Brussels
April 1st 2017

Dear Angela

I have been holding your line that the UK cannot expect to discuss anything about the future relationship with the EU until they have agreed and settled a large bill for exit. I understand fully Germany’s reluctance to put more money in to the next seven year budget framework just because the UK has left and is no longer helping pay the bills, but I cannot accept your view that is all the EU’s fault. The member states also played their role in developing policies and attitudes which clearly upset too many people in the UK. The European tradition of showing respect for government, and voting again if a referendum miscarries, is not unfortunately practised in the UK where apparently they accept the result.

I have to say I don’t think the current line is going to work. The UK is emboldened by what has happened so far, and they seem to be losing their fear of the consequences as a result. We saw how Project Fear warning them of bad economic consequences did not stop them voting against the EU, and the absence of such negative results so far has strengthened the hand of the Brexit side in the argument. We also need to be aware that there are now pro Brexit Ministers in the government, and advisers who are also of that persuasion. It will be very difficult for us all if at the first meeting we present the bill and the UK simply refuses to accept any liability. They apparently believe there is no legal basis in the Treaties to require them to pay other than their regular contributions up to the date of exit. I am struggling to find a counter to this case.

I am being lobbied by business and farmers from Germany and elsewhere that they want us to keep tariff free trade for cars and to avoid high WTO tariffs on agricultural products, two areas where the EU has a large balance of trade surplus with the UK. I am also being told by other governments that they don’t want to anger the UK, and do not wish to lose the valuable intelligence, military co-operation, scientific collaboration and various joint investments and activities. May I suggest we do not have a prolonged wrangle over talks about talks, as this could also fuel Eurosceptic and other hostile opinions in France, Italy and elsewhere where we face elections soon. May I also respectfully suggest that you do not speak out before consulting other states, as there is some private resentment of this.

Perhaps we could get together soon to see what we can salvage from this tricky situation. There is a case for cutting our losses with the UK quickly before it splits the EU and diverts us from our most important task of creating greater unity amongst the remaining 27.

Yours

etc

I am happy with the principles behind the proposed legislation. Whilst we are leaving under the Treaty provisions, the actual legal abolition of EU power in the UK requires the repeal of the Act of Parliament which gave the EEC, then the EU, the powers in the first place.

The Bill is misdescribed as the Great Repeal Bill. It is really the Great Continuity Bill. Its prime purpose is to transfer all current directly acting EU laws and past court decisions into UK law. It is therefore reassuring to all those who voted Remain because they liked current EU laws and protections, as this legislation will preserve them and make them UK requirements on our departure.

Labour and the Lib Dems were keen to stress their wish to see areas like employment law protected. This Bill does just that. They will therefore need to vote for the Bill to carry out their clearly expressed wish that every EU employment protection survives Brexit. This should be an unusual Bill where the whole House wants to support it. There will of course be amendments which will cause debate and division, about how much detail has to be put into the Act itself. Anyone who does not vote for this Bill is supporting no continuity in our laws and uncertainties over what the law is in many fields.

Some are now saying what is the point of leaving the EU if we keep all the EU laws. The point is once they are UK laws, we in the UK can decide to keep them, improve them or remove them. The UK government has reassured the Opposition that it has no wish or intention to repeal or dilute any of the employment protections that stem from EU law all the time it is in office. The government does, however, wish to introduce new border controls and benefit and migration policies, which is only possible once we have taken back control and transferred the EU border and benefits law into UK law. This will of course need UK primary legislation which will go through a full parliamentary process to change what we currently have. I also trust the government will want to put through a new fishing policy which is kinder to both our fish and our fishermen. That too will need a full Parliamentary process with new legislation.

I have commented before on the so called Henry VIII powers. Most modern Acts of Parliament have needed Statutory Instruments to implement them and handle the details. The scope of this is debated by Parliament when the Act is passed. Each Statutory Instrument itself is put to Parliament, and Parliament can debate and vote on them if it wishes.

Knowing  how keen some of my contributors are to discuss UKIP and its role, I feel I must mention the recent loss of UKIP’s one elected MP.  Mr Carswell no longer feels UKIP has a task  given the decision to leave the EU. He believes that was its main proposition, and therefore thinks it is redundant now that has been adopted by the public.  Others in UKIP think there is a continuing role in the future for the party, as they seek to define its stance on a range of issues other than our relationship with the EU.

I am not going to express an opinion on this difference within UKIP. I would be interested to hear from those on either side of the argument. Some will think Mr Carswell has behaved sensibly and has explained how voters and elected officials need to move on now the issue of EU membership has been resolved by popular vote. Others will think Mr Carswell was wrong, and will see a future for UKIP.

What kind of a party should UKIP be going forward if you think, unlike Mr Carswell, it has a future role? What should be its distinctive policies and platform?

It is curious that some in the EU seem to think there needs to be a long negotiation over the UK’s exit. The UK has announced its intention to leave, and can do so after two years or before by mutual agreement. It is difficult to see why these democratic friendly nations would want to keep us in the EU for a whole two years if we just want to leave and if they do not want to talk about the future relationship. Of course the UK will pay its regular bills up to the point of departure. There is no legal requirement to pay anything else.

