Today (I write on Monday evening) Speaker Bercow has agreed to accept a motion from Labour, the Democratic Unionist party and other opposition parties, to debate a motion charging the government with contempt of Parliament, prior to the upcoming 5 days’ debate on the Prime Minister’s Brexit deal.  This potentially generates yet another mini constitutional crisis, between government and Parliament.

The House of Commons had passed a motion on 13 November requiring the government to publish in full the legal advice on the Withdrawal Agreement provided to it by the Attorney-General, Geoffrey Cox, a Brexiteer barrister of colourful legal and Parliamentary career, whose summary on Wikipedia merits a quick visit by those not easily offended.  This motion had passed with the abstention of Conservative MPs, given the government Whips’ fear that they would be defeated with the DUP ‘defecting’.  This may be seen, with hindsight, as an error of judgment.

The traditional view of the role of the Attorney-General as legal adviser to government is that his or her advice is covered by lawyer-client privilege, which means that government may keep it confidential, and Parliament generally cannot require it to be published.  The client (but not the lawyer) may waive this privilege.

In other contexts, the British courts have given a broad remit to legal privilege – it includes, said the House of Lords in Three Rivers District Council and others (Respondents) v. Governor and Company of the Bank of England (Appellants) (2004) advice on how the client might best present their evidence, as well as strictly advising on the legal issues concerned.

So assuming that Geoffrey Cox, as Attorney-General, was discussing with Cabinet colleagues the presentation of the government’s Brexit “case” to Parliament and the public, as well as advising on any purely legal implications, was this covered by legal privilege?

I see that former Labour Lord Chancellor Charlie Falconer is tweeting that the Attorney-General should indeed yield to the House of Commons:

Attorney General is fundamentally misstating the Constitution. The Commons and not the AG is the ultimate arbiter of whether the full advice should be disclosed. If the Commons thinks it should AG cannot override that by his belief it’s not in the public interest to do so.

— Charlie Falconer (@LordCFalconer) 3 December 2018

He’s been ordered to produce the full Advice by the Humble Address. He should not await a motion for contempt before regarding himself as forced to comply. The Attorney General of all people should comply with binding orders whether it be of the courts or Parliament. https://t.co/MQ2BrV7WDS

— Charlie Falconer (@LordCFalconer) 3 December 2018

Well, there may be grounds for distinguishing this case from others – such as then Attorney-General Peter Goldsmith’s (changing) advices on the legal basis of the Iraq War – in which governments of different political persuasions have insisted on legal privilege.  In 2007, the Labour government published a consultation paper on the roles of the Attorney-General,

“1.37 On questions relating to the legal advice the Attorney General has given to Government, accountability is subject to considerations of confidentiality and legal professional privilege. However, the Attorney General is sometimes called upon to advise Parliament itself, particularly on questions of Parliamentary privilege, the conduct and discipline of Members, and the meaning and effect of proposed legislation.”

And again,

”2.9 Furthermore, it is argued, the Attorney General’s advice, as well as needing of course to be honest and authoritative, is advice to a particular client (the Government) on how its policies may lawfully be achieved, including advice on the legal risks attached, the prospects of successful challenge and so on. It is, like other legal advice, subject to legal professional privilege and is not generally published. In this way, the Attorney General operates like an in-house lawyer…

2.10 However, some commentators have suggested that the Attorney General’s advice to Government should not (or not always) be treated in the same way as legal advice given to a private organisation. The Government is not a business and the relationship of the Attorney General to the Government is arguably of a different order to that of other in-house lawyers. This raises the question of whether, at least for some purposes, “the public” (or Parliament), rather than the Government, should be treated as the Attorney General’s client. Lord Bingham has said:

“There seems to me to be room to question whether the ordinary rules of client privilege, appropriate enough in other circumstances, should apply to a law officer’s opinion on the lawfulness of war; it is not unrealistic in my view to regard the public, those who are to fight and perhaps die, rather than the government, as the client.”

Well, Brexit is not quite war, but like war, it shapes the country’s future in more profound economic and constitutional ways than other lesser events.

So where does this lead us and leave us?

In general principle, the government appears to me to have a strong case, from precedent, that legal advice and explanation, including on presentational issues to Parliament, is covered by legal privilege and that the House of Commons cannot override this.

However, since the government did not ask its MPs to vote against the motion requiring the full advice to be given to the Commons, there is clearly an argument that the privilege has been waived.  Since the privilege is that of the “client” (the government) and not of Mr Cox as legal adviser, I would be surprised if he himself were to be found guilty of contempt.

Moreover, the facts of the withdrawal Agreement ‘case’ do offer an opportunity for Parliament to force the issue and win a broader right of access to legal advice than hitherto.  For example, there could be a new distinction drawn between legitimate legal advice on a matter of pending litigation by or against the government, where legal privilege would still apply – and legal advice on matters of general national interest where no immediate specific legal proceedings are involved.  Thus, general legal advice on war, or trade agreements or other international conventions (including the tactics for presentation to Parliament or public) would be disclosable to Parliament as well as government, unless government could adduce a specific overriding reason why there was a need to withhold.

