Friday, 28 October 2022

Enter Sunak, the fifth Brexit Prime Minister

So the brief interruption to his seemingly permanent holidays from the MP’s job he is paid for was all for nothing in the end, as Boris Johnson’s bid to return to the leadership failed. It was yet another testimony to his egotism and entitlement and even in making it added to the long list of damage he has done to the country, this time by making Britain’s political crisis an even greater source of international disrepute than it would otherwise have been. “A country in free fall” as an Austrian paper put it last Sunday.

Little will Johnson care about that, any more than do the media organizations that breathlessly hyped his every word and movement last weekend as if he were the Prince returning from over the water to free his people, rather than a disgraced grifter coming back from the seaside to stick his snout into the trough again. He may yet be back for another go, but his first complacent and then demeaning conduct this time may have made that less likely. If so, it is one blessing. Meanwhile, Liz Truss stomped off with a defiant final speech, suggesting she still doesn’t even begin to understand why it all went so wrong, so quickly, for her.

Had Johnson succeeded, the prospects of immediate political crisis and further economic damage would have been much greater than they are: tellingly, sterling rose and gilt yields (i.e. the cost of government borrowing) fell sharply on the news that Johnson had decided not to enter the contest. That continued as Rishi Sunak began to form his cabinet. He is also likely to enjoy at least as brief period of respite from internal attacks from his MPs, and perhaps a bounce in the opinion polls, although there is very little sign of that yet.

However, as the fifth Prime Minister since the Brexit referendum (and the third in the last seven weeks) takes office, continuing political crisis is assured for the reasons I discussed in last week’s post and several others over the summer. It may not quite be “inevitable that Sunak will be politically ripped apart by the same contradictions that plagued his predecessors”, as Nick Tyrone puts it in his latest Week in Brexitland newsletter, but it’s certainly highly likely, and what is inevitable is that Brexit will play a central role in his administration and its ultimate fate.

Sunak, Brexitism and Brexit

Sunak may well be more ‘realistic’ and more ‘competent’ than either Johnson or Truss, and, low as the bar is, he can hardly fail to be more ethical than the former or less maladroit than the latter. He may also, as Timothy Garton Ash and many others believe, be less prone to ‘Brexitism’ than either of them, with one index of that being his good relations with the civil service (£), in sharp contrast to his predecessors and most of the Brexit Ultras. Nor does he seem especially interested in fighting the Brexitist anti-woke, culture war, although some silly digs during his first PMQs about ‘North London’ and Labour’s supposed attempts to reverse the Brexit referendum suggested he’s not completely immune to it. He also seems fairly free of the vapid boosterism of the two previous incumbents and of their ‘magical thinking’ that true Brexit belief can trump reality. And he made an early, and apparently well-received, phone call to Ursula von der Leyen.

However, ultimately he won’t be exempt from the charge of Brexitism unless he is honest about the damage of Brexit itself, as suggested in a robust intervention this week from long-time Tory donor Guy Hands, and addresses how to reduce or even reverse it. As the leading businessman Juergen Maier also argued this week, that means seeking to rejoin the single market and a customs union. The economic logic is impeccable, especially for a country in desperate need of growth. The costs of being outside are high whilst the benefits are small, if not non-existent. On the customs union, in particular, trade expert Sam Lowe makes it clear that the UK’s ‘independent trade policy’ has faltered having hardly begun. And Maier’s proposal would also effectively solve the Northern Ireland Protocol issue.

The politics are an entirely different matter though. As Maier points out, his proposal involves a “brave shift” to face down the ERG in the way that no Tory leader since, to an extent, John Major has done. It’s true that if Sunak were going to do that then now is the time, since the Tories can hardly depose yet another leader, and he could threaten them with a General Election. But I suspect, and I expect Sunak does too, that there are sufficient ‘Spartans’ who are simply beyond caring about the consequences, and would prefer to crash the government and the Tory Party than accept a reversion to ‘soft Brexit’ (or even some milder easements of Brexit’s effects).

No doubt there will continue to be calls to do so, and Tory MP Tobias Ellwood has been making them for some time now, but it’s all but unthinkable that Sunak will heed them. Even so, in the past, unlike most Brexiters, Sunak has actually admitted to some of the damage to trade. And although in his first ‘address to the nation’ he briefly mentioned ‘embracing the opportunities of Brexit’ he said no more. Arguably, he could hardly have said less. Perhaps the very most that can be expected is that he might stop adding to the damage, for example through pointless and costly regulatory divergence.

