Friday 7 September 2018

Another journey round the Brexit loop

In a widely reported interview with the BBC this week, Mervyn King, the Brexit supporting former Governor of the Bank of England, made a forthright attack on the incompetence of the Government’s handling of Brexit.

It’s an intervention that is worth considering for at least three reasons. First, because it articulates what lies behind the recent opinion polls showing that 78% of the population think that the government is making a mess of Brexit, a number that certainly includes many who still think that Brexit is a good idea.

Second, because it is indicative of one of the various ways – itemised in a previous blog post – that Brexiters are and will continue to make excuses for the failure of Brexit. In this variant, there was nothing wrong with the idea of Brexit, it was just the execution that was flawed. It’s the familiar refrain of everyone from the management guru to the Marxist.

Third, it is part of the background to a wider attempt by many supporters of Brexit to articulate an alternative approach to the government’s Chequers proposal. Over recent weeks it has been reported that this will take the form of a detailed, formal, written plan set out by the ERG to be gradually set out, starting this coming weekend and culminating at the Tory Conference. However, in the last 24 hours there have been further stories suggesting that this will not now happen, or at least not immediately.

Whether formally produced or not, the reasons for producing such a proposal are obvious. First, as with the King intervention, it is a way of insisting that Brexit could succeed if only it were being done differently. Second, it is a response to the repeated, and accurate, criticism of the Brexiters that they have failed to produce any such plan, most recently in Downing Street’s dismissal of Boris Johnson for having no new ideas and not offering the serious leadership claimed for Theresa May. And, third, it seems highly likely to me that the Ultras have seen that they made a serious tactical error in pushing the government towards no deal planning (despite King’s critique that it should have been done earlier) because it has unleashed a degree of backlash against Brexit that might even derail it, since the public are understandably alarmed by the prospect of food and medicine shortages.

So – whilst continuing to decry this as Project Fear – they need to claim there is a viable plan, if only the government would adopt it, instead of either no deal or the Chequers Proposal. It perhaps hardly needs to be said how absurd it is that, just a month before the Withdrawal Agreement was originally supposed to have been finalised, there should still be an internal political debate in Britain about what Brexit means.

What that plan appears to be is a resurrection of the idea of a Free Trade Agreement (FTA) on something like the lines of the EU-Canada deal. This, at least, is what David Davis, Boris Johnson and Jacob Rees-Mogg have recently said they favour.

Round the endless loop again

The link with King’s interview is that he, too, talks about the desired outcome being “a free trade deal”. In this he and the explicit advocates of the Canada model are once more dragging us round the endless circle of different models that characterised the referendum campaign. As regards the Canada model, the problem is that it has very severe deficiencies from a UK perspective.

The Brexiters point out (rightly, but see below) that Michel Barnier and many others in the EU have long said that such an FTA is on offer. They fail, apparently, to understand that the reasons why it has not been sought by the government are – initially, although given the Chequers proposal this aspect has apparently now been abandoned – because of lack of coverage of services; because it doesn’t deal with the dense transnational supply chains in manufacturing; and because it doesn’t solve the Irish border issue*.

In other words, the reason why a Canada-style FTA hasn’t been pursued by the UK government is because it would be a seriously damaging outcome and, instead, it has pursued, and is still to an extent pursuing, a fantasy version of being partly in and partly out of the single market. That, indeed, was the strategy of the Lancaster House approach, which the Ultras entirely supported. It unravelled because it wasn’t workable, which is what led to the Chequers Proposal (which also is not workable in its present form either, of course) which the Ultras won’t accept.

So now the Ultras are going back around the same loop, and inevitably their plan will encounter the same old obstacles. It will either be, effectively, the Canada model with all the problems of that – which will be wished away, as regards the Irish border, by imaginary technological solutions that have already been discredited along with lofty dismissal that there is any problem at all. This can be seen in both the Johnson and Rees-Mogg statements linked to above (and, it is reported today, critique of the NI backstop is to be the focus on Brexiter activity next week). Or, more likely, it will be a Canada + (or +++) model which will have all of the problems of cherry picking that Lancaster House ran into (as well as that of the Irish border). And so we would once again reach the point of facing the possibility of no deal.

Planning for no deal

The consequences of that possibility are, of course, dismissed by the Ultras as non-existent or overstated. King’s line is slightly different. He expressed outrage that the world’s sixth-biggest economy should be talking of stockpiling food and medicine (no one seems to have mentioned that all the talk before the vote was that we were the fifth-largest economy) and yet at the same time bemoans the lack of earlier planning for no deal – which would consist, in part, of precisely such measures.

It’s not, in any case, at all clear how much early no deal planning would have been feasible. Even if the UK spent, as it would need to, billions on new customs facilities how useful would that be without comparable arrangements being made at ports on the EU side of the Channel?