Another thought – the government claims that Parliament already has the essence of the full “legal advice” before it.  But as David Allen Green, the Financial Times’s legal eagle has pointed out (once more, of course, via twitter!), the 43 page document put before Parliament does not even claim to be legal advice in any shape or form.  He imagines the discussion:

“What shall we call it, Attorney General? Advice?”

– No

“Summary of advice”

– No, avoid “advice”

“Legal analysis”

– No

“Legal comment”

– No

“Legal description”

– No, avoid “legal” too

“Essay crisis copy-and-paste job?”

– It’s not even that

“Position”

– Ok, just about

— David Allen Green (@davidallengreen) 3 December 2018

In fact, it’s simply entitled “EU EXIT:  Legal position on the Withdrawal Agreement.”  It’s not a ‘summary’ of legal advice, nor does it show sign of any meaningful communication between lawyer and client.  Maybe this opens up another front – that the Attorney General was not giving legal advice to government, and that no legal privilege can attach to a general political discussion on a generalised “position” that is no more than a jobbing summary of a long document.

The House of Commons of course can vote (if the majority is there) to find ministers in contempt, even if this stretches precedent.  We can sense a government rapidly losing its life-force.  In Parliamentary constitutional terms, it’s a potentially revolutionary situation.  We can even imagine the courts being handed this hottest of potatoes to adjudicate on – a dispute over privileges between Executive and House of Commons. But surely, in our common interest, it’s time for Parliament to take control.

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Since 2000, broadly corresponding to the Euro era, real GDP per head has declined by 0.2% per year on average. And over the last decade, i.e. since the Global Financial and Euro zone crises from 2008, the decline has been severe, as this chart (comparing 10 “developed economies”) shows.

Unemployment exceeded 10% from early 2012 until very recently (latest figure, 9.7%).

So something has to be done to get the economy moving. In March of this year, a new coalition government was sworn in, composed of two non-establishment parties. The unlikely coalition consisted of the Lega, a far right nationalist party strong in the north, and the 5 Star Movement concentrated in the south. The latter has a rather eccentric, even muddled ideology, with some left of centre policies. Together, the parties scored around 50% of the votes cast, of which around 33% were for 5 Star. Seven months later in October, opinion polls show support for the coalition of around 60%, with La Lega (under its Alt-Right leader Salvini) leaping ahead to 31%, and 5 Star slipping back to 29%.

One of the less noticed and perhaps unexpected effects of the rise of right-wing “populist” governments across Europe has been that – alongside nasty anti-immigrant, socially conservative and authoritarian policies and rhetoric – their economic policies tend to be more geared towards protection of poorer citizens. By supporting austerity programmes and a dominant focus on “competitiveness”, European social democratic parties have failed to offer policies of economic protection to less well-off communities, and in Italy and elsewhere are paying the political price.

This is the backdrop to the latest very public “bar-room budget brawl” between the Italian government and the European Commission. It has quickly become clear that the Commission has demonstrated a lack of political wisdom by entering into this fight.

The European Treaties contain fiscal ‘rules’ that are contractionary – i.e. they tend to exacerbate economic downturns. Article 126 of the Treaty on the Functioning of the EU instructs member states to “avoid excessive government deficits”. The treaty requires the Commission to “examine compliance with budgetary discipline” in relation to two criteria: a deficit below 3%, and a government-debt-to-GDP ratio of less than 60%. For outcomes inconsistent with these levels, and not moving towards them “at a satisfactory pace”, the Commission is required to issue a report on non-compliance.

Not so much heeded, Article 126 requires the Commission to “also take into account whether the government deficit exceeds government investment expenditure”, as well as “the medium-term economic and budgetary position of the Member State.”

A labyrinthine set of EU legislative regulations buttresses these fiscal Treaty provisions, mainly developed in response to the Euro zone crisis. The effect has been to create an ever-more intrusive process of budget monitoring.

No penal process against Italy has yet been triggered under Article 126, nor is this likely in the near future. On 18th October, the Commission wrote to Italy’s Finance Minister

“to consult you on the reasons why Italy plans ‘an obvious significant deviation of the recommendations adopted by the Council under the Stability and Growth Pact’ for 2019, which is a source of serious concern for the European Commission.”

The main complaint is that the Italian government’s new budget for 2019 would increase the projected deficit to 2.4%, representing, according to the Commission, “a fiscal expansion of close to 1% of GDP, while the Council has recommended a fiscal adjustment” [i.e. cuts].  Both this proposed expansion, and the size of the deviation from the Council’s recommendations (around 1.5% of GDP), are “unprecedented in the history of the Stability and Growth Pact”, the Commission contends.

