Observations of an ex pat: The Holmes Option

Sherlock Holmes offered the solution to the current Brexit conundrum admirably when he told Dr Watson in the Beryl Coronet: “when you have excluded the impossible, whatever remains, however improbable, must be the truth.”

At the moment the two possibilities before parliament are the deal negotiated by Prime Minister Theresa May and crashing out with no deal whatsoever. The latter would be the result of the rejection of the first if no plan B, C or D appears on the political horizon.

The first possibility will be rejected by parliament because it turns what used to be imperial Britain into a colony of a Europe dominated by historic enemies France and Germany.  The United Kingdom would be indefinitely tied to the EU and yet left without any say in the rules that govern it. Its ability to strike trade deals with other countries would be severely hampered and Northern Ireland would be effectively hived off. In return, the UK would regain control of its immigration policies.

We will call this deal Option One and, using the Holmes formula, rule it out as it is impossible that parliament will approve it.  So we move to Option Two, a no deal Brexit. First the plus side: Immigration is controlled. Trade deals can be negotiated. Payments to the EU are stopped. The European courts cease to have jurisdiction in Britain. Now the negatives: The economy will shrink by up to nine percent overnight. Hundreds of thousands of jobs will be lost as foreign companies move operations to EU countries. The pound will collapse. Inflation will rise. Troubles could restart in Northern Ireland and tariff barriers would go up between Britain and its main trading partners on the continent.  MPs would, in effect, be voting to make every single one of their constituents substantially poorer.

The only members of the House of Commons likely to consider Option Two are the members of the European Research Group. They total 62 out of 650 MPs. In fact, an overwhelming majority of the House of Commons—450—voted to remain in the EU in the 2016 referendum. So Option Two can be placed firmly into the impossible box.

Having knocked out the two possibilities currently on the table we have to start looking for the improbable  Plan B, C or D.  The one that appears to be gaining ground at the moment is that the government accepts that leaving the EU was a bad idea; the referendum was a mistake; Brexit should be cancelled and we should return to the European fold with a renewed determination to bend the supranational body to the British will. This is Option Three. It would tear both the Conservative and Labour parties apart, further exacerbate divisions within the country at large, create a constitutional crisis and destroy any remnants of faith in British political leaders as both parties have pledged to accept the results of the referendum.

But, using the Holmes formula, this improbable scenario appears at the moment to be the most likely final result. The problem is, how to persuade a large proportion of the British population that this is the case. The best way is to let them reach this conclusion on their own.  Brexiteers are convinced that a better deal is out there. It just needs tough talking British negotiators to put the Eurocrats in their proper place. Britain needs to go back to the negotiating table, if need be with a completely different government. It needs to bang its head against the Brussels brick wall again and again and again. It needs to prove that the unpalatable and improbable Remain option is the only option.  They need to be able to say to the British public: We did our best—and then a helluva lot more.  And then maybe, just maybe, the British public will accept remaining in the EU.


* American expat journalist Tom Arms is LDV's foreign affairs editor, author of the forthcoming book “America: Made in Britain” and Campaigns Chair for Wandsworth Lib Dems

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  • Peter Martin 7th Dec '18 - 9:26am

    “The economy will shrink by up to nine percent overnight……”

    Beware those little words “up to” !

    If, for example, we see a slimming product claiming that we can lose “up to” 10lb in ten days, should we think that we will lose 10lb in ten days? Or if we hear that a data provider offers broadband speeds of “up to” 100Mbps should we expect that we’ll get that when we connect up? Losing I ounce is “up to” and a speed of 1Mbps is also “up to”.

    So is a fall of 0.5% in GDP.

    Maybe GDP will fall slightly due to the transition. But after that the UK economy will do as well, or as badly, as we decide by our own economic policies.

  • John Marriott 7th Dec '18 - 9:51am

    Here we go again! How many more angles can we get on b…y Brexit? It reminds me of the observation that so called ‘experts’ use statistics like a drunkard uses a lamp post – for support rather than for illumination.

