Friday 12 August 2022

What the leadership contest tells us about Brexit

Against the backdrop of a serious, growing, and multi-faceted economic crisis, the Tory leadership contest grinds on. The two contenders have little to say that matches the scale of this crisis and even less about Brexit, which is not only one of its components but the one most obviously unique to the UK. Nor do they speak of the immediate political problem Brexit will pose for whichever of them wins, namely the Northern Ireland Protocol Bill (NIPB). Yet, for all the silence, Brexit lurks beneath the contest; a ghost, a proxy, an indelible tattoo.

The leadership contest

One proxy is the candidates’ stoking of the anti-woke culture war. For the Brexit vote coded many things including the division between social liberals and social traditionalists and, in the mind of the Brexiters, those who ‘talk the country down’ and ‘those who love Britain’. Like much else about Brexit, this division wasn’t created in 2016 so much as given new zest and, despite existing in a different context, is a continuation of the decades-long whining about ‘political correctness’, the UK version of post-1960s backlash politics.

Indeed, there’s a dated feeling to the entire contest, especially in the constant invocations of Margaret Thatcher, perhaps reflecting the age and political reference points of the selectorate that will choose the next Prime Minister. It’s reminiscent of the way Conservatives still argue about whether Thatcher would or would not have supported Brexit, still vying for the imprimatur of the Iron Lady, or perhaps just for mummy’s approval. Equally, albeit again in a different context, the contest reveals the same contradiction of espousing free market, global free trade economics alongside social traditionalism and nationalism as that within Thatcherism. A similar contradiction, in fact, to that within the voting coalition of globalists and nativists that gave us Brexit.

Of course the many ways in which the context is different to the 1970s and 1980s only serve to reinforce the sense of a disconnect between this political discussion and current realities. The nature of the economic crisis is radically different. The geo-politics of the post-Cold War world are different. The politics of the Union are different. The now inescapable climate crisis is very different. Thoughtful Conservative commentators, such as Tim Pitt (£), warn that “cheap imitations of Thatcherism will not help the next prime minister tackle [these] formidable challenges”, but thoughtful Conservatism is long out of fashion, again in large part because of Brexit and its fallout.

It's not just that today’s issues are different to the 1970s and 80s. So too is political demography: in appealing to the ‘backlash generation’ the Tories have, apparently deliberately, chosen to set themselves against the young, the university-educated, and the urban. Yet, at the same time – and again it continues a trend that began under Thatcher but was spiced up by Brexit – contemporary Conservatives also despise the ‘traditional elites’ of the civil service, judiciary and business that used to form part of their heartlands.

All these groups, and more, are now disparaged in the new, omnipresent insult of ‘the Blob’ and its cognates ‘the remainer Blob’, ‘the Woke Blob’ (£) and ‘the Left Blob’, along with endless sub-variants like ‘the NHS Blob’ (£). It’s a terminology which, in the UK, is one of the many noxious legacies of Dominic Cummings who, when an advisor to the then Education Secretary Michael Gove, coined ‘the Education Blob’ as a term to disparage all those who actually knew anything about education. As such, it bears a family relationship to Gove’s notorious ‘we’ve had enough of experts’ line during the referendum campaign. It has now become a lazy catch-all term of abuse, as well as an excuse for governmental failures.

The (self-)importance of Frost

Woeful though they are, these terms of reference may well be adequate, and perhaps even unavoidable, in a contest pitched at the party membership, although it remains an open question whether they are a viable framing for the general election campaign that must come within two years. They certainly lack any discernible intellectual coherence or merit. But cometh the hour, cometh the man. A hero to many in the Tory Party, he is rumoured to be in line for a significant role if Liz Truss, the current favourite and his preferred candidate, wins. And he has stepped forward in a bid to provide just the coherence that is wanting.

Unfortunately, that man turns out to be David Frost who, with his habitual and limitless self-importance, this week published his Policy Exchange “essay” aspiring to exactly the big picture analysis that would enable the new leader to solve all the nation’s problems. Never one to understate anything, expect perhaps his own mediocrity, he boastfully presents this as an undertaking akin to the ‘Stepping Stones’ report that set a path for – yes, of course – the Thatcher administrations.

Apparently this is an effort that has been many years in the making but which his governmental duties had precluded writing. Now the truth can be told. Yet, for all the years of Frost’s tongue-between-teeth intellectual toil, it is, as the tagging of Thatcher prefigures, for the most part a reheat of her policies of lower taxes and a smaller state. If it differs from the intellectual pitch-rolling 1970s thinktanks undertook for Thatcher, it is mainly in lacking any kind of detailed prescriptions, relying instead on evergreen banalities such as calls to “reform our disgraceful prisons” or to “modernise the NHS”. On the newer challenge of climate change, the dangers of this constituting an ‘emergency’ are loftily dismissed as not being supported by the evidence.

