Send for Batman, I've gone all Ozzy Osbourne on Brexit

I found an interesting website recently which provides rich fodder for any exit-Brexit types out there - it's called InFacts (infacts.org) and is dedicated to stopping Brexit (hmm, that impartial sounding website title isn't very suitable then, is it?)

They work themselves into a real lather with several posts most days. The one that caught my eye was "Brextremists are the real saboteurs" on 13 Oct, a response to old Tory warhorse Nigel Lawson calling Phil 'Spreadsheet'  Hammond a saboteur for refusing to release money to government departments to spend on contingency planning for 'no deal'. Lawson argued cogently that such plans would make a negotiated deal more likely. InFacts ran a dubious argument that, as customs arrangements are two way, any money spent in advance would inevitably be wasted as the systems have to 'mirror' what the other party sets up. This is nonsense as most people in business know that if you wait for the market to be clear what it wants, or for the customer to finalise their spec you have missed the starting gun by a long way.  You have to identify the broad outlines and what you can do to be ready. There will be infrastructure and systems that we will need and we can be doing things about it now. For example, hard standing near ports if we want to avoid the permanent version of Operation Stack on the M20 probably wouldn't be wasted. If it isn't already too late. Any business would take a view that 'no deal' is a real risk and start taking sensible business continuity measures. Mind, Lawson got to Hammond judging by his amazing gaffe, referring to the EU negotiators as 'the enemy' in TV interviews while in Washington for an IMF meeting. Still it was the most interesting thing Hammond has said in ages - perhaps ever!

Another InFacts post was titled "Exit scenario begins to take shape" on 9 Oct. They actually mean looks sh!te which, to be fair, it does. Even the WTO angle, which was meant to be easy as the UK is already part of the club, is looking complicated as seven major third party countries including Canada, New Zealand and the USA are saying that the EU and UK can't just bilaterally assign shares of quotas between themselves without negotiation with the other countries. Who may want to extract concessions for playing ball. (https://infacts.org/exit-brexit-scenario-begins-take-shape/, 9 Oct)

InFacts also expects the EU will wring "more billions" out of the UK compared with what has been offered post May's Florence speech before being prepared to move the talks on (https://infacts.org/eu-will-wring-billions-uk-talks-move/, 12 Oct), while also saying "May threatens no deal but has no plan" as the PM will not answer MPs' questions on how much money has been set aside for contingency planning (https://infacts.org/may-threatens-no-deal-no-plan/, 10 Oct).

And they say Hammond is being "honest", unlike Johnson, while May is in denial, but it's not too late (er, it's getting that way) (https://infacts.org/not-late-honest-brexit/, 11 Oct).

InFacts claims to "make the fact based case against Brexit" but it seemed to me to be about 10 parts opinion for every fact and probably at least as tendentious as anything I write.

Meanwhile Danny Finkelstein, writing in the Times on 17 October, dusted off his MBA notes to tell us about the 1981 Fisher-Ury BATNA concept. They were Harvard dudes and much of the Harvard Negotiation Project they set up had become standard received wisdom by the time I was being sent on management training courses in the 90s (I know, it doesn't show, you didn't need to think it!). Your BATNA is your best alternative to a negotiated agreement. Without one you can't walk away - you daren't. You have to get a deal. And if your BATNA is much weaker than the other side's you won't get a good deal. They can hold out and use the clock against you.

Which of course is what the EU is doing. Though actually we do have a strong lever, which the EU recognised and tried to negate from the outset: they need our money to balance their budget till 2020. That is why they have insisted we agree the divorce settlement up front, because then we won't have any strong levers in the other areas. Foolishly we went into the negotiation going along with their strategy of discussing their three red lines first. We thought that the fact we buy more from them than they do from us would counter this and they would also need to talk trade, so the clock would act in our favour. I always thought this would prove to be wrong and it has. The trade issue is asymmetric: it's around half our exports, but no more than 10% or so for any individual EU state. So guess who will hurt the most? (Apologies to dedicated readers for repeating this again but it is important and it's a penny that hasn't fully dropped here yet). It has been reported that Germany is pushing as hard a line on trade as anyone - maybe they think we'll continue buying Mercs and BMWs whatever.