  • Sandra Hammett 7th Dec '18 - 10:22am

    Plan C is the PM’s plan getting thrown out, she returns to Brussels for some tinkering and then has another run at gettting it passed.
    Plan D is a soft Brexit cooked by a cross party group that can achieve majority support in the Commons.
    Plan E is Labour’s turn either through no confidence vote or a general election.
    Plan F is…
    Apparently there’s about 70 of these…

    In any event the Lib Dems need to start calling for EU reforms now, as a means to convert Leavers for a GE or a People’s vote, and with hope of remaining a fixing the causes that prompted this mess in the first place.

  • Antony Habergham 7th Dec '18 - 10:44am

    @Peter Martin

    Another aspect which I’ve seen glossed over, in news reports and on here, is that many of the scenarios for lost growth ALSO involve lesser population growth from migration.

    A situation where GDP is 6% smaller after 15 years, but also the population is 4% smaller, is a LOT less impacting on the population already here, than the figures bandied about imply.

  • David Allen 7th Dec '18 - 10:59am

    Peter Martin said: “The economy will shrink by up to nine percent overnight……” Beware those little words “up to” !

    Well that nine percent figure came from the Treasury model and it was designed to apply to the worst-case hard Brexit. But it could very well have understated the risks. The Treasury used an “equilibrium” model which essentially assumed that the British economy would smoothly and gradually adapt to an impairment in the terms of trade by shrinking in size to a new equilibrium configuration. But that’s not how economic shocks work. Instead there are violent changes – bankruptcies, market crashes, riots, etcetera. Things could be a lot worse than the Treasury suggested.

    The Treasury have been “cautious” because, if they speculated about violent change scenarios, they would be pilloried for “talking Britain down” and for influencing the markets. Their “caution”, however, has led them to pull their punches. No deal could be far worse than they have suggested!

  • The thing I find fascinating as Brexit approaches is the alternation between the supine and grandiose being deployed in some of the remain arguments. It’s too powerful to leave, we’ll be a vassal state of the Franco/German Empire, but if we stay we can bend it to our will. It’s really quite odd. If the EU is a bold experiment in pooled sovereignty and the members states are equal but different then why depict it as a German dominated neo-empire and why think the UK should be able to bend it to its will?Surely it would be more noble to say we want Britain to be part of the single currency, Schengen and so on rather trying to hide enthusiasm for the project behind unconvincing arguments aimed at what you imagine might appeal to leave voters. Is it because at some level the committed EU camp suspect that even amongst the remain voters there are doubts about the desirability of ever closer union and are hoping that given enough time the country can be nudged towards it. The EU is a political project.

  • Saw a nice little metaphor on Twitter the other day.

    Ree Smogg and and a working class guy sat round a table.
    On the table are 10 Mars bars.
    Ree Smogg takes 9 bars off the table and puts them in his pocket.
    Turns to the working class guy and says.
    ‘That immigrant wants to steal your Mars Bar.

    Well Brexit is going to leave us with one nicely mangled and pretty unappetizing Mars Bar and the sooner people stop blaming the EU and start looking closer to home the better.

  • Peter Martin 7th Dec '18 - 12:13pm

    @ David Allen,

    I must say I don’t have faith in economic forecasts from bodies such as the Treasury and Office of Budget Responsibility. If the Met people were as bad we wouldn’t pay them any attention at all! We’d do better feeling a piece of damp seaweed! If you think I’m being too unkind in saying that maybe you can supply me some examples of important forecasts they have got right.

    In any case the ‘forecast’ says “ the analysis does not account for any potential policy measures put in place to mitigate a no deal scenario.” So all the doom predictions are based on Government doing nothing? I’d hope that even this Government would at least try to do something!

    @ Glenn

    You’re right. Before the referendum the Remain side never once, at least as far as I remember, used the argument that we couldn’t leave because it was going to be just too difficult.

    It might have been better if they had. But I suppose they wanted to play down just entangled we had become. I’ve always thought that we should be totally in with the euro, Schengen, no-opt outs etc, so that we do have have at least some clout in influencing the rest of the EU, or totally out.

