Friday, 14 February 2020

The sound of silence

We’re in a strange kind of limbo period in which the UK has left the EU, and the Transition Period has started, and yet the crucial talks about future terms have not yet begun and won’t do so until March. That gives the impression that nothing much is happening with Brexit for, as Luke McGee of CNN observes, the government is “eerily quiet on the single most important issue facing the United Kingdom in 2020”.  And what little is being said has largely been drowned out by the cabinet reshuffle, HS2 and other stories.

An eloquent silence

Yet that silence, in its own way, gives and is intended to give a message. I wrote in my previous post about Boris Johnson’s childish refusal to use the word Brexit any more, a stance confirmed by the now former Business Secretary Andrea Leadsom in a visit to Sunderland this week. “That was something that happened”, she rather peculiarly said when asked, rather as if, to use a comparison I’ve made before, Brexit had been an embarrassing episode at last year’s office party. It must have been rather deflating for the Sunderland voters, many of whom may have wanted to celebrate that which they are no longer supposed to mention.

But, of course, there is a very serious side to this. Invoking Orwell, both Jonathan Lis and Ian Dunt have recently written articles about how a wholesale revision of language is underway which is expressly designed to prevent scrutiny and accountability. Whatever may or may not happen now is to be decoupled from Brexit. It is hardly a new political technique, but it is being deployed with a rapidity, ruthlessness and shamelessness that is chilling.

And yet this is developing into the latest of the many paradoxes that Brexit has created. For at the same time as attempting to relegate Brexit to distant memory, the government is also claiming all kinds of benefits from “having left the EU”. Thus Health Secretary Matt Hancock explained this week that it would allow Britain to train or re-train many new medical staff (the Daily Express, where his article was published, was rather off-message in its headline by invoking the B-word).

It was not explained how the EU had prevented this, nor whether it would compensate for the exodus of EU staff from the NHS. But the ‘now we’ve left the EU’ formulation doesn’t require any causal link to be claimed. If Brexit is something that ‘has happened’, well, this announcement is something which is ‘now happening’. If readers fill in the blanks and ascribe it to Brexit – or headline writers do it for them - that’s a matter for them.

“Traders’ wines and olive oils …”

More complex was this week’s announcement of a consultation exercise about the establishment of free ports (the policy itself is not new and was announced last August). These are areas, not necessarily on the coast, where normal tax, customs checks and trade tariff rules are suspended so goods can be imported, stored, processed or worked on, and then re-exported or sold in the domestic market (at which point any relevant tariffs would apply).

Free ports have long been claimed by Johnson and many Brexit ideologues on the free market right as one of the great prizes of Brexit. The government’s consultation document suggests as much. It begins with some airy guff about how “in the Ancient World, Greek and Roman ships - piled high with traders’ wines and olive oils – found safe harbour in the Free Port of Delos” (p.5). That language is cringe-making but it is not accidental, being all of a piece with the cod history of so much Brexiter rhetoric, as if cutters bearing spices rather than container ships bearing crankshafts were at stake, and Brexit was a remake of The Onedin Line.

There is more in this woeful vein, but then it gets to the point. Free ports (or freeports, as the document has it) are all about “the opportunities that leaving the EU brings” (p.8). The clear suggestion is that the EU prohibits free ports. That turns out not to be true. They exist in the EU and existed in the UK until 2012, at which point the UK allowed the relevant UK legislation to lapse.

This led to much adverse comment on social media that the government was lying but matters are more complex than that. The language being used is very slippery – including that of the incoming Chancellor Rishi Sunak - which makes it hard to hold on to what exactly is being claimed. But whilst free ports are allowed by the EU, they are circumscribed by EU Law as to how they can operate, including by state aid regulations (because, for example, certain sorts of tax incentives would amount to subsidies) and it was this, arguably, that led to the UK’s decision not to continue with them.

Beneath the rhetoric

So from that point of view the government is being half-truthful in suggesting that post-Brexit British free ports could be different from those within the EU (although they would not be a complete free-for-all in that WTO rules, so loved by Brexiters, create some restrictions). But nested within that are some other issues. The obvious one is that it reveals that what is really at issue here is not free ports per se but whether or not Britain agrees to the Level Playing Field (LPF, including state aid rules) which would prevent this divergence from EU free port regulations.

Since agreeing to LPF is one of the (this week hardening) EU red lines for doing a trade deal, it’s not unduly cynical to think that if the negotiations founder for that reason, one justification the government will give for not making a deal is that it will preclude these supposedly wonderful British free ports, especially as according to the consultation document free ports are to be a “cornerstone” of the government’s national ‘levelling up’ policy and, thus, the delivery of ‘the people’s priorities’.

That’s questionable because according to Sussex University’s highly respected UK Trade Policy Observatory the economic case for free ports is debatable anyway, and numerous criticisms of their role in lowering labour standards and promoting tax evasion and money laundering have been made. And where there are examples of successful free ports they do not really translate to the British context (£).  Moreover, the government proposals are actually a hybrid of various kinds of policy, including regional regeneration which is not seen as a rationale for free ports even by their advocates, and enterprise zones which exist anyway.

I’ve focused on the free ports example because it has been current this week, and because it may come to have an importance in its own right, but also because it is illustrative of the tangle of language which has the effect, and probably the intention, of bamboozling people. Hence the half-true implication that this is new freedom for Britain, and the disguised truth that what is new about it is not having to adhere to regulatory restrictions which, if explained, many might prefer to keep, and the tendentious claims for the benefits.

That itself is consonant with the way, as argued in my previous post, that the government remains within Brexit campaign mode. For it is very much like the linguistic chicanery of ‘Turkey is joining the EU’, defended on the grounds that it was true that, in principle, there was an ongoing process for Turkish accession whilst carrying the untrue implication that accession was an accomplished and imminent fact. Likewise, the “let’s spend” £350M a week on the NHS slogan was defended on the basis that this was merely a ‘suggestion’ for what could happen.

Fortunately, the English love a queue

However, in one respect at least the government did start talking about the practical realities of Brexit – though it was not generally reported as the headline story it should have been - and it turns out that these are not so liberating after all.

As with free ports, it was dressed up in bracing terms – the Border Delivery Group, no less – beneath which lay the stark truth that as of next January there will be border checks on goods coming into Great Britain* from the EU, whether or not there is a trade deal, as well as tariffs charged if there is no trade deal. There were promises of ‘smart border’ arrangements by 2025, but that’s a long way off, most experts think them unlikely to be ready that soon and, anyway, they do not mean an end to customs formalities.

At one level, such border controls have been the obvious implication of Brexit ever since it was decided that this meant the hard Brexit of a trade deal or the even harder one of no trade deal at all. Yet that reality had been obscured by all the gaslighting about lack of checks on the Swiss border, the endless promises of ‘frictionless trade’ continuing and fanciful claims of ‘alternative arrangements’ to deliver this (most often with reference to the erstwhile Irish land border but, by extension, to be used at all EU-UK borders).

Everyone who knew anything about it knew that this was nonsense but, extraordinarily, this week was the first time that any high-profile official announcement of the reality of border checks in the UK was made. In the preparation for a no-deal Brexit, the plan had been that, whilst it was accepted that there would be EU tariffs and checks on UK exports to the EU, there would be almost none on goods moving from the EU to the UK.

That was always a strange idea anyway (giving EU exporters a huge advantage over UK exporters), but was intended as a temporary measure, at least in the first instance**, born of a recognition that there was insufficient time to build the necessary customs infrastructure in the UK. For similar reasons, no-deal planning had waived or reduced many of the normal border formalities but with this week’s announcement these, too, will now be put in place by the end of December.