The Commission’s comparison is to the budget for 2019 proposed back in March this year by the outgoing centre-left government, which claimed that the deficit should fall from (estimated) 1.6% in 2018, to just 0.8% in 2019, and “a broadly balanced budgetary position by 2020”. The Commission recommended that an increase in government spending in 2019 should not exceed a minuscule 0.1%, an insignificant increase implying in real terms a significant cut.

With unemployment still projected to be above 9% in 2020, and an employment rate well below other major EU countries, it seems extraordinary that Italy should be required to reduce public spending, even if there are legitimate arguments around the actual content of that spending. One weakness that Italy shares with the UK is the low overall level of investment. Public investment is particularly low, at around 2% of GDP. But if one assumes it to be reasonable to borrow for investment, then of the new proposed deficit level of 2.4%, the majority relates in fact to capital investment.

The real concern for the Italian government is not the actual level of the deficit, but of the public debt, which is around 130% of GDP. Rogoff and Reinhart, two US economists, in 2010 implied (wrongly as later evidence showed) that debt levels in excess of a 90% of GDP threshold tend to depress growth and create financial instability. This view was enthusiastically taken up by the then Commissioner for Economic Affairs, Olli Rehn. But certainly, 130% is high, and if interest rates rise rapidly, this would add to the budgetary pressures on the Italian government.

However, unless there is a political fracas on this issue between the EU and Italian government, which would be unnecessary, no reason based on economic analysis presents itself as to why the debt to GDP level would rise more than marginally as the result of a deficit of 2.4% instead of 0.8%.

In our view, there is no merit in the argument that an Italian budget deficit in 2019 of 2.4% of GDP is wrong in principle or itself a danger to the Stability and Growth Pact, let alone to the Monetary Union. As recently as May, in its Spring 2018 European Economic Forecast, the Commission was forecasting this (page 97):

“In 2019, the headline deficit is set to remain constant at 1.7% of GDP, under the assumption of unchanged policies and excluding the legislated hike in VAT rates.”

On this as well as other assumptions,

“the debt-to-GDP ratio is expected to have peaked in 2017 at 131.8%… and to progressively decline to 130.7% in 2018 and 129.7% in 2019, mainly as a result of stronger nominal GDP growth”.

So the Italian government’s proposed deficit for 2019 is only 0.7% of GDP higher than this May 2018 estimate.

If the level of deficit is unremarkable, it is of course possible to be critical of the composition of the measures in terms of their expansionary potential – even though they reflect election commitments. There is little in the spending package for increased government investment, for example, despite its low level and the urgent need for infrastructure improvements.

But while the Commission could reasonably offer advice to governments on the content of their budgets, it is surely on dangerous ground to threaten penal sanctions because of disagreement over the policy mix.

Another recent criticism is that the putative stimulus package is actually not a stimulus. This comes from Olivier Blanchard, ex-IMF Chief Economist, and Jeromin Zettelmeyer, both now of the Peterson Institute for International Economics. Despite inclusion of a multiplier effect of 1.5%, they contend that the overall impact of the budget is likely to be contractionary, because the increase in interest rates it provokes will outweigh the (assumed) benefits.

But this raises a deeper issue. Is the increase in interest rates, if this occurs, a function of the package itself, or rather of a reaction to the expressed opposition of the European Commission and other institutions? In other words, would the interest rate rise reflect economic uncertainty in money markets, or political uncertainty caused by Commission opposition to the budget? It is hard to judge with certainty, but we feel it is likely that this public opposition to an objectively modest proposed expansion at a time of high unemployment has greatly exacerbated the market reaction.

We have elsewhere expressed concern over the EU’s lack of true democratic space in the economic sphere:

“Despite its commitment to democratic values, in one key area the European Union does not permit legitimate democratic choice, and that is the economic sphere. Because so much of the economic policy of the EU is embedded in its Treaties…there is a growing frustration that the democratic will of Europe’s people simply cannot be expressed if on any point it differs from that set out in the Treaties.”

These concerns are all the greater when, as we believe, a wrong-footed political response by the Commission is almost certain to strengthen a government of which the stronger component (la Lega) promotes reactionary policies that truly breach our shared democratic norms.

The European Union has a genuine interest in ensuring that no state undertakes economic policies that seriously damage its monetary union. But even if it is not perfect, the current Italian budget package comes nowhere near to doing so. It is a reaction to decades of decline and years of searing unemployment. To prevent a new wave of fascism or ultra-nationalism, the EU needs to respond by ditching its bias to austerity.

As a final comment, we note that the tension over the new Italian budget exposes the lack of political judgment by the centre-right parties throughout the European Union for at least two decades. The EU fiscal rules are dysfunctional. Long ago the progressive parties should have opposed them. They failed to do so. Now it is the right, the far-right in some cases, that may harvest the popular outrage against the budgets adhering to those rules.

Photo credit: Flickr / Ministero Difesa

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