Liberal Democrat grandee Lord Ashdown has forecast that the British Government is likely to negotiate a Norway-style trade deal with the EU with add-on “bells and whistles” and that UK Prime Minister Theresa May might call a general election next spring.
Paddy Ashdown also said he thought the British Government would introduce work permits to control UK immigration post-Brexit and that Article 50 would be triggered early next year.
Of all the off-the-shelf options for post-Brexit trade models (such as the Turkey or Switzerland models), a model similar to Norway’s relationship with the EU, was the most likely one May’s Government would opt for, Ashdown surmised.
Norway is a member of the European Economic Area (EEA) – the single market. The country pays a contribution to the EU budget and has to participate in the freedom of movement of people but has the freedom to negotiate its own free trade agreements with non-EU countries.
“I think it will be like none of the other models, it will be a particular deal for Britain but it will look most like Norway though it won’t be the same as the Norway model,” Lord Ashdown said. “It will look like Norway but have all sorts of things added be that regarding immigration or the contribution of the UK to the EU budget.”
‘A Norway Christmas tree’
“Imagine a Norway Christmas tree that you add bells and whistles to,” he said.
“Theresa May just wants the best for Britain and I think that is probably something like the Norway deal. That is the one that will do the least damage to Britain, the least worst scenario,” he said, in an exclusive interview with Asia House.
He said financial passporting rights (which allow UK financial firms to sell their services across the EU) was a key issue that would need to get resolved as part of the Brexit negotiations but he suspected that “sensible minds would find a way to make it work.”
But the former Liberal Democrats Leader, who was a fervent Remain campaigner, said some Brexiters would not be happy with a Norway-style deal.
“The Brexiters would like to see a model like Singapore or Hong Kong,” he said. Both city-states do not impose import or export tariffs at all. He said whilst he could see the economic advantages of such an approach it would be “politically impossible” to do that in the UK without “tearing society apart in the UK” and dismissed it as “fantasy politics.”
Lord Ashdown said he did not think Mrs May would call a general election right away, even though she may be tempted to, given the chaos that the Labour Party is in, but he said she may find herself in a perfect position to call an election next spring.
He said he thought Article 50 of the Lisbon Treaty would be triggered early next year, possibly in March, after which Mrs May would present a Norway-style model of exiting the EU, which he predicted would be rejected by the hardline Brexiters and then the “constellations would be perfectly aligned” for her to hold an election to face the Brexiters down and coincidentally take advantage of “Labour’s disarray”.
At the G20 summit in China, the British Prime Minister rejected an Australia-style points-based system for controlling immigration.
Lord Ashdown said he expected the British Government to adopt a general work permit system instead, but one which could, for example, make it easier for EU nationals to obtain the permit. “My guess is we will want to be in the single market so we will have to have an element of free movement.” But he said the question was what the EU would accept as the UK’s constraints on free movement, which is one of the founding principles of the EU.
The Lib Dem grandee was forthright in his criticism of May’s choices to appoint Brexiters Boris Johnson, Liam Fox and David Davis, in Cabinet positions.
“That was more about her concern about the internal management of the Tories and not thinking of the best interests of the country,” he said.
However, the Lib Dem peer was otherwise very positive about the British prime minister’s term in office so far, describing her as “impressive” and saying she was a “refreshing change” after an “era of Eton boys”.
He added “the public was responding well to her”and she was “doing things in a competent manner”. He said he expected she would be restricted by the “burden of Brexit”. “Whatever instinct she has to do other things, her time will be consumed by Brexit and the economic consequences that follow,” he added.
A Brexit Unit has been set up at Whitehall which has approximately 150 staff. “I think they are scouring the world for trade negotiators,” Lord Ashdown said. He pointed out that rewriting all the EU laws would take years.
“I don’t think anyone understood the scale of the parliamentary and administrative task of Brexit,” he said. But he admitted there were “shortcuts” that could be taken to rewrite the laws.
Britain’s ties with Asia
He made gloomy predictions about the British economy in the long term and Britain’s standing in the eyes of the rest of the world post-Brexit. “I think our standing in the world has been diminished and our bargaining power as trading partners reduced,” he said. But he conceded Britain could take advantage of its trading positions and skills as a commercial trader but that it would have “less influence.”
“Our ties may get closer to Asia but our influence will be less, the substance will be less,” he said.
Nevertheless various countries, not least Australia, India and China, have already expressed interest in forming free trade agreements with the UK once it exits the EU.
