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Beginning to see the light: Brexit, the most English of revolutions

 

inequality
‘My dreams were full of strange ideas
My mind was set despite the fears..’

 

This week’s column is the first of a trilogy, next week we will consider income inequality, and finally we will look at the rise of ‘populism’ and nationalism and what it has meant – writes Philip Gilbert

 

This trilogy will then be summarised as we consider where the UK might go politically post-Brexit and C-19.

Brexit was the most English of revolutions, driven by a minority that have been left unharmed by it, whilst the majority who they hoodwinked into supporting it, suffer the consequences. This typifies British democracy; ‘the ruling class defuses social grievances by selectively recruiting from the ranks of the aggrieved.’

To better understand Brexit, we need to consider what caused it.

In 1946 Churchill1 spelled out his vision ‘to recreate the European family, or as much of it as we can, and to provide it with a structure under which it can dwell in peace, in safety and in freedom.

We must build a kind of United States of Europe.’ But he did not see Britain as being at its heart, ‘France and Germany must take the lead together’, which they did, forming the European Coal and Steel Community in 1951 and then the European Economic Community in 1957.

 

‘the ruling class defuses social grievances by selectively recruiting from the ranks of the aggrieved’

 

By 1961, the then Tory prime minister, Harold Macmillan, applied for membership, believing that continued exclusion would be harmful.

Whereas the Labour leader, Hugh Gaitskell, felt that joining a federal Europe would be ‘the end of Britain as an independent European state, the end of a thousand years of history’.

Macmillan’s application was vetoed for a decade by French president Charles de Gaulle, who feared that the UK would torpedo the grand project. It was not until 1973 that Edward Heath’s Tory government took Britain in.

In 1974, Labour PM Harold Wilson promised the electorate a referendum on Britain’s continued membership, allowing his own Eurosceptic cabinet ministers, led by Michael Foot and Tony Benn, to campaign to leave. Most of the Tory press backed staying in, and the result was 67% in favour.

Margaret Thatcher had campaigned to stay in the EEC in 1975, and, as PM, signed the Single European Act in 1986.

However, she became concerned about the ambitions of the European project, and her 1998 Bruges speech became a template for a new generation of Tory sceptics. In it she said, ‘To try to suppress nationhood and concentrate power at the centre of a European conglomerate would be highly damaging and would jeopardise the objectives we seek to achieve’.

Tory Eurosceptics were inspired,  as they were concerned that the original vision of a trading area had been supplanted by Franco-German ambitions for political and economic union.

 

‘to try to suppress nationhood and concentrate power at the centre of a European conglomerate would be highly damaging’

 

Ultimately, Thatcher’s increasing scepticism put her at odds with key members of her cabinet, including Michael Heseltine, and hastened her downfall.

Thatcher’s exit, and the UK’s traumatic experience with the European Exchange Rate Mechanism in 1992, followed by rows over the Maastricht treaty, which created the EU and paved the way for economic union, ensured that Europe dogged John Major’s premiership. With a tiny working majority, his government was crippled by division.

Tony Blair became Labour leader in 1994 and promised to lead a British government committed to the EU and which would even consider joining the euro if conditions were right.

Fortunately, his right-hand man and future Chancellor, Gordon Brown although pro-European, had severe doubts about the euro.

The Tories made little progress under anti-EU leaders, William Hague, and Iain Duncan Smith, and the Party suffered due to in-fighting and focus on Europe at a time when the electorate was more influenced by domestic issues. As further European treaties, such as Amsterdam and Lisbon, brought greater integration, Tory Eurosceptics talked openly of leaving.

In 2004 The EU added 8-new members, all from eastern European, triggering a wave of immigration that strained public services. In England and Wales, the share of foreign-born residents increased to 13.4% of the population by 2011, almost double the level in 1991.

In the years prior to the Brexit referendum, migrants came to the UK as our economy was growing at twice the pace of the euro zone’s.

 

‘migrants came to the UK as our economy was growing at twice the pace of the euro zone’s’

 

On becoming PM in 2010, David Cameron said he wanted his party to stop ‘banging on about Europe’. But his Eurosceptics continued to demand more, even cuts to the EU budget and a veto against integrationist plans were not enough. They wanted a referendum on whether to stay or leave.

The straw that broke the camels’ back came when anti-EU U.K. Independence Party (‘UKIP’) won 13% of the vote in the 2015 general election. Immigration had become the central issue, which, because the free movement of citizens is a basic tenet of EU law, leaving the bloc was the only way to stop this. This led directly to the referendum in June 2016.

