The long-awaited Budget – in all but name – has now arrived, but the public could be forgiven for not realising the extent to which it is a Brexit budget, given the near taboo in the Conservative and Labour parties on mentioning the economic consequences of Brexit. I discussed that silence in a Byline Times article this week, describing it as being ‘Lady Chatterley’s Brexit’, and won’t labour the general point here (the article is free to read). In any case, I’m hardly the only person making the same observation, both in the UK and abroad.
Suffice to say, it was a silence barely broken in yesterday’s announcement. Jeremy Hunt spoke vaguely of making use of “Brexit benefits” whilst Rachel Reeves’ response, although in other ways robust, merely mentioned in passing Labour's intention of “fixing the holes in the government’s Brexit deal”. Yet in the accompanying OBR report it was once again laid out what Brexit meant for the economy. It was left to smaller parties, most notably the Green’s indefatigable Caroline Lucas, to point this out, and also to point out that his silence about it made a mockery of the Chancellor’s claims to ‘honesty’ about the country’s financial situation. As Paul Johnson of the IFS said earlier this week, Brexit “has had a substantially negative effect on the UK economy”.
There’s really no room for serious doubt about that anymore and, in a sense, this Budget is the latest instalment of the so-called ‘punishment budget’, much mocked by Brexiters as ‘hysterical’ and ‘Project Fear’, that George Osborne warned would be necessary if the UK voted to leave the EU. That ‘punishment budget’ would have involved £30 billion of measures, half tax increases and half spending cuts. It didn’t happen in the immediate way Osborne had threatened, but has developed more gradually, and actually we can now see how modest his proposals were compared with the scale of damage Brexit has done. For, even before these latest announcements, Sunak’s March 2021 budget had already introduced record tax increases of £29 billion to (almost) cover the costs of Brexit at that point.
It's a Brexit Budget in another sense, too, arising as it does from the catastrophic failure of the Truss mini-budget, that ended her premiership. For that was explicitly hailed by Brexiters (£) as being the budget that would finally begin to deliver true Brexit, and was drawn up by pro-Brexit politicians, surrounded by pro-Brexit ideologues in explicit rejection of the supposedly anti-Brexit Establishment in the form of civil servants, the OBR, the Bank of England (BoE) and all the other bugbears of Brexit’s gimcrack revolutionaries. It left a £55 billion ‘black hole’ to fill, and massive reputational damage.
The Observer columnist Sonia Sodha is certainly right to argue that the concept of a ‘fiscal blackhole’ is misleading, and that there were different and better ways to respond to this mess. But that the mess had to be responded to isn’t in doubt, and this Budget is the government’s way of doing so. So, during an interview with Bloomberg’s Lizzy Burden (whose coverage of Brexit has been consistently excellent), former member of the BoE monetary committee Michael Saunders was equally right to say “without Brexit, we wouldn’t be talking about austerity this week”.
That is damning, but we could also turn all this round on its head. The post-Brexit economic debate has been almost entirely one where both remainers and independent economists point to the damage that has been done, whilst Brexiters and pro-Brexit economists deny it. It’s as if the important question were: was ‘Project Fear’ right? But Brexit was sold on the basis that it would positive for the country. In that sense, the clearest indictment of its failure is that literally no-one is suggesting that Britain’s fiscal position is better as a result of Brexit.
Failure: conformity assessment
If the Budget is the most high-profile, even if under-acknowledged, example of Brexit’s mounting failure, others are, more or less quietly, gradually being admitted. At the quieter end of the spectrum, this week Business Secretary Grant Shapps announced another extension to the introduction of compulsory UKCA marking, and to the end to the validity of CE marking, on goods sold in the UK. Originally due to come into force in January 2022, the deadline had already been extended to January 1 2023 but, as I remarked a couple of weeks ago, it was all but impossible that firms would be ready to meet this.