The post-Brexit political constraints on Sunak

Of course if Sunak went even that far it would add to the roster of political opposition he faces within his own party. Even before his victory had been announced there were signs of it, with Christopher ‘upskirt’ Chope, conceivably the most odious MP not just of this Parliament but those of many decades, warning that he faced an “ungovernable party”. The reason, at least in the first instance, is that, like rainmakers forecasting the weather, MPs such as Chope will make it so. Indeed there is a sense that, quite apart from any disputes about personality, policy or ideology, there are some Tory MPs now addicted to the drama and chaos of rebellion, plots and coups. Within that, some, most obviously the ludicrous Mark Francois, appear to revel in the pompous self-importance that such drama allows, like a latter-day Captain Mainwaring but with less good scriptwriters.

However, the opposition Sunak will face goes much deeper than that, and the reasons all root back to Brexit. One is the fragile nature of the electoral coalition that delivered Johnson the 2019 ‘get Brexit done’ General Election majority which Sunak inherits, a fragility which feeds through into a highly factionalised body of Tory MPs. Now, those voters, and especially the fabled Red Wall voters, are leaching away from the Conservatives whilst the factions are more entrenched than ever. It is not the case that, just because Johnson assembled this coalition, he and only he could manage the factions it gave rise to. In fact, despite being, on paper, a comfortable majority, right from the outset of the 2019 parliament Johnson faced repeated actual or threatened rebellions, resulting in numerous policy U-turns. So Sunak will have a majority which is large, but is inherently unstable, with many factions able to mobilise the 40-odd votes needed to defeat any particular piece of legislation.

That instability will be all the greater for Sunak because the consequence of Truss’s disastrous mini-budget is to make significant public spending cuts his first priority, whereas part of Johnson’s 2019 pitch was to airily banish ‘austerity’ to the past. It remains to be seen whether the Red Wall MPs, especially, will condone its return. Equally, others will oppose any tax rises he may introduce. It’s even possible Sunak’s government may fall early on, if it cannot pass its finance measures, but that’s the one thing that may force rebel MPs to approve them: the potential rebels on fiscal policy, unlike ‘the Spartans’ on anything Brexit-related, are not immune to reason.

The other reason he will face opposition goes deeper still, and derives from the incoherent and now fissured support for Brexit itself. In particular, although Sunak was himself a Brexiter in 2016, albeit not a very high-profile one, for many of those who were high-profile he is the ‘wrong sort’ of Brexiter. Indeed that is the inevitable corollary of him being less ‘Brexitist’ than the last two Prime Ministers. Thus, already, his premiership, and the demise of Truss, are being represented by Nigel Farage and others on the populist right as being a victory for the ‘globalist Establishment’ and a ‘remainer coup’. Likewise, he is seen as having been too ‘conciliatory’ to the EU when he was Chancellor, especially as regards the Northern Ireland Protocol. Notably, his candidature was not endorsed by the ERG which, despite its pledge of loyalty to whoever became the leader, looks set to pounce on any deviation from what it takes to be Brexit orthodoxy. Yet at the same time as being denounced as an Establishment ‘globalist’, and despite being very much on the free market, deregulatory right, in the bizarre world of Brexiter politics Sunak is regarded as a ‘socialist’.

Everything about this is difficult to decode, since it comes from supporters of Johnson, who was neither a deeply committed Brexiter nor a small-stater, as well as from supporters of Truss and the Patrick Minford-IEA libertarians, from whom Sunak is not very ideological distant except to the extent that he didn’t endorse their ‘anti-Establishment’ idea that borrowing money to cut taxes would promote growth. Indeed he is likely to be closer to Truss’s version of Brexit with respect to being relaxed about immigration levels than to that of Suella Braverman, and this cuts directly across the Farage line that Truss et al were anti-Establishment insurgents and yet not genuine Brexiters on immigration in the way Braverman is. It’s yet another example of the total incoherence of the Brexit project.