Though my other newly found website, eurointelligence, said on 19 October that the German view is softening. They got this from Bloomberg who have seen a German foreign ministry paper that calls for a broad EU-UK partnership covering, at minimum, foreign and security policy, fighting terrorism, co-operation on criminal justice, agriculture and fisheries, energy, transport, research and "digital issues" (I doubt this is a reference to the Churchillian salute). It seems some key German players think this is all at least as important as money and they won't necessarily prioritise the integrity of the single market. It's not clear they have Merkel on board, mind. Banking and finance are significant omissions from the list. But it sounds as if some of them have remembered that Poland isn't much of a buffer from Putin and that, in an era of cyber-hostility, access to GCHQ is useful since they don't like spending much on that kind of thing themselves.  Mind, this was the German foreign ministry not their treasury or trade mandarins, who might be more concerned about the integrity of the single market.

But back to Finkelstein, who says we don't really have a BATNA, so our only option is to play for time, having as long a transition period as necessary. I don't agree. A Brussels based think tank has said that the only logical debt we owe the EU is our share (14%) of the EU's accumulated deficit. This comes out at less than £10 billion, nowhere near the sum Juncker and Barnier are reported to be demanding. So we should say until you talk about trade, that's our maximum offer. Because no deal means no payment at all, zilch, zero.  May made her conciliatory speech several months too late. She should now be getting ready to give a tough "talk or we walk" speech, while there is still time for sense to prevail. Except her electoral gamble, her unhelpful Tory referendum result deniers (Anna Soubry et al) and Labour's opportunistic positioning, with Lady 'white van man' Nugee confirming how thick she is every time she opens her mouth, means she hasn't got a Commons majority for it. So we have got a BATNA, but we can't use it.

No wonder the Europeans say the EU 27 are more united than the UK 1.

The Sunday Times USA economic correspondent, the admirable Irwin Stelzer, stuck his nose in to say Juncker and Barnier understand four things our team don't:

• Markets hate uncertainty. Which is why they keep saying they can't talk about trade yet, playing on uncertainty to weaken the UK position
• Make the other person negotiate with themselves. Which is why they keep saying "try again, Theresa" without saying what they would work for them, other than leaking clearly preposterous numbers. A great tactic to see just how far the other side will go: sometimes further than you would dare ask
• Brussels is not interested in the welfare of its member states. They have no interest in a mutually successful Brexit: they daren't encourage the nations with crippling unemployment, trapped in an EU with a currency that is under-valued for Germany, to dream of life on the outside. This is the EU I have repeatedly portrayed as a self-harming psycopath that is deaf when our team talk about mutually beneficial future arrangements
• To Juncker's amazement, the British negotiators won't use the powerful negotiating tools they do have. Stelzer is amazed that Britain said up front it would continue to put its superior security and military resources at Europe's disposal. Why should it? As he points out, Putin is not going to take a slice off a piece of Britain and surely a Britain that has been put at a financial disadvantage should not be bound to the defence of a Europe in which most nations don't meet their obligations to NATO. 

This last point is quite telling when the EU is so hung up on our obligations to it, though the NATO treaties don't caveat that an attack on one isn't an attack on all, unless the one has been pulling its weight. But still it's a point we are foolish to have set aside at the outset. We had a BATNA but we've already discounted it.

Maybe we should be taking out ads in national newspapers in the relevant countries making clear how much the French wine makers, German car manufacturers and Polish workers' families get out of the UK market. I do hope we have them ready to roll. Stelzer also says we should be ready to walk away from Rene - he says "if you aren't prepared to walk away from a negotiating table, don't take a seat at it. The other side can smell weakness and desperation. And the Eurocrats are acting as if they have got more than a whiff of it.

In the meantime two cabinet ministers who voted Remain (Liz Truss and Jeremy Hunt) have said they now back leaving. Hunt's reason was that the EU has been so arrogant in the negotiations that he's seen it in a new light. Which is no surprise: I said before the negotiation started that EU intransigence could be expected to harden anti-EU views here. Truss has changed her mind because of the more positive economic results than Project Fear forecast. This was also a factor in Hunt's Damascene conversion. I think this is an amazingly Daily Mail/Panglossian type view of the economy: "see, everything's actually going great" while conveniently ignoring the fact that nothing has actually changed yet, we are still in the EU and trading accordingly but our forecasts are downgrading while the world economy is improving.

