Project Fear moved up a level this week with Nicola Sturgeon predicting a “right wing Tory takeover” after a Brexit vote, and the Chancellor George Osborne promising to raise taxes and cut spending in an emergency austerity budget. But what would really happen if the unthinkable comes to pass and Britain voted to leave the European Union?
Well, initially, probably not very much would change. Everyone would be slightly stunned. No country has left Europe since Greenland in 1985 but that was a remote colony with only 85,000 inhabitants. Brexit would be one of the pillars of Europe falling.
There is an exit route, however, under article 50 of the 2009 Lisbon Treaty, which allows for countries to leave by agreement after two years. Britain would be expected to apply for exit under this clause and to begin the negotiations for withdrawal within weeks. Many in Europe will initially shrug their shoulders and say: well, Britain was always semi-detached from the European project, perhaps it’s for the best.
At the emergency EU summit immediately after the referendum there will no doubt be efforts to keep Britain in some sort of continuing relationship with the EU. Like Norway, Britain will presumably wish to remain in the single European market, which means a lot of the regulations about bent bananas and chocolate content would remain even after leave.
There might be attempts to urge Britain to consider another referendum at the end of the two-year negotiation. This would amount to an attempt to turn the departure from the EU into a renegotiation of Britain’s terms of membership. It would be up to Westminster, of course, to authorise another referendum, but if the negotiations appear to be going badly for Britain it might leave an escape route from Brexit. This happened when Ireland rejected the Lisbon Treaty in 2009. Sixteen months later, in another referendum it voted to stay.
Brexiteers would be furious, of course, but a case could be made, perhaps if the rest of Europe decided to allow Britain to have restrictions on free movement to deal with immigration. By then, British voters will presumably have discovered that leaving Europe does not end immigration, half of which comes from outwith the EU. Indeed, immigration might be the first post-Brexit crisis as France stops trying to halt illegal migrants at Sangatte.
David Cameron may try to remain in office, but his situation will surely be untenable after this defeat. He was the architect of the referendum, the architect of the failed renegotiation, and architect of the campaign. Mr Osborne would have to stand down immediately. His threat of a Brexit austerity budget has infuriated many Tory MPs, not least because it breaks the Tory law on not increasing taxation until 2020.
The Conservative government will be deeply split. Boris Johnson might seem the obvious beneficiary, but few of his colleagues in the Tory cabinet would accept him as leader and it’s not certain the party membership would either. Michael Gove, the more sober Brexit-supporting Lord Chancellor, might be in with a shout, as would the Home Secretary, Teresa May, who has made clear her disenchantment with the EU but did not join any of the Leave campaigns.
Labour would be on the sidelines of the Tory civil war and would be happily distant from the negotiations with the EU about Brexit. Indeed, since these are almost certain to go badly for Britain, whoever is doing the negotiations, Labour might find itself in with a chance for the 2020 general election – that’s if it can find some way of ending its own civil war.
The economy, of course, would be the backdrop to the parliamentary squabbles. British debt costs would initially rise, and the pound would almost certainly fall in value. Markets don’t like uncertainty. This could pose problems for debt repayment. But the fall in the pound could equally lead to an export boom, as it did in 1992, when Britain left the Exchange Rate Mechanism. A low pound makes British goods much cheaper in Europe. Mr Osborne’s crash austerity budget would deflate the economy, but since he wouldn’t be around to deliver it, it probably wouldn’t happen.
However, if an export-led boom happened, the rest of Europe might accuse Britain of using competitive devaluation to damage European trade. The German car manufacturers would be very upset at their vehicles suddenly costing thousands more in the UK. The British government would say it has no control over the currency markets. But the risk of tariffs being placed on British goods after Brexit cannot be ruled out.
Other countries in the EU might become extremely restive for different reasons. Spain, Greece, Portugal suffer from having currencies that are over-valued relative to Germany. This is why they have experienced such severe unemployment, running at nearly 50 per cent for young people in Spain. They might well argue that if Britain can do it, why can’t they?
Of course, because Britain stayed out of the eurozone, it is a lot easier for Britain to leave the EU than it is for countries like Greece. But the fact of Britain having left will in a sense “break the spell”. It will establish a precedent that others might threaten to follow. If there is another economic crisis ahead – as many economists predict – then this could lead to a chaotic disintegration of the EU.
This is what many foreign affairs analysts fear: that in eastern and southern Europe a wave of nationalism could turn the EU into a rabble of fractious states each blaming the other for their misfortunes. Some believe Russia might try to exploit this weakness in continental Europe to make further gains in Ukraine or even to foment discontent in the Baltic states like Latvia, which have large Russian-speaking populations.
As for Scotland, there would be widespread discontent here at being removed from the EU against the wishes of Scots, who still seem to be keen on Europe. Alex Salmond has forecast a repeat independence referendum within two years if there is Brexit, and that is not inconceivable. Though it sounds more likely Scots will wait and see what happens in the negotiations before deciding on their future. Nicola Sturgeon seems in no hurry to call another referendum.
But in the sweep of things, Brexit would surely bring independence closer. It would be the most dramatic evidence of the deepening gulf between the two partners in the UK. The Scottish Government would certainly use the negotiations over withdrawal to seek further powers for Holyrood, perhaps over immigration, fisheries and taxation. Scotland could not opt to join the EU while it is part of the UK, but it seems highly likely Brussels would now welcome an application from an independent Scotland.
So, Brexit could leave Britain broken and Europe on the brink. But things aren’t exactly going swimmingly in Europe anyway. It is quite possible that, in a decade’s time, people will look back and see Britain’s leaving the EU as having been inevitable. And Scotland’s leaving the UK as self evident.
Herald 16/6/16