It remains an open question whether the ten months or so until then will be sufficient and, if not, there are likely to be serious queues at the main ports (‘unfree ports’, perhaps). But, more importantly in the long-run, it spells out the very clear fact that Brexit is going to put an end to businesses running EU-UK just-in-time supply chains, as well as adding substantially to the costs of other businesses which trade across the new border.

Conceivably, it is intended as a negotiating ploy designed to make ‘German car makers’ and the like realize the consequences of there being no trade deal (if so, Brexiters have learned nothing). But it looks more like an acceptance that the no trade deal scenario is increasingly likely and, in any case, that there is no trade deal which can re-create the frictionless trade of single market and customs union membership. Zero tariffs does not mean zero checks and zero customs formalities – all of which mean friction and also mean increased business costs.

On the other hand, if there is no trade deal and import tariffs apply, an obvious question to ask is what tariff rates Britain will be applying. Alas, there is no answer to that since it also emerged this week that it has not yet been decided (£). This is a peculiar situation for a nation seeking, and desperately needing, to make trade deals not just with the EU but around the world. After all, how can such negotiation proceed if the other party does not know the terms that would apply without a deal being struck?

That is part of a more general picture of lack of preparedness which is one reason why leading American officials to say that a trade deal with the UK is now a lower priority for the US than one with the EU. We’re no longer ‘first in the queue’ apparently. That may explain why Brexiter MPs like Iain Duncan Smith are spearheading opposition to the government’s use of Huawei – perhaps they have belatedly realised that the realities of international trade talks entail power plays that make a mockery of their windy rhetoric about ‘taking back control’.

Bait and switch

Businesses now have a greater sense of what the government intends to inflict on their trade with the EU and, to some extent, that at least has the benefit of increased clarity. But they have warned, again, what this will mean for product availability and prices. That will have no cut-through with either the government or much of the public, of course, having already been discounted as Project Fear. The calculation appears to be that there is no political price to be paid for having spent years promising sunny uplands and then delivering dank swamps. Such a bait and switch is the oldest technique in the conman’s repertoire, but it does risk the wrath of disgruntled punters.

Much will depend upon exactly what damage occurs and how quickly, and whether enough people make the connections. Will they, for example, remember cases such as the boss of Norton, the British motorbike firm that went into receivership this week citing Brexit as one reason, saying in 2018 that Britain “would thrive outside the EU” and urging the government to get Brexit done? Or, if they face shortages and price increases because of border delays and costs, will they recall the warnings that were dismissed as Project Fear?

More generally, will enough people remember that Michael Gove, who made the announcement of the new border controls this week, was the same person who in 2016 sold them the bogus Vote Leave campaign line that there “is a free trade zone stretching from Iceland to Turkey … after we vote to leave we will remain in the zone”?

The depressing thing is that they probably won’t, the more so if the government is successful in persuading people that Brexit was something ‘that happened’, rather than something that is happening, and which both in principle and in form the Prime Minister and other leading ministers made happen.

This is why it is important – especially in the media - to keep challenging the linguistic contortions, and to keep comparing the promises with the outcomes. For although it may seem that both rationality and honesty have now disappeared from our politics that is not inevitable, and will only become so if we all drop the attempt to keep them present.

*The arrangements for Northern Ireland will, of course, be different. How these will work remains unclear and appears to have experts baffled.

**I say ‘in the first instance’ because, whilst the plans were indeed billed as ‘temporary’, on the wilder fringes of Brexit debate there are some influential figures who do propose the unilateral abolition of (all) import tariffs by the UK. Apart from the devastation this would cause British manufacturing and agriculture, such an approach would, of course, make negotiating trade deals with other countries rather difficult. For (whilst trade deals aren’t just about tariffs) why should they remove tariffs on UK goods if the UK has already removed tariffs on theirs?

Friday, 7 February 2020

Brexiters need to stop campaigning and start governing

Brexit day has come and gone. But as has been widely remarked, though apparently not universally understood, nothing really changes in the Transition Period, so there is no radical rupture in daily life.

The big question is whether that also means that nothing really changes in the way that Britain approaches Brexit. For last Friday did mark a rupture in one, crucial, way. Brexit, in the formal sense of Britain leaving the EU has happened, and a new phase has begun.

The issue now is not so much whether remainers accept that (£) – they don’t have much choice anyway - it’s whether Brexiters do. In particular, the issue is whether Brexiters – who now, unequivocally, form the government – are able to shift from campaigning to, indeed, governing.

What would this mean?

Stopping the lies

The first and most important thing that would have to change is for Boris Johnson, his government, and all the Brexiter commentators and advisers to stop lying. If they are serious about Brexit they need to face up to the realities of what it entails and that means telling the truth to themselves and others.

To take an example from this week. Hardly had the celebrations ended than Johnson was reported to be “infuriated” that the EU had “reneged” on its commitments to strike a ‘Canada- style’ free trade deal by now insisting on ‘Level Playing Field’ (LPF) commitments in terms of state aid, workers’ rights, environmental standards and so on. But that this was the EU’s position has been clear for at least a year and, more importantly, was set out in the text of the Political Declaration (paragraph 77) that Johnson himself signed. It’s this kind of constant gaslighting that would need to stop.

There’s more to it than that, though. Suppose that it were true that the EU had hardened its position, or suppose that it does, indeed, harden position in the coming months. In that case: welcome to the real world – there’s no point in having a foot-stamping, ‘it’s not fair’ tantrum.  This is what Brexit means. This is what you wanted. The UK is now a third country with respect to the EU, which will pursue what it judges to be its own interests and those of its member states. Britain is no longer a member state, and the EU will, quite properly, have no regard for our interests.

It seems strange to have to remind Brexiters that the EU is not some cuddly, kind uncle, showering largesse upon the world. It is ruthless in pursuit and protection of its own interests. So too will be the US, or Japan, or China, or India, or any other country with which the UK seeks to made trade deals, including ‘cosy’ Australia, New Zealand and Canada.

Nor is this confined to matters of trade, and trade itself is linked with other issues. That is evident in the row over Huawei 5G with the US (£) and the report that Spain will have a veto over the application of any UK-EU deal to Gibraltar. The latter caused much pearl-clutching from Brexiters but, again, there is nothing new here. It was the subject of one of the earliest rows in the Brexit process, back in April 2017. And as I wrote at the time, this row contained several lessons for how Brexit would proceed.

These lessons included, again, the need for realism. Just as the UK used Spain’s accession to the EU in 1986 to garner EU support for the UK’s rights over Gibraltar (in that case, to have an open border with Spain), so the converse applies now that the UK is leaving. Another lesson was that the UK needed to drop the idea that only France and Germany mattered in terms of negotiating with the EU. As the pivotal influence that Ireland has had over the last three years should have demonstrated, that simply isn’t true. The EU will negotiate as a bloc, on the basis of a mandate from the Council, and with regard to the (various) interests of all its members.

Getting real

If Brexiters are going to get serious about governing, what also has to end is responding to these and similar things through the victimhood narrative of being punished by the EU or the bullish assertion that it all proves that Britain is right to leave. These are campaigning stances – arguments, if you believe them, for leaving the EU. But Britain has left the EU. The campaign is over. It’s time to get real.

That ‘getting real’ also includes being honest about the economic and political effects of what is being done. A trade deal, of any sort, with the EU is going to do little for services. A minimal trade deal will do relatively little even for goods. If the approach is to be de-alignment then recognize, as Sam Lowe of the Centre for European Reform explains, that “flexibility does not come for free”.

All reputable economic forecasts show that, whatever the trade deal, we will be somewhat poorer and if there is no trade deal we will be much poorer. There’s no longer any need to try to rubbish those forecasts (or forecasts in general, although in fact, with one notable exception namely that of ‘Economists for Brexit’, these have been fairly accurate). If they turn out to be wrong then they will turn out to be wrong, but admit that, at the moment, that’s the most likely outcome. So plan on that basis.