What of Brexit?

One important implication of all this ‘back to Thatcher’ maundering is that almost nothing proposed here, or by the leadership candidates, actually requires Brexit. Indeed the first “pillar” of Frost’s proposals is that “the public must come to feel that we have taken a wrong path and to react against it”. But, hold on, isn’t that exactly what the public had been told, and responded to, in 2016? Wasn’t Brexit the new path? Must we now, just six years later and less than two years since the end of the transition period, embark on yet another new path?

The answer, it seems, is that “Brexit in itself creates neither huge economic advantage nor disadvantage”. Alas, this is not what leave voters were guaranteed in 2016. And puzzlingly, despite this apparent neutrality of Brexit, in the same paragraph Frost asserts that “leaving the EU has already hugely shaped our politics and political economy”. Indeed it is a “huge discontinuity” and yet, apparently, only the prelude to the next one, which will sustain the “Brexit Revolt”. The theme of revolt permeates the essay and presumably informs his grandiose choice of Lenin’s “What is to be done?” as the title of the prescriptive chapter, hard as it is to picture ‘the Rt Hon Lord Frost of Allenton CMG’ chugging wheezily up the steps of the Winter Palace.  

In reality, this call to a new path is a tacit admission that Brexit has failed. Not only are there none of the huge advantages that had been promised, but Frost is forced to concede it has come with “some costs” which he downplays as not “material” and not amounting to the “disasters” predicted. This is the now boilerplate Brexiter position that forgets the promises of ‘sunny uplands’ in favour of the rather more modest definition of success being the avoidance of total disaster. Thus ‘Project Fear’ is supposedly discredited since the effects of Brexit haven’t been as bad as some of the Brexiters’ own hyperbolic renderings of the most extreme warnings, and it is taken as read that all the ‘Establishment’ forecasts have been discredited.

In fact, the Treasury long-term forecast of 2016 for the scenario of Brexit with a UK-EU trade deal, whereby after 15 years GDP is in the range of 4.6%-7.8% lower than it would otherwise have been, now looks as if it will be fairly accurate, with the latest NIESR projection being for 5%-6% lower over 15 years. Those are still projections, but they are consistent with actual performance so far, with the latest CER calculation suggesting that at the last quarter of 2021 GDP was between 4.9% and 5.2% lower than it would have been. By any normal meaning of the term that is, indeed, a huge, and ongoing, economic disadvantage. As for all the reports of other damages of Brexit across just about every sphere of life that have accrued, these are airily dismissed by Frost as “rarely justified by reality”. The running sore of the Northern Ireland Protocol that he negotiated gets even shorter shrift, as no more than an “issue” that “must be resolved”.

Brexit’s coy revolutionaries

The grudging recognition that Brexit has been an economic failure has been growing amongst the Thatcherite Brexiters for a year or so, and I discussed it in detail in a post last December. The proposition it leads to is one re-iterated by Frost. His suggestion is that the problem is the “psychological hangover” of EU membership, which means “the EU is still a reference point for too many issues and policies”. He means, in particular, that this has hampered deregulation and “supply-side reforms”. Yet Frost is very coy about giving any details. The same is true of Sunak and Truss, as well as numerous others, like Mark Sedwill (£) who this week trotted out yet another of the interminable articles in the pro-Brexit press about cutting EU red tape without specifying which rules would go.

So what are the ‘supply-side reforms’ that Frost and the leadership candidates envisage? It’s a loose term, and to talk as they do of deregulation and supply-side reforms is unhelpful as the latter term usually includes the former, alongside free trade and tax cuts. As regards tax cuts, such reform is often associated with the largely discredited ‘Laffer Curve’, which, in brief, suggests that, at least to a certain point, cutting taxes will increase tax revenues and also promote growth. This seems now to the be the basis of both Sunak’s and Truss’s tax plans (itself based, again, on a selective reading of Thatcher-era policies). But since, whatever its dubious virtues, such a policy could be pursued with or without Brexit, and given the particular flagging of the term, it’s obvious that deregulation is a central issue.

The mirage of deregulation

The vagueness about what this deregulation is to consist of is because of a number of inter-related reasons, all of which in different ways relate to the incoherence of the Brexit project. It might refer to regulatory divergence from the EU on things like product standards or data protection. The problem here is that, as the government has already found, such deregulation is unpopular with businesses because it reduces rather than extends the scope of their markets. Indeed that is hardly surprising – these shared regulations are the essence of the single market, and one of the reasons Thatcher herself was a single market enthusiast.