The data below shows that, in general, Brits have been reluctant to embrace the EU; it is estimated that since we joined in 1973 somewhere between 30% and 60% of the public has always been opposed to membership. This undoubtedly increased after the rapid rise in EU immigration, which began in the late 1990s, and the Eurozone debt crises, which precipitated mass unemployment across Southern Europe. Nevertheless, there has always been a sizable Eurosceptic faction in Britain, in contrast to the other member states.

 

  1. The UK ranked 28 out of 28 for European identity: nearly two-thirds of Britons do not identify as European at all, compared to fewer than 40% of French and Italians, and fewer than 30% of Spanish and Germans. (1)
  2. The UK ranked 26 out of 28 on trust of the EU: fewer than 30% of Britons trust the EU, compared to 39% of Germans, 47% of Dutch and 57% of Danes. (1)
  3. The UK ranked 28 out of 28 for the percentage of emigrants living inside the EU. According to UN data, there are more Britons living in Australia than there are in all 27 other EU countries combined. (1)
  4. The UK is less reliant than most member states on the internal EU marketplace being ranked 27 out of 28 for imports, and 28 out of 28 for exports. (1)

This lack of integration led to the populace having less European self-identity and lower trust in the EU for several reasons:

  • Britain was the only allied European power not to have been occupied during WW2.
  • Britain has its own common law legal system, which contrasts with the civil law system of continental Europe.
  • Britain has an established church, most British Christians have historically owed their allegiance to a national institution headed by the monarch, rather than to an international institution headed by the Pope.
  • Britain is an island whose surrounding waters have partially isolated it from cultural developments on the continent.
  • The fact that Britain does relatively more of its trade and investment outside of the EU, is due at least partly to the size and economic development of its former empire, the status of English as the global business language, and its particularly close ties with the United States.
  • Britain’s colonial past explains why relatively fewer of its emigrants choose to resettle in the EU.

Whilst it is clear that we have never really integrated with Europe this study overlooks what I believe became the key driver, immigration. Within this we need to consider government’s austerity policies which further stoked the immigration fire.

The mantra of the ‘Leave’ campaign was ‘taking back control’ an overtly nationalistic slogan. Nationalism and immigration are two-sides of the same coin.

If immigration fueled the fire of increasing Euroscepticism, it was Nigel Farage, the United Kingdom Independence Party (‘UKIP’) leader, who light the match.

The original first Eurosceptic party was the Referendum Party, created by the financier Sir James Goldsmith to fight the 1997 General Election. The party planned to contest every constituency where there was no leading candidate in favour of such a referendum, and briefly held a seat in the House of Commons after George Gardiner, the Conservative MP for Reigate, facing deselection, changed parties in March 1997.

The party polled 800,000 votes and finished fourth but did not win a seat in the House of Commons.

UKIP was founded in 1993 by Alan Sked, but had limited success. Farage became the party’s dominant figure in 1997 when he led the faction that ousted Sked as leader.

The mantra of the ‘Leave’ campaign was ‘taking back control’ an overtly nationalistic slogan

Due to a change in the election principle, the 1999 European Parliament election allowed for the first UKIP parliamentary representation.

In 2006, Farage officially became leader, under his direction, the party adopted a wider policy platform and capitalised on concerns about rising immigration, particularly among the White British working class. This resulted in significant breakthroughs at the 2013 local elections, 2014 European elections, and 2015 general election.

It was in January of 2015, that Farage made a quantum leap forward. He met with Gianroberto Casaleggio, who Farage described to an aide as the ‘genius behind Five Star’, the Italian political party that won a 25% vote share in 2013, the first national elections it had ever contested.

Casaleggio and the comedian Beppe Grillo, who was famous in Italy for his rabble-rousing live shows, had founded the movement just 4-years earlier.

They had largely built the Five Star Movement online, with little money or mainstream media attention.

Five Star was the first step towards Casaleggio’s long-term ambition of supplanting parliament with an online democracy where citizens, highly informed through the internet, could fashion policy directly.

Farage, who had ‘always been interested’ in direct democracy, and in ‘turning everything over to the internet’, was more impressed by the fact that, after just a few years, Casaleggio’s largely online movement was on the verge of becoming Italy’s biggest political party. He wanted to know how Casaleggio had done it, and to replicate its success.

Casaleggio’s ‘edge’ was utilising social media and the internet to create a new model for political communications.

‘Casaleggio’s ‘edge’ was utilising social media and the internet’

From a single on-line platform, Five Star members were discussing and voting on policy, and nominating and electing each other to run for office while being steeped in party propaganda.

