would play out to an already skeptical UK electorate.

Cameron then made another blunder on Friday morning, by saying that he would resign in time for there to be a new Conservative leader by the Party Conference in October. It was a dignified and well-delivered speech, but by the time he had finished what was left of his authority had evaporated. His announcement created a situation where the summer and early fall will be dominated by the Conservative leadership campaign—Lame Duck Dave will be spinning his wheels and nothing much will get done—whilst the pressing need is to establish an effective government that can get started on the hard work of the Brexit process as quickly as possible.

It would have been better had he resigned on the spot and announced that he was off to Buckingham Palace to advise the Queen to invite a senior Brexiteer to become interim Prime Minister during the campaign to select his longer-term successor.

It is helpful here to recall the resurgence of interest in the Wars of the Roses following the discovery and reburial of the body of Richard III. Despite my Yorkist sympathies—we have long memories over here—I would heartily recommend the BBC’s recent series The Hollow Crown, but one should bear in mind the Lancastrian bias of the playwright-propagandist on which it was based, one William Shakespeare, who sought to damn good King Richard to help legitimize the weak claims of the Tudors to the English throne. My point is that as the Wars of the Roses progressed and tempers became ever more frayed, it became customary to settle scores by battlefield executions of captured enemy leaders. No niceties, no ceremony, and to the point.

In this context, I would offer the new PM a little unsolicited advice. The first head that figuratively needs to roll should be that of the Chancellor of the Exchequer, George Osborne. There are many reasons for Osborne to go—his penchant for porkies, his string of broken promises and, it has now emerged, the complete neglect on the Treasury’s part to do any contingency planning for Brexit. However, I will focus on just one: the Treasury’s Brexit reports. These reports were a disgrace. Their gist was that a Leave vote would leave the UK unmistakably worse off and lead to a self-inflicted recession. However, the Treasury’s analysis ignored any possible benefits to Leave and ignored any costs or risks of Remain. The Treasury’s models were then blatantly rigged to produce extreme pro-Remain results, which were fiddled further to get the results Osborne wanted and then presented to the public as facts rather than the inventions they really were. He then had the brass cheek to base not only an economic case for Remain, but a moral one too, on these same fiddled reports.[1]

The new PM should also fire the Governor of the Bank of England, Mark Carney. I can think of many reasons for Carney to go. He has taken a highly misleading line on the rebuilding of UK banks’ capital post the Global Financial Crisis, but this narrative is not borne out by the evidence. He uses the Bank of England’s stress tests to reassure the UK public that their banks are strong, but the Bank’s stress tests are also fiddled and yet even so, careful analysis of them reveals that UK banks are in fact anything but strong. In the present context, the key reason he should go is because he abused his position as Governor of the Bank of England—a position that requires him to remain politically neutral—to campaign openly for the Remain side. He crossed a line that shouldn’t be crossed.

Carney also has to go if only because no Brexiteer-led government could ever have confidence in him. The new PM should invite his predecessor Mervyn King to replace him as interim Governor whilst a search committee is set up to find a more permanent replacement.

I would add that any Bank of England participation in that process should be kept to the absolute minimum and that no senior current Bank of England official should be considered for the post: every single one of them has compromised themselves, either in the handling of the crisis or in the Brexit debate or both. We need fresh blood.

Who would be the best candidate to be the next leader of the Conservative Party? Ideally, I would have preferred either of [Lords] Nigel Lawson or the Chingford skinhead Norman Tebbit. Both played distinguished roles under Margaret Thatcher, the first as her chancellor, the second as her “bovver boy.” At ages 84 and 85, however, Lords Lawson and Tebbit are now too frail to bear the burdens of the premiership. Fortunately, there are two outstanding candidates who are fighting fit and at the peak of their powers: David Davis MP and former Defense Secretary Dr. Liam Fox MP. Both are consistent long-term, hard-core Brexiteers.

You will note that this list does not include the most-talked about candidate, Boris Johnson. Despite his jovial populist image and the entertaining clown act, Mr. Johnson did a poor job as London mayor, is often not on top of his brief and is unpopular among Conservative MPs. His Brexiteer credentials are also doubtful, notwithstanding the major role he played in the campaign. He sat on the fence for a long time before announcing which side he would support. In fact, it has just been revealed that before deciding which side to take, he wrote two letters to be published, one supporting Remain and one supporting Leave. He himself then admitted that he found the Remain letter more convincing, but opted to join the Leave campaign instead. There is a lingering suspicion that he had calculated that he had nothing to gain if Remain won, but if Leave won, Cameron would be out and he could swan in as the man who had saved the Brexit cause to become Cameron’s obvious replacement. Mr. Johnson is, thus, an opportunist.

At the risk of having to eat my words, I don’t see Boris getting in.

Let me take a brief detour to explain why.

Traditionally, the Conservative Party leader was selected by majority vote among Conservative MPs, i.e., smoke-filled rooms. However, it was recently decided to modernize the process by giving a say to party members as well.