Trade deals with those countries with which the EU has deals are not all going to roll over on identical terms, and even where they do this will only put the UK back to the position it would have been without Brexit. Trade deals with new countries, even the US, will not make a huge difference and will not off-set the loss of trade with the EU. Be honest and realistic about the priorities and possibilities for global trade policy as Sam Lowe (again, but in a different article) suggests.

There are going to be border checks and other formalities between Great Britain and Northern Ireland, so stop pretending otherwise. Recognize that in due course that may lead to Irish reunification. Also recognize that Brexit has made the case for another independence referendum in Scotland all but unanswerable, or at all events ensured that calls for it will be increasingly vociferous. It will surely happen eventually. So accept that and, with it, the possibility that Scotland will leave the UK.

Almost all of these things are, in my view, damaging. But that argument is over. Now that they are going to happen what matters is, again, for Brexiters to stop trying to win a campaign argument and start being realistic. If they think they are a price worth paying then so be it, but admit the price and start working out how to go about paying it.

And getting real means dropping all the tired old lines – still being wheeled out by the likes of David Davis - about how Britain’s trade deficit with the EU, and the needs of German car makers, guarantee a great trade deal. They helped win the campaign, but the campaign is over. They were lies but they’re no longer needed. Or, for those who want to insist they are true, they are still redundant as we’ll soon get that great trade deal anyway.

Developing a serious strategy

The second big change that would be needed is also about truthfulness and realism, but on a bigger canvas. I’ve several times argued that Brexit is not just a strategic error but, actually, a strategic absence. Again, that’s linked to its having been a campaign and protest movement. The historian Professor Robert Saunders has provided a more developed version of that argument in a truly superb essay on his blog.

It’s well worth reading in full but, in brief, Saunders argues that Britain joining the EU was a belated strategic response to its changed economic and geo-political situation in the aftermath of the Second World War. It may, he says although he does not agree, have been the wrong response, as Brexiters believe. But that does not mean that the challenges it responded to have gone away.

Moreover, he argues that the British Euroscepticism that ultimately gave rise to Brexit has its roots in a 1990s analysis of the world order which, in 2020, is redundant. Therefore we need, in his words, to get “serious about the choices in front of us” which “will require more imagination, more humility and a more clear-eyed appreciation of the options than anyone has yet offered in Britain’s tortured Brexit debate”.

It is a proposal in line with Sam Lowe’s analysis of post-Brexit trade priorities, referred to earlier, in which he argues that a long-term trade strategy must have a coherent economic or geo-political purpose rather than being a search for “political trophies”, although of course trade strategy is only one aspect of the wider point.

All this I agree with. Developing such a strategy will be difficult and the more so because it needs to be done quickly. It needs a big public conversation which should have preceded the Referendum or, at least, been developed once the result was known. ‘Global Britain’ is not such a strategy but rather, as the Foreign Affairs Select Committee put it in 2018, a slogan in need of substance.

Showing competence

Given the current time pressure and all the operational things that will need to be done – for example in developing new customs procedures – there is probably not the political or administrative bandwidth to achieve it in the next eleven months. But it is important to at least begin, and not just because such a strategy is needed in itself. Rather, along with being truthful and realistic about what Brexit means, doing so would at least send a signal of competence. That would do something to repair the battering Brexit has given to the UK’s image abroad, but it would also be an important domestic signal.

There is much talk of the need to reach out to those who voted for Brexit because they had been ‘left behind’ (though that could and should have been done long ago, without Brexit). But there is also a need to reach out to remainers, and perhaps to a particular group amongst them. Call them ‘the Establishment’ if you must, but like it or not the many business people, professionals, administrators and so on who, as the demographics of the Referendum voting suggest, largely did not want Brexit are going to have to deal with its effects.

In my previous post I argued at length how dangerous it is that we are embarking on a complete change of direction whilst being so internally divided. That would be true even if Brexit was the most wonderful idea there had ever been. Any such policy needs some minimal level of buy-in from those who have to deliver it.

Having failed for three years to provide the consensus-building leadership that might have created that, the government now has a final chance to at least demonstrate that it will approach Brexit in a realistic way, being truthful about its actual effects and challenges. I don’t suggest that this would win over many remainers, but it might at least persuade some that Brexit has moved from unicorn fantasies to a deliverable, if still to them undesirable, project.

Getting out of the echo chamber

A final part of the shift from campaigning to governing would be for government ministers to look beyond the advisors who – I assume – they most closely rely on. Many of them, including Dominic Cummings but not limited to him, have their background in, precisely, the Leave campaign. Relatedly, the whole shady network sometimes known as the Tufton Street mafia is a big part of the problem, because it is from this that so much of the misinformation has flowed. Again, this would be the case even if Brexit were the most wonderful of ideas. It’s always a problem to confine advice to ‘true believers’ as it is a recipe for groupthink and poor decision making.

For Brexiters to recognize this involves dropping the idea – born both of being in campaign mode but also of a victim mentality – that they face a ‘remainer conspiracy’, whose lack of positivity will put a brake on Brexit. Yet if Brexit is supposed to be a realistic project, rather than an act of faith-healing, it requires that ministers get technically competent advice rather than just the soothing balm of being told what they want to hear.

Equally, if the government is really serious about ‘bringing the country back together’ then it would start engaging with people outside of the doctrinaire Brexiter camp. Instead, this week has seen journalists excluded from briefings and business groups not invited to Johnson’s speech on his Brexit ‘plans’. Echo chambers are bad enough on social media, and they’re certainly no basis for effective government.

Will any of this happen?

The short answer, of course, is ‘no’. The very nature of last weekend’s celebrations gives a clue as to why. It showed how, for many who were celebrating, the pleasure comes from triumphing over remainers rather than leaving the EU. That triumph can be endlessly relived, but doing so won’t deliver Brexit. Some, burning EU flags, are more concerned with hatred for the EU than with what Britain outside the EU would be. If Brexit leaders continue to pander to these two sentiments then, as for the last three years, Brexit will continue to be entirely focussed on the campaign, not on governing.

Still others were pro-Brexit but were protesting against Johnson’s Brexit for not being the real thing. That betrayalism, which no doubt Farage and some in the ERG will continue to articulate, means that Johnson is likely to continue to approach Brexit as a tactical party management device rather than as a matter of policy delivery. In any case he is an unlikely person to lead a shift from campaigning, given that it entails both being honest and also giving attention to practical detail and delivery. These things are hardly his most obvious strengths, and were he minded to try he would have started immediately after Brexit day, if not indeed when he became Prime Minister.

Instead, we’ve already seen in this first week we that nothing’s going to change. Apart from the bogus claims about the EU having suddenly invented its LPF requirements, we had the equally bogus idea that the UK could prosper with an ‘Australian-style deal’. In trade terms, since there is no EU-Australia free trade agreement, that just means no trade deal i.e. WTO terms (plus a few bits and pieces). Presumably Johnson’s advisors have suggested his formulation sounds more palatable.

So, still no honesty and, given the devastating effects it would have, still no realism and still no strategy. Johnson’s Brexit speech, according to politics Professor Tim Bale, was “of little substance” and did not have “a whole lot of realism”. Childishly, but in line with government policy (£), he refused to use the word ‘Brexit’. Unsurprisingly, the pound fell by about 1% against both the dollar and the euro as he spoke.

To the victor the spoils

That is one small example of the fact that Brexiters, led by Johnson, will now have to confront reality even if they refuse to be realistic. Slogans and rhetoric won the campaign, but neither they nor ‘true belief’ will make a difference to that reality. Strangely, those on the free-market Right, many of whom are such ardent Brexiters, used to know that ‘you can’t buck the market’.