This made supporters feel as if the movement’s identity was emerging from their online interactions, whilst Casaleggio and Grillo could guide those interactions with messaging from above.

Uniquely, the ‘movement’ was dominated by a private company owned by Casaleggio. Five Star more resembled a publicly traded company than a political party. Its members were voting shareholders, but Casaleggio had the controlling stake.

‘If I was starting UKIP today,’ Farage told the political scientists Matthew Goodwin and Caitlin Milazzo around that time, ‘would I spend 20 years speaking to people in village halls or would I base it on the Grillo model? I know exactly what I would do.’

Farage applied the lessons he learned from Casaleggio first to the Brexit referendum, and then to the Brexit Party which he founded to pursue his own political goals under the guise of direct democracy.

The Brexit party used slick digital ads and promised to save democracy by giving power back to the people. Supporters can apply to be candidates via an online portal, and the party has jettisoned traditional structures and hierarchies.

‘The Brexit party used slick digital ads and promised to save democracy by giving power back to the people’

‘The Brexit party is the virtual carbon copy of the Five Star Movement,’ Arron Banks, Farage’s long-time supporter and collaborator, told me. ‘What the Five Star did, and what the Brexit party is doing, is having a tightly controlled central structure, almost a dictatorship at the centre,’ he went on. ‘If you have a tightly controlled structure, then the crazies can’t take over.’

Whilst Five Star claimed to be neither right nor left-wing its policies attracted many supporters disillusioned with the Italian left, which, like Tony Blair’s New Labour, had swung to the centre.

Five Star’s central message was its condemnation of what it saw as the country’s overpaid, corrupt political establishment – right and left alike. Several friends and former staff have said that Casaleggio was against open immigration and that he strongly disliked Italy’s left.

Both parties blamed political elites for the deepening financial crisis, which had caused unemployment to soar in Italy as well as the UK, and capitalised on the public’s growing mistrust of mainstream parties.

‘capitalised on the public’s growing mistrust of mainstream parties’

Both claimed to be struggling against entrenched powers and taking back control for the people. Farage claimed referendums could address the disconnect between politicians and ordinary people and argued for the right of recall, whereby constituents would have more power to force out their MP. Five Star called itself a ‘movement of citizens’; Farage said UKIP’s supporters were the ‘People’s Army’.

Interestingly, these polices were already central to Farage’s thinking. Prior to the 2014 European elections, Farage believed that UKIP could win a majority if the party reached beyond the right-left divide.

To appeal to Labour’s northern heartlands, Farage combined his usual message about EU idiocy and waste, with talk of how industrial communities had been left behind. But he also stoked fears about immigration and said the EU’s free-movement policy was a threat to national sovereignty.

Migration, driven by freedom of movement became a key issue for ‘Leave’ voters. Freedom of movement for workers is one of four economic freedoms in the European Single Market allowing EU citizens the right to move and reside freely between member states.

Aside from some ‘asylum seeker’ fears, campaigners for ‘Leave’ believed that reducing immigration from EU citizens would ease pressure in public services such as schools and hospitals, as well as free up jobs for British workers, allowing for higher wages as labour supply decreased.

Whilst this was readily believed by many Leave voters, I want to examine whether these concerns were genuine.

  1. Have more jobs for EU citizens meant fewer jobs for UK nationals?

Jobs for EU citizens increased annually since data were first collected in 2006. This was not the case for UK nationals in the aftermath of the GFC, e.g., in 2009 there was an average loss of 446,000 jobs.

Assessing the data for and after the 2016 referendum shows that:

  • Jobs growth of UK nationals aged 15 and older peaked at an average of about 491,000 jobs in 2014.
  • Over the 3-years following 2014, the UK added on average around 223,000 jobs for UK nationals per annum.
  • Job growth for UK nationals remained strong in 2018, with about an additional 39,000 jobs.
  • The first two quarters of 2019 showing average jobs growth for UK nationals of about 225k.

This compares with a peak in jobs growth for EU nationals of about 279,000 in 2015, with an average increase in jobs for this group of about 167,000 per annum in the following two years. Conversely, over the course of 2018 there was a decrease in EU-27 employment of about 73k, though this has rebounded to an additional 100k jobs on average in the first two quarters of 2019. (2)

  1. Income inequality and living conditions.

In general, the living conditions of the UK population are good relative to our peers.

