Friday 26 May 2023

Punch-drunk Britain

I don’t purport to provide anything like a comprehensive weekly record of reports of Brexit damage – fortunately the indefatigable Anthony Robinson curates the closest thing there is to that with the Davis Downside Dossier – which some weeks would be almost a full-time job. It would also be a heartbreaking one, partly because behind many of them lie lives disrupted if not devastated, partly because of what this damage means for all of us, and partly because it was all so predictable but the warnings were ignored with the mocking parrot cry of ‘Project Fear’. It is heartbreaking enough to discuss just some of them, which keep coming like punches on a bruise.

The latest punches

In this week’s crop, there is the record level of Foreign Direct Investment (£) – no, not in the UK, in Germany, and partly driven by a surge in UK investment projects as companies seek to maintain a foothold in the single market. It is the latest evidence of what was bound to happen, even if only at the relatively minimal level of UK firms setting up companies and sometimes offices in EU countries to avoid the extra bureaucracy of Brexit – as advised, in a sub fusc governmental recognition of the damaging reality of Brexit, by the Department for International Trade in 2021. So far as the bigger overseas investment projects are concerned, it can only be assumed that these are at the expense of domestic business investment, which was recently estimated to be £29 billion less than it would have been since the referendum result.

To refer to the next story as one this week’s crop of damaging Brexit news would be a bad pun, for it is the report that the value of UK exports of fruit to the EU have dropped by more than half since the end of the transition period. It’s not a coincidence, and it has persisted post-pandemic: it is because of the new regulatory and customs barriers created by Brexit. This, of course, is just one of the many examples of the adverse effects and risks for British farming post-Brexit.

Another newly emerging example affecting food producers and retailers is the one I mentioned last week, namely the requirement for all UK-produced foodstuffs, including vegetables, fish, meat and dairy produce, sold in the UK to be marked ‘not for sale in the EU’. It has since been reported that this may entail four labels (£) (on the individual product, the packing case, the supermarket shelf, and posters). As I explained before, this arises from the requirements of the Windsor Framework, but is being applied UK-wide, rather than just in Northern Ireland, partly to reduce the costs of different labelling as between Great Britain and Northern Ireland, and partly for the political symbolism for unionists.

I noted then that Brexiters are furious about this, but subsequently I’ve seen multiple comments on social media, apparently from non-Brexiters, saying that this labelling obviously means that the produce is not of a high enough standard to meet EU requirements, and that they would therefore be wary of consuming it. This is not necessarily so, and in most cases won’t be so, but it is an interesting misunderstanding as it is the mirror-image of the Brexiters’ complaint that there’s no reason why UK produce should not be sold freely into the EU as it continues to meet the same regulatory standards.

Both misunderstandings go to the heart of what the single market means, and what being outside of it means. The issue isn’t the standard of the product or the product standard, as such, it is about being part of a common system of standard-setting and standard certification to demonstrate compliance, as well as a legal system to enforce it and provide redress for breaches. The UK has chosen to be outside of that system, because it wants the freedom to set its own standards and regulations, and that puts UK products outside of that system even if the actual standards and regulations have not changed. It's true that maintaining the same standards is still advantageous, since, albeit with different labelling in the case of food, the product can then be sold in the UK or sold to the EU, but if sold to the EU it will be as an export into the single market, after going through regulatory and customs checks, rather than sold freely within the single market.

As regards foodstuffs, in order to ease the Northern Ireland situation (though it would have benefitted the whole of the UK), in 2021 the EU actually offered a deal on Sanitary and Phyto-sanitary (SPS) standards whereby UK produce could effectively be treated as if it originated within the single market, but only if the UK agreed to ‘dynamic alignment’ i.e. not just following existing EU SPS standards, but changing in line with them, as they changed. The UK rejected this as not being compatible with ‘sovereignty’, and also as potentially preventing it changing SPS standards, perhaps in order to secure a trade deal with the US.

