The media analysis of the brexit speech today has been disappointingly superficial. Even on social media, we’re basically just seeing remainers feeling disheartened and leavers naively lapping everything up without a second thought – but that’s just been the whole thing in general. Here’s my take, which is a bit deeper than anything I’ve seen written so far. Of course, I may be wrong to look at it so closely, it may be that Theresa May is simply aiming for a hard brexit. But it would be a bit embarrassing if it took her six months to decide that she’s just going to aim for the unmitigated worst case scenario and not try for anything better, wouldn’t it?
She hasn’t laid it out exactly, but we now know Theresa May’s negotiation strategy:
1. Suggest that we’ll become a tax haven if things don’t go our way
2. Say “Well we can’t be in the single market because it means immigration, the other EU leaders said so, hint hint”
She is now throwing the ball into the EU’s court and hoping they’ll see that she’s serious and soften on freedom of movement. It’s not an accident that the tax haven idle chatter, which has come out of nowhere, was first made in an interview with a German newspaper: it’s a threat levelled at Mrs Merkel.
This implies that Theresa May doesn’t think the tax haven idea is strong enough to be plan A.
She made the explicit assertion that immigration has put a downward pressure on wages. This is probably not true, and is easy to rebut by pointing out that London has the highest amount of immigration in the country, and also has the highest wages.
She also seems confused on globalisation. She is all for it with all her talk of a global Britain, as are most ultra-Tories, but most ordinary people resent globalisation; that’s why they voted for brexit. Becoming a tax haven is temporarily kicking the resentment of globalisation down the road. When we can’t blame immigrants for low wages and insecure employment, we’ll blame the foreign tax dodging multinational corporations. We already do, just not as much as we blame immigrants.
And the correct way to limit the political power of a multinational is to harmonise law and regulations within similar economic areas, like some kind of union of European countries. A European union, if you will.
The corporation tax cuts are also supposed to keep multinationals in the UK. Theresa May is betting that tax cuts will offset the lost competitiveness that will come in the form of increased bureaucracy and tariffs needed to maintain trade with the EU. However, in the UK we have never put much emphasis on making multinationals pay their tax, meaning that they pretty much decide themselves what they’ll pay. Google, for example, is thought to pay 3%. As a proportion of their revenue, any gains a multinational makes due to lower nominal tax rates are likely to be lower than the impact of additional tariffs and bureaucracy. Prepare for productivity to plummet under a plethora of previously purposeless paperwork.
If we go with the tax haven route, our plan is:
1. Leave the EU
It would be unfair to describe leaving the single market as risky, because the word risk suggests that there is some identifiable benefit to be realised, and no prominent leaver has yet managed to put that into words. Dangerous would be a better word; reckless would be another. However, there’s nobody at home preventing Theresa May from being dangerous or reckless. She has a parliamentary majority and an extremely weak opposition. She could announce a policy of eating babies and she’d still poll around 35%. Monopolies promote incompetence and Theresa May has a monopoly. It is therefore to be hoped that the EU will soften on freedom of movement, but British people don’t react well to being threatened and I suspect Europeans aren’t all that much different.
Prediction: We actually go down the tax haven route and it turns out to be an expensive way of keeping everything much the same, but a bit worse. People who were angry about the EU are still angry and people who weren’t angry about the EU are resentful. Eventually, in about 10-15 years, the majority of under 45 year olds are struggling financially due to being the victim of two consecutive periods of economic mismanagement, and as a voting bloc they become large enough for things to start to swing the other way.