  • GDP per capita in the UK has grown faster than in comparable EU economies since the European single market began in 1992.
  • The unemployment rate has trended down since 2011 and was around historical lows in June 2016.
  • In terms of poverty, measured by the percentage share of the population aged 18-64y at risk of poverty or social exclusion, the UK is below the EU-average and showing a declining trend in recent years after the post-financial crisis rise.

The issue for much of the population was the fact that the gains were not equally spread across society or regions, leading to high income inequality.

As measured by the Gini coefficient (3), the UK is more unequal than the EU average. Ranking all EU countries in an ascending order of income inequality, the UK is ranked 7th highest among countries such as Italy, Romania, Greece, and Portugal.

According to data from the ONS, between July 2014 and June 2016, 43.8% of total wealth was owned by the top 10% of the population. In comparison, the bottom 10% owned only 0.1% of total wealth.

This income inequality in comparison to other EU countries is not a recent development, ever since data was first collected, the UK has always been less equal when compared to most other EU countries.

This inequality became more pointed post the 2010 general election when the coalition government’s focused on deficit reduction.

A study by the Institute for Fiscal Studies (2016), show that the tax and benefit reforms under the Programme resulted in significant income losses for those of working age in the bottom half of the income distribution.

In addition, cuts to spending on services tended to have greater impact in areas that were already more reliant on central government grants (IFS, 2015).

Whilst immigration was a key driver for many ‘Leave’ voters, the data doesn’t fully support this. Although job growth for UK nationals did suffer when compared to EU nationals immediately post the GFC, wage data for 2018 and 2019 show that increases in jobs for UK nationals have coincided with the fastest pay growth seen in over a decade at a time when the pace of jobs growth for EU nationals has fallen back.

Leave voters tend to be ‘older, white, socially conservative voters in more economically marginal neighbourhoods

The one area where there is clear evidence is demographics. Referred to as ‘The Left Behind’ by Professors Matthew Goodwin and Robert Ford, these Leave voters tend to be ‘older, white, socially conservative voters in more economically marginal neighbourhoods’.

The demographic breakdown of those who voted Leave in the EU membership referendum supports this theory.

This factor can be summarised by a quote from Inglehart and Norris’s 2016 paper on the economic have-nots and cultural backlash: ‘Less educated and older citizens, especially white men, who were once the privileged majority culture in Western societies, resent being told that traditional values are ‘politically incorrect’ if they have come to feel that they are being marginalized within their own countries.’

As a summary we should examine what the impact of Brexit has been. However, after only 1-month it is somewhat unfair to judge.

Personally, I have not seen, read, or heard of any upside, except for fish, who, according to Jacob Rees Mogg are ‘happier’.

Although this might be because fisherman have stopped catching them as Brexit has led to new costs and regulations. This has meant catches rotting before they reach EU markets, costing the industry millions.

There is the governments stealthy deceit in planning a lorry park for up to 1200 lorries on the white cliffs at Dover. With less than one week before the end of an official 21-day engagement process, residents have mounted what they describe as a ‘David and Goliath’ battle to try to reverse this decision.

The site is one of 10 inland border facilities the government has either opened, is building, or is planning to deal with the full suite of customs, tariffs and duties checks that will be operation from July this year.

‘Personally, I have not seen, read, or heard of any upside, except for fish, who, according to Jacob Rees Mogg are ‘happier’’

There is the fashion industry, especially the cheaper end with smaller margins, which is being hit by the ‘rules-of-origin crisis’, paying new duties on products manufactured outside the EU.

The crisis in a car industry that’s worth £42bn in exports, employing 823,000 people, where car-part delays are halting production at some factories.

There is the City and the slipping away of the so-called invisible exports.  The Governor of the Bank of France has said that Britain’s withdrawal from the European Union has driven almost 2,500 jobs and ‘at least €170bn in assets’ to France.

Whilst the EU is still allowing London clearinghouses to operate across the continent for 18 months, this is only because they do not have comparable institutions of their own. Once that deadline has expired, however, financial transactions in euros are going to have to be settled within the EU.

There is the unfolding Northern Ireland disaster. The crisis in the GB/UK crossing is not down to ‘teething problems’, as Raab woud have us believe, it is part of Brexit. The Telegraph reports that 10% of lorries are being turned back at the EU border. Delays will continue, spot checks at EU borders are standard, as will queues, lorry parks and roadside squalor.

In fact, such is the mess for exporters that many UK small businesses are being told by advisers working for the Department for International Trade (DIT) that the best way to circumvent border issues and VAT problems that have been piling up since 1 January is to register new firms within the EU single market, from where they can distribute their goods far more freely.