The UK is making a very friendly and generous offer – full tariff free access to our market, full rights for all EU citizens currently here, continuing defence and security collaboration and much else. All we ask is the same courtesies in return. I always defend the other member states and EU from allegations that they want to damage themselves and us during this process. I now look forward to them living up to the fine ideals of democracy, co-operation and free trade which they say are part of the EU scheme. I would expect them to see that free access to our market is an important advantage for their farmers and others who would face higher tariffs under WTO rules.

Some said the pound would tumble more when we sent the letter.

Instead this week in the run up to its delivery the pound has remained fairly steady at around $1.24 and Euro 1.15, above the lows of October last year when the pound reached $1.20 and 1.10 Euros. The cut in UK interest rates last summer and the rises in US interest rates have of course led   to a stronger dollar. The world’s leading currency has also risen strongly against the yen and the Euro.

The pound hit an all time low against the Euro of 1.04 in December 2008 when we were firmly in the EU  and is now 10% above that.  It is also well above its all time low against the dollar.

Independence Day will forever be 23rd June. UK voters decided they wished to be self governing again on that day last year. March 29th will also be high in our affections. Today is the day we send in our formal withdrawal from the EU.

As Lord Pannick argued in Court and in the Lords, the Article 50 letter is irreversible. We will leave the EU within the next two years, with or without an Agreement.

There are those who now wish to change the legal advice from the Remain side. Some now claim the court case argument was just that, a useful argument at the time but not one Remain really believed. I will defend Lord Pannick in his absence. I am sure he is an honourable peer of the realm. This was no mere lawyer using the best argument for his client, but a member of the legislature stating what he as an expert believed the law to be. It was successful. The government would have won the case if  the court thought  the Article 50 letter was just an invitation to talks about withdrawal. I made all this clear in the Parliamentary debates we held to pass legislation to approve our exit. The court has now done us a favour. We are leaving the EU with a very strong majority of MPs supporting departure, as well as a majority of UK voters. The Act to leave the EU passed with a majority of 372 votes.

Article 50 put in the two year exit provision to prevent a reluctant EU delaying a country’s departure by refusing to negotiate an exit agreement sensibly. The UK’s despatch of the letter now places the obligations on the rest of the EU to see what they can salvage from their departing member. They should have a long list of things they do not want to lose which is realistic, and another list of things they don’t want to lose which are unrealistic.

The first list will encompass protecting their access our lucrative export market, ensuring the position of EU nationals in the UK, keeping access to the City for the money their companies and individuals need to raise, keeping their flying rights into the UK, keeping UK involvement in European defence, and preserving and developing many collaborations on research and joint investment. All of those the UK is willing to grant in return for a punishment free settlement.

The second list may encompass an exit fee, continuing contributions to their budget, and continuing freedom of movement between the UK and the EU. Asking for those will show they still have not understood why we are leaving, nor the weakness of their legal and political position.

The EU has constantly underestimated UK unhappiness with the EU and our resolve to leave as a result.

They are in danger of doing so again. They are determined to believe just leaving is impossible, because it does not suit them. No worry that it forces them into their own Project Fear. No worry that it means trying to think of ways to harm themselves.

Leaving without a deal is always going to be better for us than a punishment deal. What is bizarre is the number of politicians in the UK  who are on the EUs side,actively promoting the idea that the UK has to pay a fortune to the EU to leave when there is no such legal or moral obligation on us. The BBC also claims to have found government officials who want to undermine the walk away option. So they too want to weaken the very strong UK position.

The EU should not overplay its hand by believing the UK woukd not dare to just leave if there is no deal that makes sense.

Henry VIII legislation is a pejorative term for laws passed without Parliamentary approval.  The EU has been good at using such powers. Henry VIII sometimes passed laws by proclamation, without reference to Parliament. That is exactly how the EU legislates when it puts through directly acting Regulations. The UK Parliament cannot amend or vote down such laws, but just has to accept them as good UK law. Once we have left the EU there will be  no more directly acting Regulations that Parliament cannot vote down.

Incorrectly some people argue that a Henry VIII clause is a clause in an Act of Parliament which allows government to provide more detail under the Act  by means of Statutory Instrument rather than having to enact further primary legislation. This has been a common practice by governments of all persuasions. Parliament agrees the framework and main provisions of an Act, then allows details like level of charges or dates of implementation to be made by Statutory Instrument. SIs  still need Parliamentary approval. Parliament may  debate any SI it wishes, and can vote them down if they do not suit. Parliament decides when it passes the original primary legislation how much details it is willing to handle at a future date by SI and how much of the detail has to be on the face of the Bill. Any perishable or often changing provision, like a fee or charge level, is often best left to more flexible SIs.