As for businesses, there is a limit to what no deal planning is possible, however much time there is: for some, what it would mean would bringing forward relocation plans which might well mean businesses leaving which, in the event, they didn’t have to. That is because no deal planning for such a business doesn’t just mean thinking ‘we could move to France in March 2019’, it means putting in place the concrete means of doing so which incurs costs. Having incurred them, there’s a good case to move anyway, regardless of how things work out. The same applies to something like redesigning supply chains.

Moreover, what ‘no deal’ looks like is not a fully known quantity for which to plan. It’s not as if the government’s briefing papers so far have been long on concrete detail as to what should be done in preparation. And no deal wouldn’t just be about trade. To take an example with massive importance for individuals (as well as businesses, in terms of their workforces), no one knows what no deal means for EU-27 nationals in the UK. In a no deal scenario, that would be a matter for unilateral decision by the British government. Very little effective contingency planning can be done without knowing for certain what that decision would be and, as for businesses, worst case scenario planning (setting up arrangements to move, say) is likely to be both expensive and also to become self-fulfilling, so that the unintended consequence of planning could be to actually create the damage that no deal would do.

Beyond all that, in King’s remarks – as with almost all Brexiters, in more or less extravagant ways – there is the underlying idea that the EU have to be threatened (by not being left, as King put it, “under any misapprehension” of the real possibility of no deal) in order to do a deal. This unnecessarily antagonistic approach has dogged the negotiations from the beginning – consider all the angry noises over the financial settlement, for example - with ‘the other side’ being seen as hostile and having to be forced into submission by Britain’s ‘war cabinet’ (whilst, all the time, it being claimed that a deal was assured by EU self-interest).

But, as noted above, an FTA has always been on offer from the EU without any need for threats; the stumbling block throughout has been Britain not wanting this, but rather a form of agreement that violates its own red lines as well as those of the EU. So the antagonism – which has squandered so much good will – is in any case quite misplaced.

King’s implication is that it is now too late to plan credibly for no deal, but we can expect any ERG proposal to contain the same veiled threats. These reveal yet another contradiction in Brexiter thinking, by the way, in that no deal is simultaneously regarded as having damaging effects (for the EU, otherwise it is no threat) but being of little or no consequence (for the UK, otherwise it is Project Fear). In this and far more important respects if the ERG do publish a proposal it will finally mean that the Ultras’ plans come under scrutiny, something which should have occurred during the referendum campaign if, as they claim, the vote endorsed their version of Brexit. This possibility may, indeed, by one reason why they may decide not to go ahead with publication.

If it is published, it is, to say the very least, highly likely that the proposal will be found inadequate, not least as it is rumoured to be based on the same coterie of ex-Legatum consultants and Minford group economists the Ultras have always relied on. But although that would be damaging for them, it would not necessarily be fatal (it is presumably the calculation of which will be the better option that explains the indecision about whether to publish or not).

For their purposes, it might be enough simply for it to exist, allowing them to claim that there is an alternative to Chequers – whether published in full or drip-fed through letters, articles and interviews. By the time it has been pulled apart, that idea will have lodged in the mind of the Brexit supporting public that there is a ‘viable’ alternative – re-enforcing King-style excuses that the only flaw in Brexit is its implementation - and, anyway, the whole caravan will have moved on.

Where to now?

If the last few days runes are read the latest possibility is that it will be to ‘blind Brexit’ (how many more varieties of Brexit can there be?). As prefigured in my most recent post, this would be a Withdrawal Agreement accompanied by an extremely vague and brief statement of intention for the future relationship. Potentially, vague enough to encompass the ERG proposal, Chequers and, maybe, anything up to and including the single market and a customs union. Potentially, then, also vague enough to get voted through by MPs in the belief that their version of Brexit, or a version of Brexit they could live with, might be the ultimate outcome. If so, that opens up the singularly depressing prospect of spending the next few years going around the same old loop of the different models of Brexit.

The reason for that loop is quite simply stated: there is no way of undertaking Brexit – and certainly not hard Brexit, in its original meaning – which does not do a level of damage to the economy and also to the politics of Northern Ireland that no democratic government could get away with. Hence when the government try to find a relatively less economically damaging form of Brexit, proponents of hard Brexit revolt; when hard Brexiters push towards an FTA or even no deal, the economic damage implied causes pragmatic politicians and voters to recoil. It is that basic, irreconcilable contradiction which structures current the British politics of Brexit.
*It might, then, be wondered why the famous Barnier stairway ends with a tick next to the Canada model, given that it is incompatible with no border in Ireland. The answer (as I understand it) is that this means Canada plus the NI backstop, with the border in the Irish Sea. But this isn’t what the Ultras mean by the Canada model, which they envisage as being possible without any border at all. If I am right, they are therefore deluding themselves in claiming that they are seeking what Barnier has already said is on offer, something that Dominic Raab, at least, seems to have spotted.

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