The latter looks extremely unlikely now and was a bogus reason anyway, as the EU offered a temporary dynamic alignment deal which could have been ended if and when the UK ever did change standards. The former is simply theoretical, unless or until the UK actually does change standards, and one cost of that theory is that food of an identical standard to that required by the EU must be marked ‘not for sale in the EU’. It is the cost not of divergence, but of retaining the right to diverge.

This is the madness* that not just hard Brexit but the Johnson-Frost ‘sovereignty-first’ Brexit has brought us to. It is most visible with food, because it is an everyday product, but in various ways is present in other sectors (e.g. chemicals firms having to register with the UK REACH regulatory system which, in the government’s words, “replicates the EU system as closely as possible”, at an estimated additional cost of £2 billion). And, by the way, the cost of ‘not for sale in the EU’ labelling will be even greater if large numbers of British consumers do, indeed, mistakenly conclude that British food marked in this way is sub-standard, and decide to buy imported alternatives, perhaps from EU producers.

A coming punch: import controls

All of this will begin to be introduced from October 2023, although the exact details have still to be decided, adding uncertainty to all the other problems. That date is also when we will finally see the beginning of the much-delayed imposition of UK controls on imports from the EU. Again, there’s quite a bit of misunderstanding in all quarters about this.

One is that many people are under the impression that this has already happened – hence, for example, the rash of stories about UK customers having to pay import duties on goods delivered from the EU that started immediately after the end of the transition period. But the point is that hard Brexit created (or re-instated) two kinds of ‘border’ (I put it in speech marks, as it doesn’t necessarily refer to a physical border, but also to the processes and formalities of border control). One is a regulatory border, by virtue of leaving the single market, and the other a customs border, by virtue of leaving the customs union. The latter was erected by both the UK and the EU from the outset, and is what gave rise to those stories (it is more complicated than that, as it was also do to with VAT: for more details on this, and the more general issue of what happened immediately after the end of transition, see my post of January 2021).

The former, the regulatory border, was erected by the EU but not the UK (again, it’s more complex than that, as UK checks on certain “high-risk” products did begin in January 2021), and doing so was delayed four times, most recently in April 2022. On that occasion, the minister responsible was Jacob Rees-Mogg who, in a rare moment of candour, admitted that Brexit does indeed involve substantial costs. He estimated that completing import controls would add another £1 billion a year to the costs of British business and, although he didn’t spell it out, this also implicitly admitted that there are costs in the other direction, as a result of EU import controls.

Another persistent misunderstanding (and it is a variant of the one about what ‘not for sale in the EU’ means) is that not having full import controls doesn’t matter because EU goods conform to high standards anyway. That’s a fallacy, for reasons I explained in detail in yet another previous post, in April 2022, of which perhaps the biggest is that, as a result of Brexit, the UK no longer has access to the EU early warning databases, for example for outbreaks of animal diseases or food contamination.

But underlying that fallacy is something much deeper, and it was perhaps the central delusion of Brexit, which is the way that Brexiters seemed to envisage leaving the EU as a kind of ‘symbolic act’ in which nothing needed to change. In this particular context, that is reflected in the common Brexiter comment ‘if the EU want to erect borders that’s up to them’, as if there were no concrete meaning to leaving the institutions that got rid of borders, or needn’t be but for ‘EU protectionism’ (Rees-Mogg, inevitably, furnishes a good example of this fallacy).

This total ignorance (which, by the way, is also an ignorance of the ‘WTO rules’ that so many Brexiters used to get so moist-trousered about) isn’t just a matter of this or that comment by Brexiters trying to score debating points. It went right to the heart of government policy so that, astonishingly, it was not until February 2020 – that is, over three years since Theresa May finally confirmed that Brexit meant the hard Brexit of leaving both the single market and the customs union – that a government minister, Michael Gove, officially confirmed that this meant there would be import controls on EU goods.