    It isn’t realistic to sit on the sidelines, as we were doing anyway before the referendum, and have any meaningful input into future policy. I know we had representation in the European Parliament but we all also know that is not where the real decisions are taken.

  • Peter Martin 7th Dec '18 - 1:16pm

    I wouldn’t have bothered posting this if it had been from the Express or Telegraph but it’s from the Independent!

    “All official agencies, trapped in an echo chamber, are competing to paint the grimmest picture of economic consequences of a British exit from the European Union. They are straining so hard because their projected costs of exit have no basis in economic theory or empirical findings”


  • Tom Arms the UK economy would never shrink by nine percent overnight. It is likely that if there was a no deal our trade with the EU will suffer and this will cause the economy to shrink. Also it is likely that the pound will fall in value and this plus EU tariffs will increase inflation. It is possible that the Bank of England would ignore these external inflationary pressures and decrease interest rates to encourage business investment in the UK. It is possible that a UK government assess that in the first year the economic effects would be a 1.5% reduction in UK aggregate demand and so increase aggregate demand by 1.5% of the economy (about £33 billion) by giving this amount to those receiving out of work benefits and in work benefits.

    Sandra Hammett has the right idea. Her plans C and D seem likely. As the DUP have said they will vote to support this government in a no confidence vote, a general election is unlikely, but I suppose we could call it plan E. Tom Arms’ option 3 is unlikely to happen. Plan F has to be a new referendum using AV with three options and requesting an extension.

  • The Peter and Glen show is becoming reptative. Peter and Glen do not understand the reality of Brexit and that they wish to play down the damage they have done is understandable. No amount of facts will dent their self image “of men of dustinction”. Tis sad that they are now reduced to agreeing with each other, as all the other Bexiteers have fled. The last Brexiteers standing, reduced to trying to defend the indefensible and wondering why they are not taken seriously. In many way they are iconic Brexiteers resistant to reality and facts while continuing to proclaim their importance.

  • Peter Martin
    To me the basic problem is that the EU is clearly designed to lead to a federal super state, but can’t get over obstacle of national identities that few want to give up. The result is the Esperanto of world politics. It’s a kind jumbled up mixture of invented words and forced syntax that doesn’t really result in coherence. At the most basic level a single currency plainly needs a single value and single tax systems so that the economic rewards are distributed evenly. It then needs things like a benefit systems and healthcare providers that work across the regions so that no one is disadvantaged by the circumstances of age or where they live. On a psychological level the data indicates that on average people tend to live within 50 miles of where they were born. So rather than being globe trotting citizens of everywhere, they’re kind of home-bodies who like to be within driving distance of kith and kin.

  • Ftranke
    Distunction? Let me suggest that it is becoming repetitive because we are right and you have no game to combat it,

  • On statistics and forecasts

    The analogy I like is that if you eat a big pizza every day, a relatively good forecast is that you will gain weight! I forecast that the average weather in July next year will be sunny and warm. Now I may be wrong about a specific amount of weight gain or the weather on a specific day but I will be broadly correctly because I know that excess calories get converted into fat and the weather is normally warm in the summer (even in the UK!)

    And medium term forecasts tend to be better than very short or very long ones. I eat a huge pizza every day and find that I have NOT lost weight – that may be due to a different amount of water in my body. But you can’t say “hey, experts you were wrong about pizza eating”. Very short term factors can change things and in the long term there can be factors you are not aware of now. A forecast in 1800s of the economy in years to come would hardly be aware of all the technological change.

    Those that criticise forecasts, scenarios and experts “as always wrong” tend to confuse all these factors.

    It seems fairly clear to me that there is a bigger economic cake if you are in a single market of 500 million people than one of 60 million people. If you don’t have to fill in forms crossing in and out of borders and a car made here crosses the channel effectively many, many times. That a car manufacturer will more likely build a plant in Europe with access to big market and many more suppliers and less red-tape than here – all things being equal. That the economy of Hampshire is bigger because it can trade with Dorset, Sussex, Berkshire without any hassles seems fairly clear in a bigger single market.