‘it was now clear that Brexit was not about winning back control from the EU but investing in it to survive’

One small business owner who received this advice from the DIT said: ‘This guy talked complete sense. What I said to him was, have I got another choice [other than to set up a company abroad]? He confirmed that he couldn’t see another way. He told me that what I was thinking of doing was the right thing, that he could see no other option. He did not see this as a teething problem. He said he had to be careful what he said, but he was very clear.’

As the owner said, ‘it was now clear that Brexit was not about winning back control from the EU but investing in it to survive’.

One of the central tenets of Brexit was that leaving the EU would be a liberating moment, creating a buccaneering free-trade Britain allowing wealth creators to flourish as they were unshackled from the stifling regulations of Brussels.

The reality is that Brexit has imposed a vast amount of cumbersome and costly new bureaucracy on exporters and importers. While some ministers talk about reducing worker protections in the name of ‘cutting red tape’, a move for which there is little demand even from employers, Brexit is ensnaring British businesses in mounds of the stuff.

‘Whilst Johnson and his cronies hide behind the term ‘teething trouble’ these are permanent problems’

Whilst Johnson and his cronies hide behind the term ‘teething trouble’ these are permanent problems. There will be an ongoing increase in border friction and all the expense that comes with it are the consequences of Johnson’s Brexit.

The truth isn’t something Johnson is familiar with, even as he was hailing his agreement with the EU, claiming that ‘there will be no non-tariff barriers to trade’, his government were recruiting and training 50,000 additional customs agents for the post-Brexit world.

HMRC estimates that Brexit demands that British companies complete 215m additional, often complex documents a year, with a mirroring amount of extra paperwork also being generated by EU counterparties. The cost to British business alone is estimated at £7bn a year.

All of this so a few Colonel Blimp types could say that we have our sovereignty back.

To paraphrase Churchill, Never, in history, has some much damage been done by so few, to so many.

‘Sees the failures of the Modern Man
Wise words and sympathy
Tell the story of our history’

Notes:

  1. https://blogs.lse.ac.uk/politicsandpolicy/explaining-brexit/
  2. https://www.kbc.com/en/economics/publications/voting-leave:-what-were-the-underlying-factors-behind-the-brexit-vote.html
  3. The Gini coefficient is based on the comparison of cumulative proportions of the population against cumulative proportions of income they receive, and it ranges between 0 in the case of perfect equality and 1 in the case of perfect inequality.

‘Another departure’ this week as Philip serves up an absolute epic as his now ‘grown up’ column goes back to its roots by looking at Brexit one month on; it is planned as the first of a trilogy to be followed-up with a summary considering where the UK might end post-Brexit and C-19.

Because of the very nature of the topics he considers many of the threads that weave their way through his narrative will be familiar as they are intrinsically entwined; issues of inequality and the ‘left behind’ are present because they played such a key role in shaping recent history.

Very many of his column inches have been devoted to exposing innumerable Covid cock-ups and Brexit buffoonery, and Philip has made little secret of the height of the esteem in which be holds the Bullingdonians, so a comment in his preamble may cause some concern – ‘I believe that the Tory’s would win an election if it were called today. Unbelievable, maybe, but this country has deep rooted issues. I just don’t believe Labour appeals to the electorate.’

Philip’s potted history of the UKs relationship with Europe explains in no small part how it just may be possible to be half-pregnant; a member only of the parts it embraced and with high levels of mistrust and Euroscepticism, perhaps the result of the 2016 referendum was always an inevitability.

As a fascinating aside, he also describes how the architect of Brexit became attracted to the idea of ‘direct democracy’ and how Nigel Farage’s admiration for Italy’s Five Star party enabled him to engage the disaffected by promising to address their concerns about the large inflows of people post-EU enlargement in 2004 and to ‘take back control’.

However premature it may be to draw any sweeping conclusions, just one month in the initial signs are not good; chaos at the borders, mountains of red-tape and companies being advised to move abroad may seem a little steep in terms of the price to pay for our now deliriously happy fish.

Philip posits that what we have is not teething-trouble, its the manky old set of post-Brexit molars we’ll be beaming with on the sunlit uplands; having said that, would our vaccination programme have been so relatively advanced if we’d been waiting for the other 27 to approve it? Discuss. 

But do so only after you’ve lapped up this week’s grown up, and entirely pertinent tracks – for fun only Billy Bragg and ‘A New England’ and Joy Division with ‘Failures’. Just saying.

Philip Gilbert 2Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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