Moreover, in the current global economy, they are very often adopted well beyond the EU single market or, just as often, the EU standards themselves derive from other global bodies. For any one country, especially one that does half its trade with the EU and which is bound, by virtue of proximity, to continue to do a high volume of its trade with the EU, setting its own standards just doesn’t make economic sense. Nor is it compatible with the ‘free trade’ aspect of supply-side reform.

What has happened is that the latter-day Thatcher imitators have mistaken different kinds of regulation and deregulation. Some regulation, including that of the single market, is market-making. In those cases, deregulation reduces rather than extends the market. More than that, in the case of leaving the rules of the single market (and the customs union), it re-instates the regulation that otherwise exists. Hence Brexit has massively increased the ‘red tape’ (or regulatory) burden on trade with the EU even without any regulatory divergence (a common Brexiter myth is that having the same standards ought to mean trading as before, but it doesn’t absent of being part of the regulatory and legal eco-system of the single market: this was the myth that underpinned Liam Fox’s ‘easiest deal in history’ foolishness). Adding regulatory divergence to this will further increase, not decrease, those barriers to trade.

By contrast, some of the Thatcher-era deregulation was market-making. For example, changes to financial services law in the 1980s removed the restrictions on services that Building Societies could offer (e.g. cheque accounts and unsecured loans) so that they could compete with banks. The desirability of that, and other parts of 1980s financial services deregulation, can be debated, of course, but the present point is that this deregulation did indeed extend rather than reduce the market (more precisely, it re-regulated to do so). Thatcher’s Brexiter imitators, including Frost, Rees-Mogg, Sunak and Truss, have wrongly concluded that removing EU regulations from the UK statute book is akin to this kind of deregulation, when in fact it is the opposite. It’s more like getting rid of the laws that enabled building societies and banks to compete, and reverting to the barriers that previously existed so as to segment their markets.

The other aspect of this, and the reason for the coyness about specifics, is that many kinds of deregulation are likely to be highly unpopular not just with businesses but with voters once the implications are known. That applies not just to product and environmental standards but, perhaps even more, to reductions of employment and other rights if, as seems likely, this is the agenda that remains unspoken. Many voters, including many who supported Brexit, will not support that and, depending exactly what is envisaged, it could again militate against free trade aspirations, especially if it violated the level playing field clauses of the Trade and Cooperation Agreement.

There’s obviously nothing new about these ideas in British politics, nor about the idea that one significant strand of Brexiter motivation was to enact them. But it was only one strand, and as a result Brexit doesn’t give enough cover for it, reflecting the perennial Brexit problem that the 2016 vote was not a vote for any particular meaning of Brexit. Many parts of the leave-voting coalition would bitterly oppose this deregulatory agenda – not just some ‘Red Wall’ nationalist traditionalists but also some ‘Blue Wall’ One Nation liberals. Since this is the same coalition that supported Johnson in 2019, a government under either contestant would struggle to deliver it just as he did. Certainly, it is, at the very least, unclear that they could retain that coalition in a general election fought explicitly upon such a manifesto.

Two faces of Brexit

All of this serves to illustrate the misnomer of the subtitle of Frost’s ‘essay’, “Reality-based politics and sustaining the Brexit Revolt”. For the ‘Brexit Revolt’ was never a singular movement, and it only briefly maintained a coalition of diverse discontents by the denial of reality; by insisting that it was possible to ‘have our cake and eat it’, a cost-free Brexit and one which could deliver all of the contradictory promises made for it. Those false promises have already been exposed, not least in relation to Frost’s own bugbear, the Northern Ireland Protocol.

This means that Frost’s ‘third pillar’ for the future, a reclaimed national identity “to bed in the view irreversibly that leaving the EU was the necessary precursor to achieving this” has already failed. Brexit has already further divided the union, and it has bitterly divided the population at large. There is absolutely no recognition from Frost, or from any other Brexiter, of this, still less any responsibility taken for it. There is not the tiniest suggestion that he and they are to any degree at fault for what has happened. Instead, the idea is to push on even harder in the same direction, once again treating the 2016 referendum as a mandate for things never put to the electorate and yet, in a grotesque political spoonerism, claimed as a triumph of democracy.