Undoubtedly it is this, along with the paranoid rush to get Brexit done as quickly as possible, including the refusal to extend the transition period, which explains why, unlike the EU, the UK wasn’t ready to introduce import controls in January 2021. Even now, their introduction is reported in both the Telegraph (£) and the Mail as being a ‘blockade’, rather than the inevitable consequence of the UK’s own decisions.

However they are described, their introduction is likely to prove as big a shock as the EU’s introduction of controls did. Again, fresh produce, including meat and dairy products, will be most affected, with shortages likely initially and, in the longer-term, higher prices and reduced choice for consumers. So this isn’t some obscure technical change but, to use another unfortunate pun, a literally bread-and-butter issue which will affect daily life. A report this week from the LSE’s Centre for Economic Performance estimates that of the 25 percentage points rise in UK food prices between December 2019 and March 2023, eight percentage points are attributable to Brexit (i.e. about 30% of the total rise). It is an astonishing finding, and, as the authors, explain, it is the result of increased non-tariff barriers (the things which David Frost airily dismissed as “exaggerated”, and which Boris Johnson dishonestly said were abolished by the trade agreement with the EU) meaning, primarily, EU import controls. 

The introduction of full UK import controls will, by definition, further increase those barriers. And, for all the government’s boasts that this will be a high-tech, “world-class” border, the reality, according to Shane Brennan (£), the Chief Executive of the Cold Chain Federation, will be “a step back to the 1950s in terms of the types of supply chains options we have, in terms of getting hold of goods from Europe”. Nor will it just affect what we eat. For example, gardeners have been warned by the Horticultural Trades Association that they, too, will face higher costs and less choice, and that this industry alone will face an added “£42 million a year in red tape … for no economic gain”.

A rabbit punch to watch for: data protection

The introduction of import controls has at least received quite a bit of media coverage. That is less true for something potentially very nasty lurking in the undergrowth: the Data Protection and Digital Information (No. 2) Bill. This again has a long history, made more complicated by the churn of ministers responsible for it. 

Very early on in the Brexit process the UK passed that 2018 Data Protection Act and when it was still in development I discussed it as an example of how, in practice, post-Brexit regulation would follow that of the EU. That proved true, and is the reason why the EU has accepted UK regulation as “adequate”, meaning “essentially equivalent” to EU GDPR. However, this is subject to periodic review and renewal, with the current adequacy rulings due for review in 2024 and possible renewal when the current period for which adequacy is granted expires in June 2025. Moreover, in the interim, the UK’s provisions are monitored by the EU and, if found to lack equivalence, the adequacy decision can be revoked earlier. The implications would be profound, as, without adequacy, sharing of personal data between the EU and UK for commercial and security purposes would be severely curtailed.

Nevertheless, Brexiters have always regarded divergence from GDPR as a ‘prize’ of Brexit, and the new Acting Minister responsible for the latest Bill is John Whittingdale, an arch-Brexiter. Last month, he stated that it would not be “a complete disaster” to lose EU adequacy, referring to various work-arounds that would be possible. It’s a mark of how low Brexit ambitions have been set that ‘not a complete disaster’ apparently now counts as an acceptable benchmark. It is also worth considering what that actually means: industry insiders estimate that losing adequacy would cost between £1 billion and £1.6 billion a year and, beyond that, there would be the cost, perhaps in lives, because of the impact on data sharing in relation to serious crime and terrorism which the adequacy ruling allows.

Punching ourselves in the face: student visas

It remains to be seen what will happen in terms of the detailed provisions of the new Bill, and perhaps Rishi Sunak’s ‘pragmatism’ will prevail. Yet that pragmatism looks increasingly flaky. Last week I alluded to how the expectation of record high net migration figures (now announced) was re-energizing Brexiters’ discontent, and one consequence has been the government’s announcement this week that overseas postgraduate students on taught courses will no longer be allowed to bring their families with them. Inevitably that means that at least some of those who would otherwise have come to the UK will go elsewhere, in what is a highly competitive market for such students. Why, if you want to study abroad without being parted from your family, come to the UK now?