This week’s statement extended the deadline to the end of 2024. But it would not be at all surprising, and the latest announcement hints at this, if these extensions go on and on being made until, eventually, the entire UKCA idea is dropped. It’s also by no means unlikely that the same will end up being true of the now four times delayed introduction of import controls on EU goods, currently postponed until the end of 2023.
This whole saga of conformity assessment marking, which I’ve been discussing on and off since March 2021, is a microcosm of Brexit folly, imposing a double regulatory burden on manufacturing firms which sell in both the UK and the EU. It arises solely from a theocratic, ‘sovereignty at all costs’ approach to Brexit. It had no economic or business rationale, and indeed Shapps’ announcement implicitly acknowledges that UKCA marking constitutes a cost for businesses and a distraction from their priorities. Also implicit is that those businesses which have begun to comply have already incurred costs, and if the whole scheme ends up being abandoned then those costs will be a total waste of money. For that matter, what are firms who are not currently ready to comply meant to do now? Continue to prepare for something that may never happen? Or take a bet that there is no need to do so?
As well as being a stupid idea, UKCA marking was stupidly done. The original timescales were always unrealistic, and, like many other aspects of Brexit, it would have been far better to have created a genuine – and long – transition period. The issue wasn’t just business preparedness but, again as with many aspects of Brexit, the time needed to prepare the regulatory infrastructure to register and certify the new markings (even though, just to hammer home the full nonsense of the idea, the actual product standards need not change at all). But the Brexiters have always been not just unrealistic but totally reckless in pushing for an early and quick Brexit, starting with the massive pressure they put on Theresa May to trigger Article 50. If there is a rational explanation for that, it is the wholly disreputable one that they knew how slender and flawed a mandate they had for Brexit, and were determined to ram it through whilst they had a chance.
The decision to postpone UKCA is, in one sense, a sensible one, in that at least it is better than insisting on the previous unworkable deadline. What would be far more sensible, of course, would be to abandon it completely, now, rather than defer it. But that, presumably, is still in the realm of the politically impossible, for fear that the Brexit Ultras will erupt in fury.
Failure: independent trade policy
Some aspects of the UKCA fiasco are present in one of this week’s louder admissions of Brexit failure, the wholesale denunciation of the UK’s trade deals with Australia and New Zealand by George Eustice. There are multiple important aspects of this. One is that Eustice, formerly DEFRA Secretary, was closely and directly involved in the negotiation of those deals. Another is that he is a long-standing Brexiter, originally a European parliamentary candidate UKIP (in that respect his intervention has some parallels with that of Theresa Villiers over the scrapping of EU retained law, discussed in last week’s post). So although none of his criticisms are new, having been made extensively by commentators, including me, for years, they are significant in showing how they are starting to be admitted by Brexiters themselves.
That’s particularly so given that the UK’s capacity to make its own free trade agreements is not just any old aspect of Brexit. It is repeatedly and vociferously claimed by Brexiters to be amongst the most crucial of Brexit dividends, and these two trade deals are so far the entirety of that dividend. Moreover, it was repeatedly claimed by the government that these deals were good for British farmers. Now, Eustice reveals in public that the critics were right, and that both the Australia and New Zealand deals conceded British interests, especially farming interests, with no compensating return. The reason, as again all informed observers have repeatedly said, was because the deals were rushed (£), giving the other countries anything they wanted, solely in order to ‘prove’ to the public that Brexit had benefits.
At the same time, Eustice made an astonishing attack on the competence of Crawford Falconer, now the most senior civil servant in the Department of International Trade. But, unlike other Brexiter attacks on the civil service, this was made against someone originally brought into the Civil Service, by Liam Fox, precisely as an antidote to the supposedly obstructive remainer ethos of the career civil service. He came from the infamous pro-Brexit thinktank the Legatum Institute, having been, along with Shanker Singham, one of the hard Brexiters’ go-to trade experts.