These ongoing divisions of Brexit actually permeate the leadership election, despite Brexit not being mentioned much, and not in itself constituting a dividing line between the candidates. For one way to think about the Truss-Sunak contest is as being between treating Brexit as a kind of Year Zero, instigating a permanent revolution against established realities of economics, geography, law or convention, and a more orthodox, pragmatic pre-Brexit though pro-Brexit, Conservatism.

Despite how they themselves voted in the referendum Truss is firmly the candidate for the former camp, being almost Johnsonian in her relationship to truth, and Sunak represents the latter. It’s not surprising, and doesn’t bode well for Sunak’s chances given their smaller numbers, that whereas opinion polls suggest he narrowly leads (53-47) amongst Tory Party members who were remain voters, Truss massively leads (81-19) amongst those who voted leave (figures exclude don’t knows/ won’t votes).

Both are equally committed to Brexit, so that isn’t the point at issue. What is at issue is the contradiction between Brexit as a ‘reality-based’ policy agenda to be delivered by government and ‘Brexitism’ as a campaigning, insurgent mood of permanent ‘revolt’. Truss embodies that mood, albeit less vividly than Johnson, whereas Sunak’s belated efforts to do so appear uncomfortable and he is already being attacked (£) for his technocratic caution having  ‘frustrated’ Brexit.

It’s a contradiction we’ve seen before. Theresa May treated Brexit as a policy to be enacted, and was destroyed by those who wanted the mood and the campaign, and didn’t like the reality at all. Johnson provided the mood and the campaign, but couldn’t enact the policy to the satisfaction of Brexiters. This wasn’t just about their individual failings, considerable as those were, it was about the impossibility of doing both.

The unavoidable impossibility of post-Brexit politics  

So Frost’s call for “Reality-based politics and sustaining the Brexit Revolt” misses the fact that there is actually a choice: reality-based politics or sustaining the Brexit Revolt. A ‘revolt’ can’t also be a government. It also misses the fact that whichever of the two is chosen, it will not satisfy Brexiters for long. The ultimate cakeism of Brexit is their refusal to make that choice, the ultimate tragedy for the country is that winning the referendum forced it upon them. It’s that impossible dynamic which is still ongoing, lies silently at the heart of the current leadership campaign, and will persist whoever wins.

So if Truss wins, it won’t be long before the complaints start that she is lightweight, prone to empty gestures and u-turning under pressure, talks the talk of Brexit but doesn’t walk the walk. She certainly doesn’t have a strong track record of policy delivery. And it’s notable that although the original basis of her popularity with the party membership was her flashy announcements of ‘getting trade deals done’, providing them with at least the illusion of Brexit being delivered, the hard-core free marketers see the deals she has agreed with Australia and New Zealand as far too timid, and as having given in to UK producer interests (of course UK producers don’t see it that way, nor, apparently, does Sunak). She’ll have a go at the deregulatory fantasy, but nothing much will come of it for the same reasons as nothing much has come of it under Johnson. No doubt her one-time support for remain will be recalled. As time goes on, sustaining the revolt won’t be enough without providing the reality of what the Brexiters think is possible. A salesperson with nothing to sell. Johnson 2.0.

If Sunak wins, he may well make a serious attempt to enact Brexit: to make it a reality. He too will find himself ensnared in the illusions of deregulation but perhaps he will push on anyway, in which case the economic crisis will get worse. Perhaps he won’t, and will be lambasted by Brexiters for that. He may well, as Truss also promises, plaster his beloved freeports all over the country (though, given a conspiracy theory which seems to currently be gaining traction, it’s worth mentioning that there are no plans to create Charter Cities in the UK and that these are radically different to freeports on any normal meaning of either term). But still the Brexiters will say he has not delivered real Brexit, either in terms of the general economy, for freeports are not an economic panacea, or in terms of what many leavers thought they were voting for as regards secure and well-paid jobs and improved public services. No doubt his background as a globalist, ‘citizen of nowhere’ investment banker will be recalled. As time goes on, the reality will collide with revolt. Tarnished goods offered by someone with no sales skills. May 2.0.

These categorisations are probably overly stark, and in practice each of them will mix ‘reality’ and ‘revolt’ (as did May and Johnson) but still skewed in one or the other direction. But either will have to decide which way to go quite quickly on one key issue, because of the choices they will face over the NIPB. Again there is no solution here which will satisfy both the desire for perpetual revolt and the reality-based politics of economic and governmental rationality. That circle can only be squared by insisting that ‘the Blob’, rather than the government, is in charge, so they are still insurgents who, if they win, can deliver the promises of Brexit. It’s unclear, though, for how long an electorate facing multiple crises will support a government whose central message is its inability to govern.

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