Friday 28 July 2017

Compromise better than cliff edge in Brexit negotiations by Paul Chase

Will Brexit actually happen? New Liberal Democrat leader Sir Vince Cable doesn’t think so. Speaking on the Andrew Marr show, he said: “I’m beginning to think Brexit might not actually happen.” Tony Blair weighed in, expressing the view it would be stopped – and should be stopped. Are these opinions the wishful thinking of a bunch of “remoaners” or are they on to something?

Certainly in the cabinet there is a clear split between those around chancellor Philip Hammond who want a “soft Brexit” – putting the economy and jobs first – and those who want a “hard Brexit” and believe reducing immigration trumps all other issues. The issue of immigration control is one of huge significance for our sector because of our reliance on immigrant labour – and not just in London. Consider the following statistics:

– In the managed house sector, including pubs, bars, nightclubs and casual dining, 37% of the workforce are non-British nationals

– Across hospitality and tourism as a whole, 24% of the workforce is made up of non-British nationals, with 55% of those coming from outside the EU and where immigration controls are already in force, while 45% are from other EU countries where there are no restrictions on the right to work or live in the UK

– In London, non-British nationals make up 64% of the hospitality and tourism workforce, of which 46% come from other EU countries

I think there is a growing realisation among those who voted “leave” without knowing the destination that a hard Brexit would come at huge economic cost, and without a £350m-a-week bonus for the NHS.

What might a soft Brexit look like or might we decide, having glimpsed the destination, to stay in the EU after all? I think we will leave but it will be a gradual and nuanced affair. The talk of transitional arrangements, based on the difficulty of agreeing everything by March 2019, gives a steer regarding the direction of travel.

I suspect a transitional arrangement may look something like the “Norwegian model” – an “off-the-shelf” Brexit package based on the relationship Norway has with the EU. Its main elements are we would have tariff-free access to the single market for our goods and services but not be part of EU political institutions or subject to “ever closer union” or pressured into joining the single currency. We would not be part of the common agricultural policy or the common fisheries policy so would regain control of our territorial waters. We would still pay into the EU’s budget but probably about half the current rate. We would not be part of the Customs Union and therefore free to strike our own trade deals with the rest of the world.

What’s not to like? Crucially, the price to be paid for access to the single market would be more than just financial. We would have to abide by EU trade laws and be subject to European Court of Justice (ECJ) judgements; and we would have to agree to free movement of people – subject only to a temporary break clause in the event immigration was causing an acute social or economic problem. Being rule-takers but not rule-makers would mean we’d have no influence over how free trade within the single market might develop.

The points about the ECJ’s jurisdiction and free movement of people are the real sticking points. I suspect this will be sold to us as a transitional arrangement, with the final shape of the “leave deal” to be determined further down the line.

However, deadlines have a habit of slipping and one suspects a transitional arrangement scheduled to last two years could well be extended to three or four years, at which point the politicians would hope we’d all moved on and the transitional arrangement would quietly become permanent. This is shaping up to be that most British of arrangements – a compromise that satisfies neither side. However, it might just save our sector and others from an economic and recruitment cliff edge. Either way, I think a hard Brexit is dead unless the hardliners are bent on a strategy of keeping their hostage in Downing Street while trying to provoke a breakdown in negotiations and a walk-out of British officials from the talks. I, for one, favour a compromise rather than a cliff edge.

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