Moreover, the Office for National Statistics has found a half billion pound hole in the UK balance sheet. The Telegraph reported on 16 October that global banks and bond strategists were left "stunned" by the revision, which showed Britain is £490bn poorer than thought and no longer has any reserve of net foreign assets. The massive balance of payments write down shows the net international investment position has collapsed from a surplus of £469 bn to a deficit of £22 bn, a swing equivalent to a massive 25% of GDP. I couldn't tell from the rather sensationalist article (by Telegraph standards, anyway) whether this is a post Brexit swing or just one of those "oops, we got the numbers wrong" revisions. It sounded like the latter, as it has been concluded that Britons own fewer foreign shares than thought, foreigners own more British assets, company profits are lower than estimated and what was thought to be ownership of foreign debt securities is actually loans to over-leveraged UK citizens. (Maybe I shouldn't have got that Santander credit card.....)

But a definite Brexit impact has been seen in the FDI (foreign direct investment) numbers: down from a surplus of £120bn to a £25bn deficit over the first half of 2017. As was obvious to a dullard (but not the paper that Lord Salisbury famously said was for people who can read but not think, i.e. the Daily Mail) the fact that this stat held up after the referendum was because commitments had already been made. The idea that the economy is a supertanker whose engines have been cut but hasn't slowed much because of favourable currents appears not to have occurred to Truss and Hunt. What the Telegraph says is that we headed into Brexit with a much weaker financial position than was thought.

Mark Carney has said that our persistent current account deficit means we are reliant on "the kindness of strangers". Of course it's not actually kindness. Investors give us their money because they know they'll get a return. But if they perceive the risk is going up they'll want a larger premium. Strangely, one of the "kind" investors is (drum roll for effect) - the ECB!  The European Central Bank is covering most of the UK current account deficit (!) - a bizarre situation caused as a side effect of the ECB's quantitative easing policy. Many of the ECB's bond purchases occur in London. Banks rotate the proceeds into UK bonds. The ECB's purchase of UK debt securities was a whacking £68.7bn in the second quarter of 2017. So what happens when the ECB steps back? We run a current account deficit of almost 5% of GDP which will not be sustainable in a post-Brexit world. Or even when the ECB start to run down its QE programme at the end of 2017. Commentators say this could easily go pear-shaped for Britain and end up being like 1976 and the IMF all over again.

Even so, I think Hunt's reaction to EU arrogance is understandable and he won't be the only one: it's another trend I predicted and it didn't need a crystal ball. I'm sure there will continue to be a majority for exiting, if only for Osbourne's famous 'medical reasons'. (Not George Osborne - the Black Sabbath Osbourne was once asked if a member of the band had left because of musical differences. Ozzy replied it was medical reasons: "we were all sick of him").

After all, while the referendum was Cameron's doing, Merkel and co gave him absolutely nothing in the non-renegotiation. Either that's how much they wanted us to stay, or they arrogantly thought we wouldn't dare vote to leave so they didn't need to concede anything. Either way - not friends, not partners, not interested, couldn't care, got their own furrow to plough.

But the real reason for Hunt and Truss's change of mind? And Hammond's 'enemy' meltdown? Could their target audience have been the Tory MPs who will nominate their next leader? Oh, what a cynic I am.

But with such good reason.

I said before the referendum (see my anguished posts when I was deciding how to vote) that the problem was the transition, not the end state. It's proving that way and more. We've no BATNA, or we're too polite (or chicken) to use it. And the opposition see political advantage in sending us in to negotiate naked, as Nye Bevan put it, refusing to accept that a threat of no deal might be necessary to get an acceptable deal. So I'm with Ozzy: I'm sick of Barnier, Juncker, Merkel, the lot of them. I'm now for Brexit for medical reasons.

Maybe we should send for Batman to get us a BATNA or just get us out of the hole. Anyone got any better ideas?