It is a wretched policy, at multiple levels. It is directly economically damaging, in terms of the loss of fee income to what is one of the UK’s few thriving sectors, and the loss of the general expenditure of those students and their families – a loss that will be felt by everyone from taxi drivers to food stores – often in areas where the local economy is fragile. It damages university finances, when universities are held, rightly, to be central to Britain’s economic future. It is a loss of the intellectual and cultural contribution of those students to university life. And it is a loss to UK ‘soft power’ – all those students and their families who might look back on their time in the UK with affection and pride, and act as ambassadors for the UK in their home country, who will now do so for another country. It seems that the Labour Party don’t care about any of this, either, since they support this cretinous policy.

Its architect is Suella Braverman, who has been in the news for other reasons this week, namely her handling of a speeding offence. That wouldn’t be a Brexit story except in the general sense that it is unlikely that, were it not for Brexit and her zealous support for it, someone of such mediocrity would be holding high office. But it has been made so by Brexiters absurdly insisting (£), as they did of Dominic Raab’s resignation, that Braverman is being targeted by the ‘Woke Blob’ for being pro-Brexit (and generally ‘right-wing’). That is now also being run together with attempts to depict (£) the continuing scandals surrounding Boris Johnson as victimization at the hands of those the ever-puerile Rees-Mogg calls “highly-strung remainiacs”.

It is all of a piece with the paranoid victimhood that runs through Brexit, and it would be laughable if it were not so deforming of political discourse, not least in striving to keep politics forever in the toxicity of the post-referendum period. That is damaging in itself, but in turn contributes to the additional damage of making it is so politically difficult to address the realities – the lost investment, the lost trade, the rising prices, and all the other things – of what Brexit is doing to our country.

Punch-drunk Britain

I increasingly wonder and worry about how much more incremental damage can Britain take. Each individual example isn’t necessarily so terrible. Each can be, and is, argued away by Brexiters as overstated or ‘not a complete disaster’. A billion pounds here, ten billion there – big numbers, for sure, but not overwhelming. But it is the cumulative impact which is so alarming, and the way it is ripping through every sector of the economy, from cars to farming, from higher education to financial services, from social care to live music.

Brexit Britain is increasingly like a punch-drunk boxer. Once a world champion, age and booze and drugs have taken their toll. But he decides to enter the ring again. He’s still a big name, of sorts, though not as big a name as he thinks. Once he fought in the big arenas, but now he takes on all-comers at country fairs. Flame-eyed, porcine, puce-cheeked, he brags that he can take any punch thrown at him and, it’s true, he has enough residual strength to absorb a certain amount of punishment, and even to trade the odd counter-punch. But each blow takes its toll, each adding a fresh bruise to a dull bruise to form a livid, purpling mass.

He stumbles and flails, an ugly, humiliating sight even to those who once admired him. Many of those watching never wanted him to come out of retirement, and even more now wish he hadn’t. But others, smaller in number but loud in voice, endlessly re-watch videos of the glory days, and insist that, even now, he is only being brought down by the doubters. The metaphor is wrong, though, in that the boxer isn’t external to us, but is all of us: we are all the Brexit-bruised flesh. And the punches are not those of some antagonistic bully but self-inflicted by our own body politic.

*It actually gets even madder and more absurd than I have presented it here, because although rejecting the offer of ‘dynamic alignment’ the UK did propose a ‘regulatory equivalence’ deal (see my post of May 2021 for more detail). This isn’t just arcane past history, and may yet come back to prominence. The two different approaches are sometimes referred to as ‘Swiss-style’ and ‘New Zealand-style’, respectively. Labour have said that they would seek an SPS agreement with the EU if they come to power, but in doing so have mentioned New Zealand, but not Switzerland (e.g. Shadow Chancellor Rachel Reeves in June 2022). Unless this is just down to not understanding the issue, then it will be a problem, as the EU have already rejected, and will never accept, a New Zealand style regulatory equivalence approach.

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