Sunak and deregulation

That incoherence also wrongfoots some critics of Brexit, so that the fact that the Trussonomics libertarians despise Sunak and vice versa rather confounds those who, when he was Chancellor, insisted that he was in the vanguard of an extreme libertarian plan whereby Brexit would pave the way to the creation of ‘Charter Cities’ across the UK. Although that idea was always nonsense, it remains the case that Sunak is ideologically committed to deregulation, and that means that it would be wrong to assume that that part of Truss’s post-Brexit agenda has disappeared. In fact, she never even got round to unveiling the ‘supply-side reforms’ that were to be the counterpart of the tax cuts as part of the plan for growth. Sunak may very well do so, even though the tax-cutting part of the plan is dead, as is the idea of ripping up employment rights, which even Truss realised was too extreme (£).

However, as I’ve written about in detail before, those deregulatory reforms are also likely to encounter significant opposition from some groups of Tory MPs, especially as regards planning laws, whilst the ‘bonfire of EU regulations’ to be created by the EU Retained Law Bill will run into major practical problems and has already encountered opposition from business and other lobby groups. This legislation was initially sponsored by Jacob Rees-Mogg until his resignation – which itself provided another instance of his trademark pretentiousness, dated as it was ‘St Crispin’s Day’. It was a suitable end to a Ministerial career which he would never have had but for Brexit, and should never have had – not because of his Brexit views but because his Pooterish didacticism marked him out as the worst kind of middle-management drone, more concerned with exerting petty authority than providing effective leadership.

The Bill continued its passage this week, with Rees-Mogg now on the backbenches spitefully denouncing as anti-Brexit those Tories raising concerns about it. Yet already it is reported that Sunak is considering slowing or even abandoning this legislation, and also that it runs counter to what he promised the ERG. So this a very possible flashpoint for a Brexit-related rebellion.

Another Brexit fissure was re-opened by Sunak’s controversial re-appointment of the politically and morally grotesque Suella Braverman to the Home Office, itself apparently the price of getting her endorsement, as a high-profile ERG Brexiter, of his candidature rather than Johnson’s. This appointment can be seen as his ‘first mistake’ but is really just the first consequence of the necessity for Tory leaders to try to placate the unplacatable ERG. In turn, it will have the consequence either that relaxation of immigration controls to promote growth is off the agenda, or that there’s going to be a reprise of the almighty Truss-Braverman row about it (£) and a wider row with other anti-immigration Brexiters. Another possible flashpoint.

It’s not even clear whether the Sunak government will be able to afford the tax breaks (£) to make meaningful the plans for Investment Zones, assuming he continues with that proposal from the Truss-Kwarteng period. What is clear, from an answer he gave Green MP Caroline Lucas at PMQs on Wednesday, is that he will not continue Truss’s attempt to revive fracking, which had already prompted bitter division amongst Tory MPs.

At all events, despite being elected unopposed by a party under ‘existential threat’ if its dysfunctionality continues, Sunak’s political position is not strong. Indeed, amongst party members, who rejected him as leader during the summer leadership contest, and would prefer to still be led by Boris Johnson, it is decidedly weak. So too is it weak in the country generally, presented with yet another mid-term change of Prime Minister without a general election, raising questions about the legitimacy of his mandate. There may be little they can do, at least directly, but the various factions amongst the MPs certainly can, and there must be every chance that a vengeful Johnson will take every chance to stir the pot. So whether on spending cuts, deregulatory reforms, EU retained law or immigration he may well face significant opposition.

Northern Ireland Protocol: the first crisis for Sunak?

However, it could be the Northern Ireland Protocol (NIP) which creates the first real crisis for his premiership. The dynamics of the NIP situation have actually changed remarkably little since I wrote about them in detail in July, when Johnson was still Prime Minister and the NIP Bill was starting its passage through parliament, which is continuing now. If things are different to how they were then, one reason is just because the passage of time has brought the non-functioning of the Northern Ireland power-sharing institutions to a point of urgency, with fresh Assembly elections now in prospect as of today.

The situation has also changed as regards negotiations with the EU because Truss proved to take a relatively conciliatory approach, and seemed to have managed to get the two ERG hardliners she appointed as NI Secretary and Minister – Chris Heaton-Harris and Steve Baker – on board with that approach. We will never know how that would have developed had she continued in office, and it remains to be seen what happens under Sunak. It is certainly important that he has kept Heaton-Harris and Baker in their posts, but what that importance is remains unclear, as it did under Truss. Does it betoken a refusal to make any compromises with the EU, as their hardliner credentials might imply? Or is it that those credentials are to be used to ‘sell’ a compromise deal to the Brexiters including, conceivably, the DUP?