So whatever kind of deal gets agreed with the EU it will have real consequences on business locations and investments, on growth, on the pound, on prices and on employment. They will happen even if Brexiters deny them, or discount them as ‘remainer negativity’, as if they were still campaigning rather than governing, still trying to win the argument rather than delivering their promises.

Brexiters are no longer, if they ever were, the victims they portray themselves to be. As Nigel Farage said at last week’s celebrations, “the war is over, we have won” (£). To the victor, go the spoils. They are now ‘the elite’ and ‘the Establishment’ but with that power comes responsibility and accountability. Like it or not, they can no longer run away from the consequences, but there’s no sign that they are going to stop trying.

Friday, 31 January 2020

A day to mourn

So today it will happen. For some, it will be a day of joy and triumph and celebration. Yet, though those celebrations will be occurring, it seems likely that they will be relatively muted and confined to a relatively small number of the most committed leavers, led by a perhaps slightly underwhelming cast of speakers. There will also be some light displays and a new 50 pence coin.

Certainly there is no evidence of a general upsurge of joy, and no mood of national confidence or renewal. The more widespread sense seems to be, at best, one of exhaustion coupled with uncertainty about what has been done and what is to come. For many already realise that today marks only a stage in a very long, painful and uncertain process.

But of course that stage is of fundamental, historic significance because Britain, definitively, leaves the EU with no possibility of revoking that decision. Hence as many, if not more, are mourning as celebrating, and some will even be in despair.

Crucially, there is clear, sustained polling evidence that more people think that it was wrong to vote to leave the EU than think it was right. The current figures, from 26 January 2020, are 47% to 40%. Even more, 56%, think Brexit will be economically damaging compared with just 21% who think it will be beneficial. Two of the four constituent countries of the UK voted against Brexit, and the parliament/assemblies of three of them have rejected the legislation enacting it.

And, yet, today it will happen.

As an Irish Times editorial put it yesterday, “no state in the modern era has committed such a senseless act of self-harm”.

Anyone waking from a four year sleep to read this would find it truly bizarre. This long post is a partial account* of how we got to this moment and where we might be going now.

Brexit has created a deeply divided country

Never before has a modern democratic country deliberately embarked on such a major change of direction whilst so internally divided about its wisdom, and one so widely seen by observers across the world as seriously damaging to its standing and fundamental interests, including to its viability as a United Kingdom.

There is a reason why countries usually require super-majorities to enact major changes, and why countries which are composed of several national components create safeguards, so each can have its say. It is to ensure that such dangerous divisions are not created.

That no such care was taken was, ostensibly, because legally this was only an ‘advisory referendum’. But, politically, that was meaningless, not only but not least because of the leaflet sent by David Cameron’s government to every household, promising to enact the result. Subsequent arguments that the result should be set aside because of its advisory status were always a non-starter.

That leaflet was just one aspect of Cameron’s grotesquely irresponsible complacency that the referendum would be won, and his use of it as a tool to manage to internal divisions of his party. In the process, those internal divisions spread their poison to the entire country which is now infected for years to come. There is no antidote except, perhaps, the passage of time and the arrival in power of a new generation.

There are much deeper causes, too, which future historians will understand better than we can. The ambivalent history of Britain’s forty year EU membership, the social and regional inequalities embedded by the unplanned and imposed deindustrialisation of the 1980s, the breakdown of political trust whose proximate cause was the lies told to justify the Iraq War, a warped and malign public discourse about immigration, the financial deregulation that led to the financial crisis – and no doubt much else.

I think, in particular, the unprocessed cultural psychology of the Second World War was one of the biggest, yet least recognized, causes. In a strange historical irony, in the long run it proved harder to ‘get over’ victory than to face up to defeat and occupation.

Whatever the reasons for the result, it remains the case that, prior to the Referendum, EU membership was a matter of almost no public interest or disquiet. Leaving the EU was not, and is still not, some huge popular crusade or cause.

Brexiters never expected to win, and would be happier if they had lost

For this reason, just as Cameron assumed he would win the Referendum so, too, Brexiters expected to lose. That freed them both to tell as many lies as they wanted and to avoid specifying what a victory would mean. There’s no point in being mealy-mouthed about this: just about every claim made by Vote Leave was either simply untrue or, at best, a distortion of the truth. I think that there were some principled advocates of Brexit who were appalled by this but, if so, the plain fact is that without the lies there would have been no victory.

I am also convinced, even more now than at the time of the referendum, that many of the most passionate advocates of Brexit would actually have preferred to have lost. For them, protest, complaint and victimhood were the comfort zone that, in winning, they lost. That has fed through into a situation whereby those who most vociferously support Brexit regard any actual form it takes – including that which Johnson is developing – as not being ‘true Brexit’.

Thus, even as it is forced on the country, they remain unsatisfied and remain in that comfort zone of complaint and victimhood. Indeed the grimmest irony of Brexit is that, ever since the Referendum result, it has left not just so many remainers feeling sad, bitter and angry but so many leavers too.

So despite the endlessly repeated mantra of that Brexit is the ‘will of the people’, there’s never been a majority for any defined form of Brexit, and only momentarily for Brexit at all. Even as it happens, the opinion polls show a small majority for remain, whilst those who do want to leave the EU are still divided as to what form of doing so is what Brexit really means.

Brexiters won, but didn’t know how to deliver

This is one of the things that makes Brexit so unusual. It entails a huge national shift which its advocates don’t know how to deliver unlike, say, the Thatcherite revolution which – whilst one could disagree with it – knew what it was doing and how to go about it.

For having refused to specify in the Referendum what leaving meant – knowing that there was no agreement about that – Brexiters both then and ever since have shown they have no idea whatsoever about the practicalities of what it entails. Almost everything they say about, for example, international trade, or law, or customs procedures, or business operations, is either based on half-truths or is just flat wrong. It’s not just a matter of not knowing arcane technical detail but basic facts about what Brexit involves, as many posts on this blog have discussed with explicit, detailed refutations of the many false claims.

That incompetence is an affront not so much to those who voted to remain, but to those millions who voted to leave and might have had a reasonable expectation that the campaign leaders knew what they were doing. In reality, campaigning and protesting were all they knew how to do. Practical realities eluded them, not least because such realities contradicted the lies that they campaigned for and protested against.

For that alone Brexiter politicians deserve to be judged harshly by history. But perhaps even more degenerate are the shady think tanks and psychopathic disruptors behind those politicians, such as Dominic Cummings who, we are told, has now ‘done Brexit’ (£). As if it were a children’s game, they have wreaked havoc and then left the rest of us to live with the consequences. Even so, whatever they may say or do, from now on, and in fact since the triggering Article 50, it is Brexiters who are responsible for whatever happens.

Brexiters have insulted and humiliated half the country

More than anything else, and unlike any political event in Britain that I can recall, Brexit is an expression of contempt and even hatred directed at about half of the population. Perhaps it was the very surprise and bewilderment of winning that led Brexiters, rather than savouring victory, to unleash a culture war against those they had defeated. Even in some of the celebratory comments being made at the moment there seems to be more gloating about remainers’ distress than pleasure in leaving the EU per se.

The constant, sneering, references to ‘the liberal metropolitan elite’, 'saboteurs' and ‘remoaners’ are just the mildest version of this. Politicians, businesspeople, judges, lawyers, civil servants, academics – not to mention EU nationals, who did not even have the right to vote in the Referendum - have all been endlessly attacked, mocked and, at the wilder extremes, subjected to accusations of treachery and to death and rape threats. It’s undoubtedly the case that this climate intimidated some MPs into supporting things, especially the triggering of Article 50, which they knew were wrong.