But Lord Ashdown said: “It will be very easy to do trade deals with countries around the world but these deals will be significantly less beneficial than if we had been in the EU. Look at the USA-Australia trade deal,” he said pointing out Australia had to give a lot of concessions.
Japanese companies based in the UK are likely to make decisions once they see if the Brexit deal Mrs May strikes will damage their trade overseas, he said.
Lord Ashdown said Brexit was in danger of “taking this country towards something much more ugly”, making a complex security situation “more dangerous” and making the economy much weaker “in the longer term,” he said.
However, he did not call for a second referendum on the UK’s membership of the EU saying it would be “foolish and wrong” for Parliament to do that.
“I think you must accept the sovereign judgment of the British people. If we have to be out then let’s make the best of it. It may well be that at some point in the future there will be a second referendum but that has to come from the people, not the politicians. Politicians should stay out of that. It’s our job now to make the best of Brexit and the best thing for the UK is to stay as close to the EU as possible,” he explained.
He also said that once Article 50 was triggered,”if the UK needed longer than two years to negotiate its exit, sensible minds would find a way round that.”
As for whether Parliament would need to authorise the Brexit vote – a matter set to be heard in the High Court in October – Ashdown said that “legally and technically it is not necessary for Parliament to vote on Brexit as Parliament has executive powers to sign treaties.”
However, he said, it would be very difficult, almost impossible politically, for a British prime minister to arrive at a deal with the EU “without at the very minimum a vote in Parliament.”
So will the EU punish the UK for leaving the bloc or will they want to strike a deal so their exports don’t suffer? The Liberal Democrat grandee said it was not the EU or European Commission president Jean-Claude Juncker that Britain would be negotiating with.
“It is national capitals and they will all have different approaches. France will take a punitive approach. Germany will be inclined to be helpful. The north of Europe will be more interested in having a proper trade deal as they are our primary trading partners. The south of Europe will take a very sceptical approach,” he said.
He said he did not think Brexit would cause the “break up of the EU”. “It will only be politics, not economics that breaks the EU up.” But he said Brexit could be a catalyst for EU reforms. “It would be foolish not to see Brexit as a reason to substantially reform the way the EU operates,” he added.
As for Scottish independence, he said: “If the Scottish people want to have a referendum I don’t believe Westminster should stop them. It is very unlikely to happen at the moment because of the economic situation in Scotland, which has been damaged by oil prices. It may happen in the future once the Scottish people have looked at the deal the British Government has negotiated and assessed the consequences.”
He also spoke about Mrs May’s controversial decision to stall approval of Chinese investment in the development of a nuclear power station at Hinkley Point in Somerset, the county where Lord Ashdown still lives and where he was formerly MP. Lord Ashdown, now senior adviser to the G3 Good Governance Group, said it was a “difficult issue to balance.”
“We have given certain undertakings to the Chinese so we need to see if there is a sensible way out. The advent of smart technology means the scale of the plant as originally designed is no longer necessary. What damage will be done to Britain’s reputation internationally if it gets reversed? So it’s a case of finding a sensible solution that does the least damage,” he said.
The future of the Lib Dems
He also spoke about the party he formerly led, the Liberal Democrats, which saw their number of seats in the House of Commons drop from 57 to just eight at the last general election.
“I blame it on fear,” said Lord Ashdown, who has since founded the cross-party centrist movement More United. “The Conservatives conducted a huge fear campaign at the last general election – that if you voted Lib Dems you would get Labour and Alex Salmond. So people voted Conservative to keep them out. We knew that going into Coalition with the Government (2010-2015) would incur electoral cost but that explains a loss of 20 or so seats, the rest were lost due to the ruthless fear campaign of the Tories.”
Does he think the Lib Dems are out of touch with voters? “Maybe with 52 per cent but not the 48 per cent who voted to Remain,” he said. “We have a clear position on Europe. If there was a second referendum we would campaign to vote Remain again.”
He said what the Lib Dems would do at the next election would “all depend on the maths.” “We did not want to do a deal with the Tories but it was the only way to offer a stable government. We are growing again and recovering. We have a long way to go but we can have a major impact on British politics. It just takes time,” he concluded.
This interview took place after a private briefing and roundtable discussion with Asia House corporate members.
Asia House corporate members represented at the table included HSBC, Mitsui, Telstra, Harvey Nash, Rio Tinto, ABP London, DLA Piper, KPMG, Eversheds and DWF.
Mark Boleat, Chairman of the City of London Policy and Resources Committee, will brief Asia House corporate members on the implications of the EU referendum for the City of London as a key global financial centre at Asia House on 23 September. For more information click here.
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