The old system was better: it guaranteed that whoever emerged as leader would have the full confidence of his or her Parliamentary party and could command a majority in Parliament, which is the key to being able to govern effectively under a Parliamentary system. If party members were dissatisfied, they could lobby their MPs, leave the party or vote for the opposition.

At first sight, one might get the impression that the Tories had adopted a system as silly as Labour’s. There are already jokes going the rounds about Labour4BoJo and I can understand if Labour supporters feel they owe the Tories on this one for the Torys4Corbyn movement in which many Tories registered as members of the Labour Party so they could vote for the most unelectable leadership candidate, i.e., Corbyn. They might want to return the favor by registering as Conservatives to vote for the candidate they feel most likely to screw up.

They can dream on.

The way the Conservative selection process actually works is as follows. The Conservative MPs begin by taking a vote. If there is only one candidate, then that candidate is selected. If there is more than one candidate, the MPs vote on the top two candidates. There is then a postal ballot among Party members, who have to choose between the two candidates offered to them.

Now consider the worst-case scenarios under both systems.

Under the Labour system, every party member has an equal vote among candidates who get some minimal level of support from their parliamentary colleagues. This is a great system because it ticks all the “right-on” PC boxes. But the downside is that it creates the possibility that the party membership might select a leader who cannot command the support of his or her Parliamentary colleagues. He or she would then be undermined from the start. Comrade C is a perfect example: he only just scraped in as a candidate and few took him seriously. However, his anti-establishment credentials were impressive and the bandwagon took off. He then got elected to everyone’s surprise, not least his own. The result is that the poor man now has a daily struggle to assert his authority over his truculent parliamentary colleagues [sic], most of whom make no secret of their lack of confidence in him. But the party leadership selection process means that they are stuck with him. All they can then do is undermine him.

I quite like this system for the Labour Party.

Under the Conservative system, the worst-case scenario is not nearly so bad. The worst-case scenario is where there are two candidates, one strongly supported by MPs, the other strongly supported by party members, and then the latter becomes party leader. This can create a disconnect between selection and the ability to work effectively in Parliament. However, at the end of the day, Tory MPs still have the ultimate veto. There is an unwritten convention that they can dismiss their leader by discreetly informing him or her that not enough of them feel they can support the leader any further, but thank you for all you have done. This is how Margaret Thatcher got booted out.

So going back to Boris: under the old system, he wouldn’t have made it because the MPs wouldn’t have voted for him. Under the new one, he can only make it if he gets onto the two-candidate shortlist that will be sent out to party members. If he gets that far, he would have a fighting chance. But my guess is that the MPs will make sure he doesn’t get onto that list: Conservative MPs have always excelled at stitch-ups.

The next question is whom should the new PM include in his or her government. To state the obvious, the PM should include a strong cohort of Brexiteers committed to making Brexit work, and there is plenty of talent to choose from. Indeed, the potential is there to form a new government of all the talents, imitating that of William Wyndham Grenville, 1st Baron Grenville, on his appointment as Prime Minister in 1806 following the death of William Pitt the Younger.[2]

In addition to Messrs. Davis and Fox, should either not be selected as leader, there is my chum and Cobden Centre colleague Steve Baker MP, who has campaigned tirelessly for sound money and banking reform as well as Brexit. There are also Dr. Kwasi Kwarteng MP, former minister Peter Lilley MP (who also has the distinction of being one of Major’s bunch of ‘bastards’), Jacob Rees-Mogg MP and the UKIP MP, Douglas Carswell. By the way, Carswell being a UKIP MP would not be a barrier to him joining a Conservative government, although it would be unusual: the PM can select anyone he/she wishes. And since Carswell had defected to UKIP from the Conservatives—and on the Brexit issue—less than two years ago, he could hardly be less out of place.

There are also two exceptional MEPs who would have much to offer a Brexiteer Conservative government: Daniel Hannan and Dr. Syed Kamall, currently the leader of the European Conservatives and Reformists Group in the European Parliament. Also highly recommended is former Conservative and former UKIP MP Mark Reckless. Although none are current MPs and the UK constitution requires that ministers serve in Parliament, this requirement is easily satisfied: the PM could recommend to the Queen that they be ennobled and Barons Hannan, Kamall and Reckless could serve as ministers from the comfort of the House of Lords. The other solution is to create vacancies for them in the Commons by putting some party old-timers with safe Conservative majorities out to pasture in the Lords.

In my follow-up postings, I will consider some of the further implications of the Brexit vote.

[See Part 2 Here]

******

[1] For some critiques of these reports, see here, here, here and here.

[2] As an aside: such a ministry is not to be confused with the fake “government of all the talents” promised by the now discredited Gordon Brown when he took over as PM in 2007, which promptly sleepwalked into and then botched the financial crisis. Never has a government been more misnamed.

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