I don’t discount the fact that those who voted to leave the EU have also been subjected to many insults – ‘Brexshitters’, stupid, racist, old, ‘gammon’ and worse – and, personally, I deplore that and have never indulged in it. The difference, though, is this. To the best of my knowledge, leading figures on the remain side have never sought to stigmatise leave voters but, rather, to try to understand their concerns. Whereas leading figures on the leave side have joined in, or at least not discouraged, the vitriol against remainers and never tried to understand their concerns.

In the aftermath of a close vote, a divisive campaign and with a colossal national task to undertake a big, inclusive, consensus-building approach to Brexit was so obviously needed. It would have been enormously difficult but neither May nor Johnson even tried. Any competent political leader would have seen the vital need to bridge the huge divides Brexit has created or revealed. Yet even at this late stage, with Brexit assured and a large parliamentary majority, Johnson refuses to make even the tiniest gesture of conciliation.

Brexiters have refused to seek consensus

Far from any attempt being made to find a consensual solution, as the years have gone by Brexit has been defined in harder and harder ways. The soft Brexit of single market membership, which many Brexiters had said was what Brexit meant prior to the referendum, and which could have formed the basis of a national consensus, was discounted as not being real Brexit. The hard Brexit of a trade agreement quickly gave way to claims that only ‘no deal’ or ‘clean’ Brexit would do.

As we leave the EU today, there is still no clarity on whether any deal on future terms will be done, or what it will look like, but the direction of travel could well be a complete de-alignment with the EU. Undoubtedly some of the Ultras will push hard for that. However it turns out, it will be very different to what the Leave campaign promised. Always the agenda has been driven by the most fanatical and extreme anti-EU ideologues and their wholly dishonest claim to represent the will of an undivided ‘people’.

Even that might have had a scintilla of legitimacy if a confirmatory referendum had been held. Far from being an outrageous attempt to subvert democracy it would have been a perfectly logical, and entirely democratic, exercise. It would simply have asked voters who had given, as it were, planning permission for Brexit to have the final say on whether, on the basis of what had thus far been agreed, they wanted to proceed beyond today’s point of no return. If they did, the answer would have been yes. If Brexiters truly believed it to be the will of the people they would have been happy to ask, but they knew it was not so.

So remainers – and, for that matter, ‘soft’ leavers – have for more than three years had their faces ground into the dirt, being told to ‘suck it up’ even as Brexiters argue about what ‘it’ actually is. It is as if, had remain won, leavers had been told that the vote was a blank cheque to join the Euro, Schengen, and create an EU army. Or as if, rather than a 52-48 remain victory being, as Nigel Farage put it before the result, ‘unfinished business’, it had been treated as a licence to demand of leavers that they publicly recant their former beliefs and swear fealty to the remain cause.

What can remainers do now?

Having used their victory in this divisive and derogatory way, the Brexiters’ demand now is that remainers ‘get behind Brexit’ or, at least, accept that since it is unavoidable they should do their best to ‘make it work’. But that is impossible, even if there was any clarity as to what it meant and even if Brexiters had shown any whiff of humility. It is like asking someone to ‘get behind’ a self-harming relative because they are determined to hurt themselves. It can’t be done.

This leaves remainers with few options. Those in the easiest position are those who were only ever marginally interested, and only marginally pro-remain. That’s probably quite a big group and it shouldn’t be forgotten because, just as many leave voters were not rabid Brexiters, so many remain voters were far from being ‘remainiacs’. In time, for them as perhaps for others, ‘remainer’ will simply cease to be an identity.

Others – and I sense this amongst some friends – are simply withdrawing from political engagement, to concentrate on personal or perhaps local issues, and in some cases leaving the country. Some others feel vengeful, and anticipate the coming damage to the jobs and communities that most heavily voted leave with something like pleasure.

Others will follow the course outlined by Steve Bullock, fighting to keep alive in Britain the liberal values of the EU in the face not just of Brexit but of what its architects will now try to do. That may have some unpredictable effects on British politics, according to Stephen Bush. Still others will regroup around a campaign to re-join the EU although, realistically, this makes most sense for younger people since even on Ian Dunt’s reckoning it is a decade away, and I think that’s optimistic.

As for me …

As for me, well, although no one reading it can be unaware that I think Brexit is a catastrophe – not least as I stated it in the very first post – I have always avoided writing anything very personal on this blog. Indeed, some readers may have the impression that my primary concerns about Brexit are to do with trade, business, economics, and international political standing. And, it’s true, I do care very much about all of those things. I do not want my compatriots to be poorer and less secure, and everything I know about economics and politics – which, in one form or another, I have spent my entire adult life studying – tells me that Brexit will have this effect, in spades.

But just as I have always thought it nonsense to say that leavers are motivated only by emotion and culture rather than rationality and economics, so too do I think it nonsense to imagine that remainers are not motivated by emotion and culture as well as rationality and politics. There has not been a single night since the Referendum that I have not woken mid-way through with a feeling of despair, nor a morning I have not woken without the dull, heavy ache of doing so to a world gone wrong. It is the only time in my life I have experienced political events as personal trauma, the worse for there being no prospect of their resolution.

I also feel a seething anger about the torrent of lies which have been told by Brexiters and, by being recycled endlessly, have come to be believed. Even as we leave a new one has gained ground, conflating warnings about no-deal Brexit with the actual situation of a Withdrawal Agreement and transition period to crow that Project Fear has been finally discredited. It’s a small but telling example of how incontinently the lies are still flowing.

In particular, I feel a constant shame at the disgusting way EU citizens – including my own friends and colleagues – are being treated. They, like, their UK counterparts in the EU, built their lives on the entirely reasonable expectation that freedom of movement was a permanent right. On that basis, they created plans, families and careers which have now been damaged if not destroyed.

It is no doubt my own psychological peculiarity or professional deformation that my response to all this is to try to provide an analysis of what is happening, using evidence, rationality and argument. And, with Britain now having left the EU I will continue to do so, not least because – I’m pleased to say – there seems to be a (mainly) appreciative audience for this analysis.

As I wrote in more detail in a post after the election, there is a continued case for providing an ongoing analysis since Brexit is still so very far from over in terms of the decisions about what it will mean. Moreover, there may be some value in creating a more or less continuous record of what Brexit has done to our country since 2016, if only because what has happened so far is already in the process of being re-written, often inaccurately and sometimes mendaciously.

There may be worse days to come

That record will show how Britain has made an historic strategic error, leaving it poorer and weaker. It is a strategic error without even being a strategic decision. Unlike the day that Britain joined what became the EU, which was the outcome of years of careful planning and statecraft, today has come about by a series of accidents and mistakes, and an epic failure of political leadership. To undertake it in the absence of any clear national consensus is profoundly dangerous and irresponsible.

At best, depending on what happens now, the effects may continue to be a gradual, slow-burn process of damage and decline with no great drama, and the full effects emerging over so many years that their cause will be easily denied.

At worst, if Brexit rapidly creates deep economic hardship – for example if there is no future terms deal and no transition period extension - the biggest danger is who, then, will get the blame? Not, I suspect, those who have brought us to this, but all the usual scapegoats, especially immigrants as always, and also those who continue to refuse to ‘get behind’ Brexit. Social media warriors already regard that as a hanging offence, and at least one mainstream politician has already proposed trying those with “extreme EU loyalties” for treason.

It’s not entirely far-fetched to imagine that the Brexit McCarthyism that has been immanent since the beginning will end up becoming a matter of State. We’ve already travelled further down that road than many would have thought possible a few years ago, with civil servants traduced, judges denounced as enemies of the people, a government minister demanding to know what universities are teaching about Brexit, and constant attempts to subvert parliament even to the point of trying to suspend it from sitting.

So I mourn the country we have already lost, and fear for the one to come. For, dark as today is for so many of us, there may well be far darker days ahead.

*For more detail, see the previous 237 posts on the blog ….

Friday, 24 January 2020

Is "f*** business" now government policy?