    And the vast, vast majority of economists support the analysis that we will be worse off outside the EU – and in the rough ballpark of £100 billion a year. Now that means around £40 billion a year less for public services – around £750 million a week. Now there are economists who disagree with this. But frankly if I am ill, I am going to go to mainstream doctor as my expert rather than an alternative quack. And 9 out of 10 doctors say the NHS will suffer if we quit the EU.

  • @Glenn 7th Dec ’18 – 11:21am

    Thanks for your comments – different points of view are useful. I think the argument is a slightly different one – that May’s deal satisfies no-one.

    It is a bit like if we asked her to shop for an elephant while a large number of people wanted a goldfish and May came back with a duck-billed platypus.

    May would point out to one side that it is a mammal and to the other side that it swims – but neither thinks it is a good idea!

    To many Brexiteers, May’s deal it doesn’t allow trade agreements with other countries. To Remainers, it means we leave the single market and so are worse off economically.

    Currently we have around 12% of the voting power in the council of ministers and you need about 62% to pass something. That means at the moment about 75% of the other countries have to think something – say a change in a specification for electrical goods – is a good idea if we don’t. Now there may be some things that 75% of EU countries think are a good idea and we don’t – but it is difficult to see many. But out of the EU and our 12% has gone. And so has our negotiating power with it. But with May’s deal we still have to go along with much of what the EU decides.

    Say we think a product specification is incorrect, now we could perhaps block it, when under May’s deal we can’t.

    So completely out (because we don’t have to follow it) or completely in (because we can block it), we don’t have something that we don’t like whereas under May’s deal we might.

  • @Glenn 7th Dec ’18 – 6:05pm

    It is clear that a currency union and single market do not mean uniform tax rates and healthcare provision etc.

    You only have to look at the UK, Scotland is currently in the UK single market and currency union but has increasingly different tax rates and NHS care. Go and live in Scotland I pay different income tax and have different NHS care such as free prescriptions.

    It makes sense to take different decisions at different levels. On healthcare. At a local level I get different services but within NICE guidelines, in different UK nations I get different services and on a European level it makes sense to be able to access their NHS equivalents.

    It is I think particularly British (and may be even English) to think that decisions have to be centralised. And so now the EU exists it has to, is and must and will take all decisions as a “bigger” entity. And hopefully we will devolve more decision making and tax raising powers to the regions within the UK.

    It is perhaps interesting that there are more countries in Europe now – Estonia, Latvia, Lithunia, Czech Republic, Slovakia etc. Many of which have subsequently joined the EU. And they have not created themselves and gained independence from bigger countries, only to abolish themselves again, or to give up autonomy, decision-making or diversity. But they do realise that some things are better considered on a European level as well as on a national or sub-national level.

    And many in the UK do live within 50 miles of another EU country – France, Ireland, Holland etc.

  • Michael 1
    Scotland is an interesting case to point because devolution is increasing the appeal of independence.

  • Peter Martin 8th Dec '18 - 9:46am

    @ Michael 1,

    “It is clear that a currency union and single market do not mean uniform tax rates and healthcare provision etc.”

    That’s always been the case, in the UK, if you include local councils which have local taxation powers of their own. In the USA, the different States also have powers to levy their own taxes on property, income and sales if they choose. They can then use the raised taxation to spend as they wish. The Scottish devolved govt is just another example of this.

    “It is I think particularly British (and may be even English) to think that decisions have to be centralised”

    This is not true. Nearly everyone else works the same way we do. The Americans, the Canadians, the Australians etc centralise their important decisions but leave some power in the hands of local and regional governments to make their own adjustments as they see fit. It’s the central government which is paramount though. We probably all know the names of the Prime Ministers or Presidents of these countries but who can name the Premier of South Australia, or the Governor of Michigan?

    On an economic note it is important to understand that the central government is an issuer of the currency, but that local and regional governments are users of the currency. This gives central government much greater powers of being able to influence the workings of their economies than regional governments.

