Rules are rules

All social and economic systems are based on rules. Some are necessary, some merely irksome, but they are all designed with a purpose in mind. All advanced societies live by a code designed to preserve social order, which is a prerequisite for economic advancement. Anarchic systems tend not to last long.

I was struck by this thought yesterday, following the UK Supreme Court’s ruling that parliament must be allowed to vote before the Article 50 legislation triggering Brexit is enacted. There are those who may disagree with the court’s ruling. Others may question whether it was necessary that the whole episode should have required legal involvement in the first place. After all, it would have been simple enough for the government to have acquiesced to demands for a vote, whilst preparing a pared down bill which parliament would find very difficult to reject – something that the government will now have to do anyway. But it is important to recognise that under English law, the courts exist to enact the law which is designed in parliament. The judgment handed down yesterday made it clear that the Supreme Court has no wish (or indeed, power) to rule on whether Brexit is a good or bad thing for the UK. It merely ruled that legislation put in place by parliament can only be repealed by parliament.

It was thus extraordinary to hear Iain Duncan Smith, a prominent eurosceptic MP – indeed a former leader of the Conservative Party – say in a radio interview: “There’s also the issue about who is supreme – Parliament or a self-appointed court ... I’m disappointed they've tried to tell Parliament how to run its business. They've stepped into new territory where they've actually told Parliament not just that they should do something but actually what they should do. I think that leads further down the road to real constitutional issues about who is supreme in this role.”

Rarely, if ever, have I heard a more crass statement from a British politician. It demonstrates a lack of understanding of how the UK judicial process works, which in itself is worrying from a lawmaker. As the writer of The Secret Barrister blog noted on Twitter “There's no issue about who is supreme between Parliament and Supreme Court. It’s Parliament. The Court expressly did not tell Parliament how to run its business. It clarified what it could not do unilaterally. The Supreme Court is not self-appointed. It was established by Parliament by section 23 of the Constitutional Reform Act 2005.” My own reaction was to question in what way a parliament, that his government wanted to be kept out of the process in the first place, was being told how to act? And the irony must have escaped him that somehow allowing parliament to demonstrate its sovereignty was a means of taking control that surely his Brexit campaign had been about all along?

But this goes to the heart of a deeper economic, and indeed social, problem. There is often a fundamental misunderstanding of the rules which are in place; why they are in place and the consequences of not adhering to them. To give a simple economic example, many people know that the Maastricht Treaty of 1992 specified that members of the single currency should ensure that their public deficit on an annual basis be kept below 3% of GDP. Fewer people know that this apparently arbitrary figure is based on the desire to stabilise the long-term debt-to-GDP ratio at 60% under the assumption that nominal GDP grows at a rate of 5% per annum (60% x 5% = 3%). Fewer still realise that if GDP growth slows, governments have to run an even tighter fiscal stance to stabilise the long-run debt ratio at 60%. Thus if growth were to permanently slow to 4%, this would require maintaining a deficit ratio of 2.4% (60% x 4% = 2.4%). Alternatively, governments will be required to run higher debt limits (a 3% deficit limit and 4% growth would allow governments to stabilise debt ratios only at 75% of GDP). Either way, the 3% deficit threshold has become an article of faith to be adhered to at all times, even though it is no longer appropriate in the current low growth environment.

As it happens, the consequences of failing to adhere to the fiscal targets are not particularly dramatic. But the fact that they are believed to be so has prompted EMU countries to embark upon a damaging round of fiscal austerity. The consequences of IDS’s failing to understand the nature of the English legal system are manifestly more worrying. Like a series of Chinese whispers, they are repeated until they become an article of faith which begins to undermine the basis of the legal framework and erodes trust in experts and institutions. This is how post truth societies emerge and gives rise to the series of untruths (or alternative facts) upon which the case for Brexit was made.

They say that rules exist for the obedience of fools and the guidance of wise men. But both fools and wise men need to know why the rules are there in the first place, or we all end up looking like fools.