So, again, this is revealing of much about the entire Brexit process: its unnecessary haste, its emphasis on the symbolism of sovereignty, its disdain for established expertise in favour of ideological fervour, and, of course, the ever-present Brexiter dishonesty in the lies told about how wonderful these deals were for Britain and for British farmers. Not only that, but the government, and specifically Liz Truss when Trade Secretary, were warned at the time of the dangers but pressed on regardless. And to all that can be added the side-lining of parliamentary scrutiny of the deals, ironically one of the things claimed to be of value in being able to make them independently of the EU (a claim itself based on another lie, since, whilst still a member, the UK had chosen to exempt itself from holding parliamentary votes on the ratification of EU trade deals).
Whilst it is revealing, and to that extent welcome, that Eustice has now confirmed what so many had said all along, it is hardly to his credit that he did not have the spine to do so whilst still in government, when he described the Australia deal as “a good agreement”. Even more disgraceful is the fact that Rishi Sunak implicitly agrees – calling the Australia deal “one-sided” and saying that future trade deals will “not sacrifice quality for speed” – and yet intends to push on to the final ratification of both deals by passing the Trade (Australia and New Zealand) Bill. Again, the reason is presumably fear of how his Brexiter MPs would react if he did otherwise.
It’s difficult to over-state how despicable and just plain absurd this situation is: that in the name of sovereignty, and for fear of those who proclaim sovereignty’s benefits, the British government is going to make international agreements which are damaging to the national interest and to a strategically, historically and culturally key sector of the economy.
Two kinds of failure
It's important to differentiate two aspects of the damage Brexit is doing, albeit that they interact. One, encapsulated by the budget, and shown almost daily by the growing economic evidence, is to do with what has been lost – especially in trade, investment, and labour market flexibility – by virtue of leaving the EU, and particularly the single market and customs union. The other is to do with the abject failure and utter incompetence of what is being created as an alternative to EU membership. That includes the stupidity and waste of UKCA and other regulatory duplications, as well as the creation of duff trade deals. But it goes much wider than that.
No realistic strategy
In a sense, the issue is that there is simply no post-Brexit economic strategy at all or, to the extent that there is, it is wholly unrealistic. The most obvious idea, that leaving the EU enables greater gains through globalizing trade was always nonsense, partly because of the constraints of geography but also because it was based on the falsehood of there being an either/or choice between EU trade and world trade as an EU member. In fact, being in the EU facilitated both, whereas being out significantly impairs EU trade whilst barely, if at all, shifting the dial on trade with the rest of world.
That aside, such strategy as there is has been based on boosterism and hubris about Britain as a world-leading innovation hub, but it is all talk and very little walk. The historian David Edgerton gives a defining example in the sorry story of the Britishvolt gigafactory, concluding that “Brexit Britain has faked it but not made it”. Another case is the replacement for the Galileo Project, which is still in limbo, a situation arising from a complicated chain of events but ultimately rooting back to Theresa May’s refusal to accept the EU’s terms for continued participation in the EU’s system (at the time, she said that “as a global player we are not short of options”). And the post-Galileo situation is part of the wider issue of the UK’s Space policy, where, as Peggy Hollinger of the Financial Times put it this week (£), “the government’s ambition in the sector is at odds with its strategy”, an ambition she goes on to criticise for its “incoherence”.
This hubris, boosterism and lack of realism shares, along with the ideas of the UK being able to dictate global terms of trade and of being able to act as a global regulator, the common root of a fantasy about Britain’s global significance, perhaps encapsulated in the endless invocation during the referendum and afterwards of the power that being “the world’s fifth largest economy” bestowed. It was based on an illusion: there are three economic superpowers and they are the US, the EU and China. After that, being fifth, tenth or even fiftieth comes to much the same thing in terms of setting terms.
Dither and uncertainty
But the situation it is worse than that. Even at the domestic level, there has been no coherence in what the government has tried to do with its post-Brexit ‘freedoms’. Farming policy is a prime example where, leaving aside the issue of trade deal impacts, the Environmental Land Management System (ELMS), set out in March 2021 as the post-CAP system for England is already mired in uncertainty. Under Truss, it seemed that it would be reviewed and replaced, then that was called into doubt when Sunak came to power, but now it appears that it will indeed be scrapped. There are related doubts about whether the post-Brexit ban on the export of live animals will be reversed.