    This doesn’t apply to eurozone countries, though, which is the main reason they have the problems they do and the reason the Paris riot police will probably be out in force again this weekend.

  • It is true that the UK has one of the most centralised fiscal systems in the world. US states e.g. California levy their own income, sales and property taxes to fund their budgets including state unemployment insurance. Education is funded via school districts from property taxes. Counties and towns levy property taxes for local budgets as well. Employer provided healthcare is mandatory in many states although coverage for family members is not included and is normally paid for by way of payroll deduction.

  • I agree with those who doubt the accuracy of economic forecasts. Any forecast rests on a particular model of reality – in this case of the economy and its trade flows – yet it is precisely these that will be disrupted by Brexit.

    Moreover, the potential disruptions are not simply relative price changes that can and will be offset by compensating shifts – for example in exchange rates. Big risks also arise from administrative and other changes that don’t come under headings of ‘economics’ (as used by the models) but are more properly the domain of ‘regulation’ and ‘governance’. I’ll bet those are NOT included in the models.

    So, a more USEFUL approach would be to search for *sensitivities* – overlooked trip hazards that might spring from nowhere to become important to particular sectors. Even apparently small ones could have massive effects.

    The advantage of this approach is that finding sensitivities would help guide policy to avoid sudden dislocations. The disadvantage is that it doesn’t suit a media looking for a story that can be boiled down to a simplistic “we will be X% better (or worse) off” nor does it play well into a political shouting match.

  • David Allen 9th Dec '18 - 12:50am

    On forecasting, its uncertainties, and people’s attitudes to those uncertainties: All forecasts are uncertain. The critical question is what to make of the uncertainties.

    Climate change forecasts might turn out to be either too pessimistic or too optimistic. Denialists leap up in triumph every time a “quietist” critical scientist suggests a reason why the consensus scientific forecast might be over-pessimistic. That’s because, if the quietist critic is right, then the denialist stands a slightly better chance of getting away with his selfish, short-sighted and lazy attitude. On the other hand, denialists tend to go very quiet when an “alarmist” critical scientist suggests a reason why the consensus forecast might not be pessimistic enough – for example, because of the risk of catastrophic ice-melting creating a postive feedback loop and melting even more ice. The more rational observer, by contrast, tends to pay more attention to the alarmist. That’s because, if the quietist is right, less needs to be done: but if the alarmist has got it right, then we had all better sit up and take notice.

    It’s much the same with Brexit. Everybody, except denialists of a Trumpian scale of self-delusiveness, knows that Brexit will hurt. Those who would like to make the British people the victims of their ideological convictions would like to use the uncertainties as an excuse for pretending that the hurt won’t really be serious. Those who, by contrast, would like to see better informed decisions, are instead keen to explore what the uncertainties might be and how they can best be identified and adapted to.

  • Peter Martin 9th Dec '18 - 4:59am

    @ JoeB

    All independent governments are fiscally centralised in the sense that only the central government has the ability to issue currency.

    There is nearly always a capital inflow onto the UK to compensate for the outflow of pounds in the current account. The two have to sum to zero. Local and regional governments simply don’t have the fiscal power to regulate their spending to replenish these lost pounds and so correctly regulate their local economies.

  • Peter Martin 9th Dec '18 - 9:33am

    @ David Allen

    “Everybody, except denialists of a Trumpian scale of self-delusiveness, knows that Brexit will hurt.”

    Phrases like “It is generally understood that” and your “everybody…knows” should be avoided. At least that what I was taught when us supposedly semi-literate science undergraduates were instructed in the ‘art’ of writing scientific papers.

    For one thing “everybody” doesn’t know. Here we have an ex – IMF economist who doesn’t think this at all. Or he thinks that any pain will be relatively minor with the long term consequences being small. The link below is known as a reference BTW! I could also have supplied similar references from Nobel winning economists like Joe Stiglitz and Paul Krugman who argue that the dysfunctional economic structure of the EU is best avoided.