Hardly had the electronic ink dried on my previous post, which included some discussion of the government’s approach to the business effects of Brexit, than Sajid Javid gave a clear and strong indication of just what that is to be. In an interview with the Financial Times, the Chancellor stated that “there will not be alignment” with EU regulations, that businesses have already had since 2016 to prepare for this, and still have until the end of the year to “adjust”.

In a way, there was nothing new in this. Ever since Boris Johnson came to power, and certainly since the changes to the Withdrawal Agreement and Political Declaration that followed, it has been clear that his government will be far less committed to alignment than, even, Theresa May’s (the ‘even’ is worth stressing since, of course, she had already taken the biggest step towards divergence by ruling out single market membership). Yet Javid’s was perhaps the hardest statement so far, and significant in coming from the person in charge of economic policy. For it seemed to suggest that there would be no regulatory alignment at all.

One problem with assessing such statements is that it is by no means clear that government ministers, even including the Chancellor, actually understand the full meaning of the terms they use and, therefore, the implications of what they are saying. But business groups certainly took him at his word (£), with the motor industry immediately warning – for the umpteenth time - that this would add billions of pounds to their costs, and aerospace, chemicals, and food and drinks industry spokespeople giving similar responses.

Known unknowns

There are multiple problems with what Javid said. One is that it is simply absurd to suggest that businesses have had since the Referendum to prepare. As anyone who has followed even the cursory details since then knows, the entire British polity has been convulsed in the debate about what leaving the EU actually means. Even now, with 11 months to go until the end of the transition period, the nature of that relationship has still to be negotiated. So how are businesses expected to prepare?

It is not enough just to know the general shape of what is in prospect (‘a free trade deal’) since that says very little about the detailed operational issues which will arise according to the specific nature of that deal. Moreover, a strict interpretation of the ‘no alignment’ line might well suggest that no such deal will even be reached, or only one of the most minimal sort, so in that sense even the general shape of things is not clear. At the very least, as things stand, there is no assurance of any deal, so even the most basic question of whether and what tariffs will apply is still open, and for some businesses the answer to that in itself will be the make or break issue.

Beyond that, if alignment with the EU is to end, then what regulations will replace them? None of that has been specified (except in a very few areas, such as the post-Euratom nuclear regulatory system), and so no business can know what it is supposed to be adjusting to. Very large businesses might be able to afford to plan for various scenarios, but even that would not be enough to make all the detailed operational preparations.

Did Javid know what he was saying?

One clue to the fact that Javid may not really have understood the implications of what he said lies in his comment in the same interview that Japan exports cars to the EU, yet does not follow EU regulations. That’s clearly nonsense – those cars it sells to the EU must conform, and the extensive investment by Japanese car firms within the UK and elsewhere, in order to be in the single market, is partly explained by this. But I think that what Javid probably had in mind was one of the basic, but mistaken, beliefs of many Brexit advocates (who, presumably, are now influential as advisors to the government). It is that what is at stake is adherence to product standards and that, therefore, a firm simply adopts the standards of the country it wants to export to for the products it wants to sell there. Meanwhile, firms which are solely domestic should not be subject to EU regulations, and their being so represents an objectionable intrusion into national sovereignty.

There are numerous difficulties with this. First, it ignores the fact that the issue isn’t just one of conforming with standards – as if all that meant was a business making internal changes to what it produced, though that in itself is a cost - but of the licensing and/or inspection needed to ensure or to demonstrate that conformity. The more regulatory regimes a business has to comply with, the higher the cost. So, far from ‘reducing the regulatory burden’ on business, that burden is increased when countries have their own regulations. Indeed, that is the foundational insight and basis of any single market, including that of the EU.

Second, it is not just about the EU. EU standards are substantially intertwined with wider, global, standards. That is, they have to some extent spread beyond the EU (e.g. chemicals regulations) or themselves incorporate standards systems from outside the EU (e.g. automotive regulations). Thus divergence from EU regulations is incompatible with the ‘Global Britain’ strategy that supposedly underpins Brexit. Or, to put it better, the distinction that Brexiters draw between being an EU member and being a global trading nation is a totally false one.

Conversely, the idea of a British set of regulations is deeply constraining. It is inconceivable that such regulations would themselves become a new international standard, so as to, again for example, supplant existing international chemicals and automotive regulations. In this sense, the question of whether these British standards would be ‘higher’ or ‘lower’ than those of the EU – whilst potentially important in its own right – isn’t so much the issue as the fact that, higher or lower, they would only apply to British businesses (though see below for clarification on what ‘British’ means here). Even if the standards are the same – which makes the whole exercise pointless anyway – there would still be a need for double registration/ licensing of conformity.

Regulatory independence has no benefits

For those businesses that currently export, that just adds a layer of regulatory cost (i.e. regulation for the domestic market only), whilst for those that currently don’t it adds a huge barrier to developing export business in the future (i.e. having to shift to, and/or demonstrate conformity with, the international standards). And it is actually even more constraining than that, because these domestically-regulated businesses would also be precluded from supplying exporting companies to the extent that their products were components within a finished product that did need to comply with EU and international regulations. There is simply no business benefit to this at all – its only conceivable value is political flag waving that we have ‘our own’ standards.

As regards the automotive industry – but something similar would apply to many others – all of this was laid out quite starkly by the Brexit Select Committee in 2017 when it considered the question of regulatory alignment: “there is no argument for a separate set of UK standards” (paragraph 27) … “we have not identified any potential benefits for regulatory divergence from the EU … There are only costs.” (Paragraph 30)

There is a further and very important dimension to all this. Not only does divergence from EU regulations damage British participation in the European single market, it also substantially damages the existence of the UK single market. That is to say, because of the terms of the Withdrawal Agreement for Northern Ireland, the more (Great) Britain diverges from the EU, the more significant the Irish Sea border becomes. That has economic consequences in shrinking the UK single market, but it also has major political consequences, most obviously for Northern Ireland but also for Scotland, since it further cements the ways in which Northern Ireland will remain in the EU single market. That is to say, the more Great Britain diverges from the EU, the more Northern Ireland diverges from the UK.


Subsequent to Javid’s interview, some supposed clarifications were made by the Business Minister, Nadhim Zahawi, but if anything these muddied the waters further. First, he said that a zero tariffs, zero quotas trade deal would mean that there would be no cliff edge at the end of the transition period, and would eliminate the bulk of the paperwork for exporters. But, apart from the fact that such a deal has yet to be done, it would certainly not solve the paperwork problem, as Pauline Bastidon of the Freight Transport Association pointed out.

Second, as so often in the Brexit debate, it seems that Zahawi doesn’t appreciate the different issues posed by tariff and non-tariff barriers to trade. A tariff deal is irrelevant to the regulatory issues and, on those, he was back in the same territory as, implicitly, Javid had been. That is, again, he seems to think that it is just a matter of British firms following particular standards. He implied that these might be the same as EU standards – for example of chemicals – but that Britain would no longer be a rule-taker.

But this makes no sense at all. If Britain simply replicates EU rules then it is, effectively, a rule-taker. Yet at the same time, unless it is formally within the ambit of EU regulatory agencies then simply following the rules will not be enough, without licensing and enforcement, to gain the economic benefits of doing so. And, as noted above, it would entail double registration and licensing processes simply in order to follow the identical standards. So, if he actually understands and means what he says, it is yet another Brexit lose-lose: as a rule-taker there is a loss of ‘sovereignty’, whilst without formal participation in regulatory systems there is also an economic loss.