This system has only been extended beyond its desirable limits by substantial legislation required by the EU. Much EU legislation takes the form of a Directive or instruction to the member states to enact laws in line with the Directive. The UK has often done this by means of Statutory Instruments under the power of the 1972 European Communities Act. Large swathes of our environmental, agricultural, trade and many other areas of  law have been put  through by such means. The 1972 Act offered by far and away the biggest extension of the power to government to legislate by SI ever adopted, and it is a power which has been used over and over again since 1972. That will end with repeal of the Act. The government has never been granted the same power to use SIs by non EU Acts.

When Parliament passes the Great Repeal Bill to provide continuity of law as we exit the EU under the Article 50 process it will wish to transfer all existing EU law into UK law, and to allow some future changes to be made by SI where these are tidying up matters. Parliament will not allow the government to create a new fishing policy or a new agriculture policy by SI under the Repeal Act nor will the government demand such power. Once the UK has left the EU and ensured continuity of law, it will then be up to Parliament to decide which areas it wishes to amend or repeal. A new fishing policy, for example, may well  be a priority. That will require a proper White Paper and an Act of Parliament. Brexit is about strengthening Parliamentary and public scrutiny and consent to our laws. Only the EU made law by proclamation ignoring the UK parliament, and only the 1972 Communities Act greatly widened the power to use SIs.

Now we know what the EU wants without the UK. The Rome Declaration signed last week-end sets out the full scheme for the Union. It is as Eurosceptics described. It is certainly not the minimalist EU based around a single market of Mr Blair and Mr Brown’s imagining.

As the Declaration says, “We have built a unique Union with common institutions and strong  values….Unity is b0th a necessity and our free choice….Our Union is undivided and indivisible.”  “We will make the European Union stronger and more resilient through ever greater unity and solidarity amongst us and the respect of common rules”

The document sets out four large areas where the Union is manifest and will now be strengthened.  The first is freedom of movement of people, combined with promises of new border arrangements and an EU wide policy towards external migrants. The second is the single currency which will be “stable and further strengthened”. There is no mention of countries opting out.  The third is a social Europe, with EU wide benefit and social policies. The fourth is “a stronger Europe in the global scene” “committed to strengthening its common security and defence” with a common defence supply industry.

This upbeat and centralising document looks forward to further increases in Union powers. It does acknowledge that “The EU is facing unprecedented challenges both global and domestic: regional conflicts, terrorism, growing migratory pressures, protectionism and social and economic inequalities”. All this points them in the direction of doing more in the Brussels to counter these unwelcome trends.

So there we have it. It was the creation of a large new state after all. The irony seems to be missed that this declaration is published  to the world when the UK sends in its resignation and as many  voters around the EU seek to show their disapproval of the vision. The declaration points to the EU having much more influence in world affairs  without explaining how it will build up its military forces to back up its wish to intervene and its pursuit of  influence in the Middle East and elsewhere.

Surely now, no-one can doubt that the EU is so much more than a set of laws regulating trade and commerce?  Why did so many UK politicians try and pretend this was just a business or commercial arrangement? As this declaration reminds us in a timely way, at the heart of the EU is the strong desire to create a single country. It will have common borders, one currency, one foreign policy and one social policy. It will have its own energy policy, its own transport policy. Indeed, it has much of that already. It is only those who refuse to read EU documents who can think otherwise.

The official forecasters and many commercial economic forecasters have now joined me in expecting around 2% growth in 2016 and 2017. They took their forecasts on a wild big dipper which I avoided,  plunging their estimates  to low growth or no growth. They thought both investment confidence and consumer confidence would bomb after the Brexit vote, but they now admit they were wrong.

Today  our disagreements are a bit more technical and limited. I have agreed with them that inflation would pick up from the very low levels of last summer. It is doing so and may rise a bit more. I disagree with them that this is mainly owing to the fall in the value of the pound. It has been mainly owing to the surge in oil and other commodity prices, and some domestic wage drift in hotels and catering in particular as the living wage comes in. The rising inflation is an advanced  world phenomenon where there is reasonable growth, not a Brexit one. German inflation has risen in lock step with ours, and US inflation has risen more.

I also disagree with them that the fall in the pound is the sole result of Brexit. There was a large fall in sterling from July 2015 to April 2016 before the vote, when most market participants and the polls were confident Remain would win. The yen and the Euro have also been weak against a strong dollar over much of this period. Interest rate differentials are the main factor likely to be affecting these cross rates. The US signalled early its wish to put up rates, has now put rates up to 1%, and intends to take them higher again this year. All the time the Bank of England and the ECB keep their rates on the floor the dollar is likely to be more favoured by those with footloose cash.

My other disagreement has been over retail sales. I saw no likelihood of a big fall in consumer confidence and retail sales after the vote. Even I was surprised by the acceleration, to reach an unsustainable growth rate of over 7%. The latest retail sales for the year to February show a solid 3.7% growth. If you take out motor fuels, hit by the oil price hike, volumes are up 4.1%. Many have been saying that rising inflation will wipe out real income gains, throttling back spending. We already have an inflation rate around the level of wage rate growth, yet retail sales growth sails on.

How can this be? People are working more hours, getting more bonus and overtime, more are joining the workforce. More are now willing to borrow to buy a car or a new home because there is more confidence about employment levels and employment prospects.