This is just one part of a wider picture in which, according to the Social Market Foundation, uncertainty about regulatory policy across the economy is inhibiting growth. It is an uncertainty which is massively enhanced by the EU Retained Law Bill which, despite noises to the contrary, is still in process, with the potential for as yet unspecified regulations to be changed or scrapped as early as next year. That uncertainty is not helped by the almost daily drip of articles from influential Brexiters proposing all sorts of regulatory changes which are either not specified or which airily suggest things like departing from the GDPR framework with no apparent understanding of how this would poleaxe UK businesses and other organizations. And there is also the ongoing uncertainty of which Brexit faction will win out over whether there is a maximalist or a minimalist immigration policy, a question about which the Budget statement remained resolutely agnostic.
All of this is without even discussing the continuing uncertainties over the Northern Ireland Protocol. These bear heavily on the people of Northern Ireland, and especially on the fragile politics of the post-GFA devolved institutions. At the same time, they mean a continuing cloud over the UK’s international reputation, with its threat to break international law still present, if perhaps more muted than it has been. And, again, there is still no clear strategy about this, any more than there has ever been. Instead, there has been denial, dishonesty or – which is most apparent now – drift. Certainly there is no sign that Sunak’s government have any idea how to proceed except for promising to resolve matters in time for the anniversary of the GFA, apparently under US pressure (as I suggested would happen in last week’s post). Exactly how that is supposed to happen no one knows, least of all, it would seem, Sunak himself.
The guilty men (and, yes, they are mainly men)
None of this uncertainty has been helped by the massive churn of ministers in many departments, itself an artefact of the post-Brexit political instability that has seen five Prime Ministers and two General Elections since the referendum. However, it goes much deeper than that. Both the damage done ‘by Brexit’ and the damage created by what is being done ‘with Brexit’ can be traced back to the total ignorance, wilful dishonesty, and reckless irresponsibility of those who proposed and campaigned for Brexit without the tiniest understanding of how to do it – something we have seen play out since 2016 – and without any understanding of what to do with it, something which is now playing out ever more clearly.
We know who they are*, these latter-day guilty men, from Farage through Johnson, Gove, Hannan, Paterson, Rees-Mogg, Francois, Duncan Smith, Baker, Cash and any number more, right through to Sunak (and, yes, women, too, like Stuart and Hoey). We know who their henchmen in the media are, the Hartley-Brewers and the Heaths and their innumerable clones. We know who gave them their tiny shred of intellectual ballast, the Minfords and the Littlewoods and the Howes, or their skin-deep patina of business credibility, the Martins and the Longworths and the Dysons. We saw their promises, their falsehoods, their evasions, and their lies, and they are all on record. On record, too, is all the spite and ridicule and bile they threw at those who warned them, who pleaded with them, not to inflict this on our country.
And as I’ve suggested in this post, their guilt is not just for having campaigned for Brexit but for all they have done since. I don’t usually quote Tweets unless they are posted by public figures, but this, from Dr Simon Ubsdell this week, is a perfect summary: “The worst crime of Brexit is not the dark skulduggery that secured it in the first place. It is the relentless mendacity, the shameless fraud, the arrogant deception, the unremitting shiftiness that has driven it ever since”.
It would be comforting to think that they will pay a price, these guilty men, if not through public arraignment then by dint of private remorse. They will not. That falls to the rest of us. We’re paying, literally, in literally devalued pounds and pence, as in this week’s budget, and the bill will go on rising. We’re paying, too, in the more intangible currency of a country whose reputation is sullied abroad and which is shabbier and meaner for those who live in it. A diminished and dolorous land whose only route to salvation lies in the honesty stolen by its guilty men and which, even now, or at least for now, eludes us.
*Others who have drawn this comparison, such as ‘Cato the Younger’, Anthony Seldon and, most recently, Tom McTague configure the list of names differently, but the charge sheet is much the same.
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