Sajid Javid also made some subsequent remarks on the subject, this time at the World Economic Forum in Davos (in between being taught some brutal, public lessons in realpolitik by the US Trade Secretary). In response to questions he re-stated that there was no point leaving the EU and still “sticking to all its rules”. This can be parsed in two ways. It might mean, as he implied before, exiting ‘all its rules’, or it might mean sticking to some but not others. The next day he spoke of not diverging "for the sake of it", which might imply the latter. But, in that case, which of them? Without saying, businesses can’t be expected to prepare. He also reiterated his belief that a trade deal could be done by the end of the year, but mentioned as if in passing that this would include “services”. But since any deal on services would necessarily include some element of regulatory alignment, did this mean that he now accepted this? Or did he not realise that this was an implication? And which specific services was he referring to anyway?

When dogma becomes policy

It’s by no means impossible that our politicians simply don’t understand what they are doing. If so, that isn’t unusual – they are not elected or appointed as ministers for their technical expertise – but it is being compounded by not listening to those who do and, very likely, listening too much to Brexit dogmatists who do not, or do not want to, understand. It really would not be a big ask to expect them to sit down for short lectures from non-partisan experts like Dmitry Grozoubinski on trade, Pauline Bastidon on logistics, and Anna Jerzewska on customs. Not with a view to coming to terms with the horrendously complicated technical details of these domains, which isn’t their job, but just to grasp the broad outlines of each which, on current evidence, they don’t.

That seems unlikely to happen. So we have to conclude that they may not know what they mean, but they do mean what they say. That is, perhaps without really understanding the consequences, they will pursue a policy of wholesale regulatory divergence. For this is not now a matter of an interview here or a speech there. There have been reports that government ministers actually regard whole, highly successful, sectors of the economy as expendable. Even that might – just about – make sense if at the same time they could point to sectors which are going to be boosted by their Brexit plans. So far, none have been identified.

Certainly there was much Brexiter excitement about a Reuters’ report this week that more than a thousand EU financial firms are to open new offices in London because of Brexit. But, alas, beneath the headline lay a different, more complex and less positive story – that, precisely in order to cope with the separation of regulatory regimes (i.e. the anticipated shift from ‘passporting’ to ‘equivalence’), these firms were establishing London offices. This would create an estimated 2,400 jobs. There was some ambiguity in the report as to whether this was across the headline 1000+ firms (<2.4 jobs per firm) or just across 300 of them (8 jobs per firm) but, either way, these are presumably ‘brass plate’ operations for registration purposes, not substantive operational moves.

Thus, as the report confirmed, it only mitigates the flow of jobs the other way. For example, just this week investment bank JP Morgan announced the latest phase of its relocation from London to Paris, where hundreds of its staff will be amongst the estimated 4000 from across the financial services who by the end of the year will have moved to Paris alone, with Dublin, Frankfurt and Amsterdam also pulling in jobs (and business and taxes).

As soon as the decisions was made that Brexit could not mean the ‘Norway model’ of single market membership that many leavers voted for, it was clear that the services sector was going to be substantially damaged. And frictionless trade for goods has long been a pipe-dream. But this apparent hardening to complete regulatory unilateralism suggests that manufacturing industry, too, is to be sacrificed simply in order to proclaim ‘independence’. Like blue passports, the value is purely symbolic. Unlike blue passports, the economic consequences will be severe in terms of jobs, the tax base and, hence, public services.

For in telling businesses so clearly that they have less than a year to prepare for a scenario that is still unknown but which looks to be deeply problematic for them, and which they have repeatedly and explicitly warned against, Javid has sent a message as clear in its own way as Boris Johnson’s revealing “f*** business”* comment. For businesses that export, have international supply chains, or which supply such firms, the message to those that can do so is to use the transition period to relocate. For others, perhaps especially SMEs, for whom relocation may not be an option, it may simply mean closing down. The costs and complexities just of new customs procedures, let alone those of future but unspecified regulatory changes, may simply be overwhelming.

But, as suggested in my previous post, we seem now have reached a point where all costs are irrelevant and all that matters is the bright, shining light of Brexiter purity. Which may be a fine and splendid thing to some, but you can’t eat it and it doesn’t pay the bills.

*I dislike the coy use of asterisks, but have used them because I have the idea that, otherwise, some internet filter settings may prevent readers accessing this post.

Friday, 17 January 2020

As costs mount, Brexit goes round the same old circles

A report from Bloomberg Economics this week estimates the cost of Brexit since the Referendum result to be £130 billion, with a further £70 billion predicted by the scheduled end of the transition period. £200 billion is a colossal sum and in any other political context you’d expect it receive far more attention than it has. Of course it is only one estimate, but it comes from a credible source (and it is consistent with others) and, again of course, it is a cost compared with what would have happened and, in that sense, one which does not present a bill to be paid nor something directly felt in people’s pockets. Still, it does make the raging debates over who should pay for the cost of the Sussex’s security seem rather trivial.

Perhaps there’s a sense, now, that we all know Brexit is going to be hugely expensive and so it’s not worth discussing it anymore. Not that committed Brexiters necessarily accept this. Just as the predictions of economic costs were dismissed on the grounds that ‘you can’t predict what is going to happen in the future, anything might happen’, so, now the costs are racking up, they are dismissed on the grounds that ‘you can’t know what caused past events to occur, they might have occurred anyway’.

It is a hermetically sealed logic that cannot be reasoned with. And even to try provokes the second, though contradictory, line of defence, where we are invited to believe that Brexit was chosen as the result of an earnest political science seminar about theories of sovereignty, and was nothing to do with economics at all (this, presumably, is why the slogan chosen for the bus was a claim about … the supposed economic benefits of Brexit).

As for what the economic costs of Brexit will eventually end up being, that will to some degree depend on what kind of trade deal gets done and here confusion continues to reign. The EU have produced two detailed briefing packs (here and here) which, so far as I know, have no counterpart on the UK side, at least in the public domain. There is a sense that we are heading towards a re-run of what was symbolised by the famous picture of the opening of the withdrawal talks, where the EU side sat with bulging files whilst the UK relied upon David Davis’s vacuous grin.

The recurrent dynamics of Brexit

If so, there are good reasons for that and they go back to the three unchanged underlying dynamics of Brexit which I outlined after the election result. In brief, these are lack of realistic definition of what Brexit means or how to do it; the insatiable demands of the Brexit Ultras; and the general political imperative of all governments to avoid economic and social breakdown. These are contextualised by a fourth factor, namely (largely self-inflicted) time pressure.

As regards the first of these, the UK government is still to a degree in thrall to the Brexiter fantasies of a quick and easy deal in which the complexities and trade-offs are seen as just a ploy by the EU that will be overcome by determined negotiation by a ‘true Brexit’ administration. So, at times, the government is still talking as if a comprehensive, deep trade agreement, perhaps with a substantial services element (£), can be achieved by the end of the year whilst at other times the implication is that it will be much more limited, but that that is fine. As from the outset, the Brexiters – who are now firmly in control of the government – have no agreed, realistic idea of what they want.

In consequence, there are other ways in which the start of the trade negotiations is likely to be analogous to that of the Article 50 talks. It is already written into the Political Declaration that the highly technically complex and politically contentious issue of fisheries will be amongst the first matters to be discussed. It may well play the part of the financial settlement, which the UK first tried to deny the EU had any right to. But with EU briefings suggesting that they will insist (£) on a more or less status quo deal on fishing as a prerequisite for any progress on other issues, it may also be the subject for a re-run of the 2017 ‘row of the summer’ over sequencing.

This brings into play the second of the recurrent dynamics. There are clear signs that Brexit Ultras like John Redwood and Owen Paterson are squaring up to make fisheries, which have always been totemic to Brexiters despite being a tiny part of the UK economy, a defining issue. With some suggesting that the UK might accept that EU proposal in return for a better deal on financial services there is a good chance that this will prove to be an early flashpoint between the government and its hard line MPs. Their position will be not just that the UK should not accept the EU proposal, but should not make any agreement on fisheries until the entire deal is done or, simply, walk away from the talks without a trade deal at all.