For the fundamental question for Sunak, as it was for Johnson and Truss, persists: if he does any deal that the EU is remotely likely to accept, will the Brexiters also accept it? Despite Baker’s surprising and potentially game-changing recent apology over how the Brexit process as regards Ireland and Northern Ireland had been handled, last weekend he issued an uncompromising warning to Sunak that the ERG would not accept any role for EU law in Northern Ireland and would collapse the government rather than do so. Yet it seems inconceivable that the EU would, or even could, agree to such an arrangement.

So either there will be no deal, the NIP Bill will pass and be used, causing a crisis in relations with the EU, and with serious implications for relations with the US; or a deal will be done with the EU, the NIP Bill abandoned or its powers not used, and there will be a political crisis within the Tory Party. Moreover, both have economic consequences. A crisis with the EU could ultimately lead to trade sanctions or even a trade war. A fresh political crisis will indicate further instability which impacts on the price at which markets are willing to fund government debt. Plainly either will be damaging to Sunak’s core focus of restoring international credibility and financial stability.

The unfolding legacy of Brexit lies

The NIP situation is the most high-profile reminder that, along with any other problems the government and the country face, those of Brexit persist. Some of these are the now entrenched ones, like the higher costs of trade and disruption to holidays in the EU. Others, like the NIP, are issues still unresolved from the exit process, and reflect both the lies told during the referendum campaign and the dishonesty and incompetence of the agreement made by Boris Johnson and David Frost.

There are numerous examples of the latter sort. One, which has received remarkably little attention, can be seen to symbolise all of them: the UK’s continuing failure to impose post-Brexit import controls. I’ve written in detail before about why this matters, especially as regards animal and public health, primarily because the UK no longer has full access to all the relevant EU databases, but also due to lack of staff with the necessary skills, as highlighted by a recent report from the Public Accounts Committee. The consequences of that were revealed this week when, within a 24 hour period, 21 out of 22 lorries inspected coming in to Dover from the EU were found to be carrying illegal raw meat products.

The reason this example is symbolic is because, like the NIP, it shows the ongoing consequences of the lies and incompetence of the Brexiters since 2016. Repeatedly they denied that (hard) Brexit entailed borders. Repeatedly they declared versions of ‘if the EU want to erect borders, that’s up to them’, demonstrating a total failure to understand the consequences of what they were advocating, not just for Northern Ireland but for all borders with the EU. That in turn meant that preparations were not begun until far too late, and the chance to extend the Transition Period to give more time to prepare was rejected as ‘backsliding’ on Brexit. So here we are now, in 2022, with a whole swathe of persistent, unresolved, ongoing problems, ranging from fishing quotas, to agricultural subsidies, to participation in Horizon, to the introduction or otherwise of the UKCA mark, to, indeed, the introduction of full import controls.

It is important to emphasise this because, as time goes by, it becomes easy to treat Brexit as if it were a past event, at most something with consequences we must now live with. Or to see the NIP issue as the last hanging thread of the Brexit process. But that is not the situation at all. Rather, in all sorts of ways, we are still in the process of ‘doing’ Brexit even though, apart from, sometimes, Northern Ireland, that is no longer headline news. And, in that process, we are still uncovering the criminal irresponsibility of the ways the Brexiters lied.

It will be especially easy to forget this given that the immediate political focus of the Sunak government will be the economic crisis, with the full fiscal statement now scheduled for 17 November. That would be wrong because all these ongoing Brexit problems are also important. But it would be doubly wrong since Brexit is embedded at the centre of the economic crisis itself. Inflation is higher, the trade deficit is larger, the labour shortage is greater and growth is lower than they would have been but for Brexit. To the outside world it is so obvious. As leading French journalist Sylvie Kauffman, writing in the Financial Times (£), puts it “for many Europeans, the only surprise of the British political and economic mayhem of the last few weeks is the lack of debate about its real cause: no one involved seems to blame Brexit”.

TL;DR

For all that Sunak may be hailed as a ‘serious’ and ‘realistic’ Prime Minister, the fact that he cannot admit these obvious facts about Brexit without being destroyed by his own party means that he cannot seriously or realistically address the economic crisis. As I argued at length in last week’s post, the same goes for Starmer unless he does so. And for all that, as also discussed in that post, the ignominious collapse of Truss’s government may mark a turning point in the entire Brexit saga, the corner has not been turned by the arrival of Sunak. Nor will it be until the poison of Brexit lies has been drained from the body politic.

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