  • Jayn Mansfield 9th Dec '18 - 11:02am

    @ Glenn,
    It is not a game. At least not for most of us.

  • David Allen 9th Dec '18 - 2:02pm

    Peter Martin, if I was writing a scientific paper rather than a brief posting, I would indeed have to supply references to support what everybody knows, rather than just stating it as a fact. Meanwhile, from your supposedly superior vantage point, you quote a link to a Brexit denialist, who provides the following magnificent piece of hyper-self-confident assertion in place of academically rigorous reasoning:

    “No trade economist believes that the long-term cost of this shift in sales patterns is any more than 0.5 per cent of GDP. Throw in 2 to 3 per cent of GDP as temporary disruption costs. Estimates higher than that are ad hoc. And ad hoc estimates can go either way.”

    Oh yes, you can throw in any random figures you like, provided you want to deny that Brexit will seriously hurt!

    PS, you then lean on Nobel prizewinning economists like Stiglitz and Krugman, but you’re leaning on them the way a drunk leans on a lamppost. Stiglitz and Krugman make valid criticisms – of the Euro. But we’re not in the Euro. We’re not talking about the Euro. We’re talking about Brexit!

  • Jayne Mansfield.
    I wasn’t describing Brexit as a game. I was referring to the person replying. to the post and his arguing style.
    I see the situation as very serious because I see British involvement in the EU as an historic mistake that needs to be rectified.

  • Peter Martin 10th Dec '18 - 11:12am

    @ David Allen,

    “Stiglitz and Krugman make valid criticisms – of the Euro.”

    I suppose that’s one way of putting it. Stiglitz himself says the “Single currency experiment has been a disaster”

    It’s important to understand that the euro is fundamental to the EU. If the euro fails, and that’s very likely IMO, then so does the EU. It’s not that the euro will become worthless but we will likely see the divergence of the Italian euro, Greek euro etc from the German euro as the supposedly “single currency” breaks up.

    The vote against the EU wasn’t about the degree of bend in bananas. If the euro had been functioning well and the European economies had been growing and functioning correctly then it would have been an easy win for Remain.

    You can’t separate the euro from the EU.


  • Peter Hirst 10th Dec '18 - 2:25pm

    With the vote on Tuesday at least delayed, the options increase. Would TM take her deal to the people? It would be a high risk move. Might she try for an enhanced deal? Or could she manufacture a people’s vote that confirmed a leave decision but leave how to the government?

  • “It’s important to understand that the euro is fundamental to the EU.”

    Speaking as a STRONG opponent of the euro from the outset, that’s highly debatable. There is, I think, reasonably good evidence that one of its drivers was a plan by some senior EU bureaucrats to set a course that would inevitably (but some years down the track) cause a crisis that would in their view force the creation of a ‘transfer union’ – i.e. in effect a EU super-state. On the other hand, it may have been a toxic mix of seriously bad economics and naïve enthusiasm.

    Either way, I for one have never believed that a transfer union was remotely possible – not before the euro started and not now. The Eurozone crisis will continue to get worse and will metastasise in unpredictable ways before it is resolved in some way – hopefully, not by blowing up although I fear that is a high-probability outcome.

    There is an old saying that a ‘good crisis should never be wasted’ and that’s true in this instance. Out of the inevitable euro crisis will come the opportunity – indeed the urgent need – to come up with a new approach to EU governance that goes far beyond the euro as such and must include a return to national currencies. That creates the opportunity to be the one ready with ‘Plan B’ and in those circumstances, it likely to succeed.

    Meanwhile think on this. The hard right of the Tory party are the biggest promoters of Leave. They are not stupid and understand disaster capitalism very well so why would they back a plan that has more holes that a sieve and that would do incalculable damage to the economy?

    The answer I suggest is that they see the NHS (and other social programmes) consuming a growing share of national resources year by year. But the NHS is sacrosanct to the voters so how to kill it? Why, disaster capitalism of course. YOU HAVE BEEN WARNED!

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