Divorce ... or time for a change of mind?

ECONOMIC reality is beginning to catch up with the false hopes of the general population.

They believed the promises of the popular press that Brexit will not reduce their living standards, so they maintained those standards by running up debts. This worked for a while because household consumption stimulated the economy.

But the moment of truth is fast approaching. As the latest figures published by the Bank of England show, wage growth is not keeping up with inflation, so that real incomes have begun to fall.

Once the experience of June is repeated in subsequent months, households will realise that their living standards are falling and they will have to adjust their spending habits. They will also realise that they have become over-indebted and will have to pay back their debts. This will reduce the consumption that has sustained the economy even further.

Moreover, the Bank of England has made the same mistake as the average household: it underestimated the impact of inflation.

We are fast approaching the tipping point that characterizes all unsustainable economic developments.

The fact is that Brexit is a lose-lose proposition, harmful both to Britain and the European Union. It cannot be undone, but people can change their minds.

Apparently, this is happening. Theresa May’s attempt to strengthen her negotiating position by holding a snap Election has badly misfired: she lost her parliamentary majority. The primary cause was her fatal misstep with the dementia tax that offended her core constituency, the elderly. But the increased participation of young people was also important. They voted for Labour in protest, not because they wanted to join a trade union or support Jeremy Corbyn (although he gave an impressive performance). Their attitude to the single market is diametrically opposed to those of Theresa May. Young people are eager to find well-paying jobs, whether in Britain or elsewhere. In that respect, their interests correspond with those of the City of London.

If Theresa May wants to stay in power she has to change her approach. There are signs she is prepared to do so. By approaching the negotiations starting on Monday in a conciliatory spirit, she could reach an agreement with the European Union on their agenda and agree to continue as a member of the single market for a long enough period to carry out all the legal work. This would be a great relief to the EU because it would postpone the evil day when Britain’s absence would create an enormous hole in its budget. That would be a win-win arrangement.

Only by taking this path can she hope to persuade Parliament to pass the laws that need to be enacted. She would also have to atone for the sins of the Tories in Kensington over Grenfell Tower. She could then carry on leading a minority Government, because nobody would want to take her place. There are signs she is prepared to do so.

The divorce process would take at least five years, and during that time new Elections would take place. If all went well, the two parties may want to remarry even before they have divorced.