If so, that will add impetus to the established pattern in which the Brexit Ultras always push for a harder or ‘purer’ form of Brexit. That saw the shift from their advocacy of soft (single market/ Norway) to hard (FTA/ Canada) Brexit. It has reappeared now in the demand that the UK should, in parallel with or even as a priority over negotiating an EU trade deal do so with the US, as argued by ERG leader Steve Baker this week (£).

As with the fisheries issue, there is no economic logic to this at all. The geographic closeness of the EU and the volume of UK trade that results from that, as well as from decades of EU membership, makes a EU trade deal massively more important than any Free Trade Agreement with the US could ever be. Moreover, to some extent, the two deals are mutually exclusive in that they entail alignment with different regulatory orbits.

But the issue here is not economic logic, even though its advocates present it as if it were by, for example, their irrelevant talk of the size of the US economy. Rather, having belatedly understood that the trade deal they for so long championed will entail some regulatory alignment with the EU – and the deeper the deal, the greater that alignment – the Ultras find even that hard Brexit to be unbearable.

For some that may be informed by an ideological belief in low regulation, small state politics – the Singapore-on-Thames delusion – and, to that extent, there’s an obvious reason why it will preclude a deal with the EU. However, I believe that the more fundamental reason is a pathological loathing of the EU in every manifestation, and indeed of non-EU European institutions such as the European Court/ Convention of Human Rights (ECHR). They want to expunge every last trace of the EU’s presence in the UK. It is much closer to a religious mania than an ideological axiom, and, as for economic cost, that is irrelevant. No cost is too high to pay. If they were to gain the next concession, and get a US trade deal ahead or instead of an EU deal then they would certainly then make leaving the ECHR their next demand.

It is that ‘Brexit at any cost’ fixation which comes into conflict with the third dynamic that for any government, even one fixated by Brexit, the basic political pressure to avoid economic meltdown means that reality sometimes has to intrude. That could include recognizing the economic case for sacrificing fishing for financial services. More generally, to the extent that it is understood that there is only time for a minimal deal, if that, it may also be understood by government that, for many sectors of British business, such a deal would be little or no different to there being no deal at all [£]. It may also be sinking in that, trade deal aside, there is little prospect of the new arrangements for Northern Ireland being ready in time.

That, presumably, is what lies behind Boris Johnson implicitly recognizing, for the first time, that it may not be possible to do a deal in time (£). This may be the precursor to accepting that there will be an extension to the transition period. Time will tell on that, but as was shown by the ease with which he dropped his ‘die in a ditch’ pledge, such a volte face is well within his range.

Businesses and Brexit

Whether or not he extends (though especially if he does not) what is in prospect is the gradual leaching away of business from the UK, ratcheting up the costs of Brexit. This may well attract as little attention as the Bloomberg report and of course – as with all the examples so far – Brexiters will deny the cause. In this, they will be aided by the fact that few companies which relocate or (which is even more below the radar) decide to make new investments elsewhere will publicly attribute this to Brexit.

For it is important to understand that now that Brexit is unavoidable the relationship between business and the remain cause has fundamentally changed. Before, business lobbying against Brexit was consistent with, and part of, the remain campaign. But businesses rarely lobby on the basis of political principle rather than their own self-interest. With the remain cause lost, they will now make decisions based on that self-interest but will have no motivation to denounce Brexit policy as they do so.

On the contrary, especially to the extent that many will want to go on doing some business in the UK they will have no interest in alienating many customers and the government. An individual remainer might – for example – seek to publicise their decision to emigrate and to take their skills and taxes elsewhere in order make the political point that this is what Brexit has done. Few if any businesses will do anything like that. So it will be a slow and quiet economic puncture, not a noisy blow-out.

This scenario is made all the more likely because whatever economic realism derives from the third dynamic, it is in conflict with the lack of realism of the first and second. This can be seen in the report this week that Business Secretary Andrea Leadsom has substantially reduced contact with business groups (£) such as the CBI because she is irritated by them raising concerns about Brexit.

Here, again, there is a recurrent pattern in which those – in business, or the civil service, or elsewhere – who know the realities and complexities are sidelined for their lack of ‘true belief’. In ways that would have been astonishing to the traditional Tory Party, the CBI have long been regarded with scorn by Brexiters and, more generally, there were many reports during May’s administration of businesses being excluded by DExEU if they voiced scepticism about Brexit.

The paradox of Brexit

It is one of the biggest paradoxes of Brexit, because most of those who understand what it entails at a practical level do not support it, whilst most of those who support it strongly do not understand what it entails at a practical level. That is evident in microcosm even in the current row about Big Ben chiming on ‘Brexit Day’, with those who know the costs and technicalities involved advising against it, whilst the Brexit ‘bongers’ insist this is just remainer negativity and that a can-do attitude will overcome any obstacles if, indeed, they really exist.

At the wider level, this paradox presents any Brexit government with a massive problem. Either it ignores those with the knowledge and flounders around trying to square the impossible circle of ‘true Brexit’ with no adverse consequences, or it listens to those with knowledge and has to compromise on at least aspects of ‘true Brexit’.

Whilst that has been true throughout the Brexit process, it is now an acute issue with the trade negotiations starting and the timescale tightening. A key part of any trade negotiation process – and one reason they take a long time – is that governments need to engage and consult with the business and other groups which will be affected by whatever is agreed. If government as a whole persists with the Leadsom line then the incentives for businesses to stay and invest in Britain sharply diminish, as they see that the government does not have – and, worse, does not want to have - a serious grasp of the issues involved. With time running out, the business decisions will need to be taken before realism intrudes, if, indeed, it ever does. And businesses will make those decisions.

However, if the government does start to engage seriously with business (and other experts and stakeholders) then the paradox asserts itself in a new way, with this realism conflicting with the first two dynamics. This is exactly what we saw with the May government. Having delighted the Ultras by embracing hard Brexit, and accepted the lack of realism of the Brexit promise by imagining that, even so, there could be ‘frictionless trade’ for goods and services, there came a point in 2018 when May understood how damaging this would be. That was what led to the Chequers Proposal which – flawed as it was – began to recognize some of the complexities and trade-offs. Cue Johnson and Davis resigning and the government falling into the disarray from which it never recovered.

It is true that Johnson’s majority makes him far more secure than May. On the other hand, the time pressures Johnson has created for himself are all the greater, and his negotiating position with the EU is also much weaker than May’s at the time of Chequers. May had the possibility of extending Article 50, as she did, and, until the Withdrawal Agreement was completed, the core EU concerns around the financial settlement, Irish Border, and Citizens’ Rights remained unresolved. Now, Johnson could only extend the transition period with difficulty, both because of domestic politics and because, on the EU side, transition extension is less assured than it was for Article 50 extension. Meanwhile, the EU’s core withdrawal demands have been met. And, in any case, the votes of the ERG are more than enough to defeat Johnson, despite his majority.

Thus the conflict between economic realism and political exigency continues to be unresolved and resolution is unlikely to occur via a single decision taken at a single moment. Rather, we can expect an ongoing process of tacking this way and that as the negotiations with the EU progress and the internal fights of the Tory Party continue. The consequence is that neither economic realism nor political exigency will definitively win out. Instead, so many concessions will be made to the Ultras as to ensure considerable economic damage, whilst so many concessions will be demanded of them that they will always regard Brexit as having been betrayed.

Thus, as has been clear for a long time, we will end up a country made much poorer in order to please the Brexiters whilst having to endure their perpetual displeasure with what has been done. It is as perfect a lose-lose scenario as can be envisaged, and the Bloomberg report has put a figure on just the first instalment of just the economic aspect of that loss. There is much, much more to come.