The limits and limitations of post-Brexit choices

The very tiniest consequence of Trump’s election victory is that its timing falls messily for me now that this is a fortnightly blog. This post’s main topic, which is last week’s budget, suddenly seems like old news. Equally, writing about that leaves little space to write about the US election.

But that may be no bad thing. I often think that hot takes on big events are foolish, and the scale of this event, in particular, is going to take time to process. It is going to be different, bigger, and potentially far more dangerous than what flowed from his 2016 victory. The consequences go well beyond the focus of this blog, but even within that focus they will be profound. Profound for the UK, for the EU, for the continent of Europe and therefore, inevitably, for the entire Brexit project.

A preliminary list includes issues of defence, most pressingly as regards Ukraine, but also as regards the Baltic states, Eastern Europe both inside and outside the EU, and the Balkans. It also includes economics, and the possibility of substantial tariffs on trade with the US. Both of these things will shine a fresh and very searching spotlight on the economic and geo-political incoherence – an incoherence so great that it can properly be called a stupidity – of Brexit as a national strategy. That can only add weight to calls to join (or rejoin) the EU, though it's hard to see them being heeded. It certainly ought to bring more urgency and ambition to what already seemed the feebleness of the Labour government’s ‘reset’ of UK-EU relations, and which has now been rendered utterly inadequate in both scale and pace.

Yet, at the same time, Trump’s victory will embolden and re-energise the populists and the Brexiters. Earlier this year, when a second Trump presidency was already looking likely, I wrote at length about the relationships between Brexit, Brexitism, Trump and Putin. Most of that still stands, although some of the dynamics will be inflected differently under a Labour government. Thus Nigel Farage is gloatingly cock-a-hoop, directly comparing the result to Brexit, and the crackpot idea of him being the ‘unofficial Ambassador’ to the US is doing the rounds again.

Meanwhile, Kemi Badenoch, the new Tory leader, is already trying to exploit the difficulties that a Trump presidency would pose for any British government, and resurrecting the Brexiters’ favourite idea that he will agree a favourable trade deal with the UK. More generally, Brexiters, who have seen their 2016 ‘triumph’ become not just unpopular but a kind of byword for failure, will see in Trump’s reincarnation the hope that their fortunes, too, can be revived.

Labour’s first budget

All of this and much more will play out in the coming years. However, that doesn’t make last week’s budget an irrelevance and it, too, will have some long-term effects. It was a notable Brexit event, albeit in a peculiarly negative way. That has two aspects, one of them fairly widely remarked upon by commentators, the other, so far as I know, not mentioned by anyone.

The widely remarked-upon aspect was trailed in my previous post, where I wrote that “at one level, [the budget] will push discussion of Brexit even further to the margins, as commentators will find many others things in it to talk about. At another level, it will make the costs of Brexit even more relevant.” And so it proved.

Rachel Reeves’ budget speech lasted well over an hour, but mentioned Brexit only once, and only in passing, when she said that the Tory “Brexit deal harmed British businesses”. The subsequent debate focussed on everything from the rise in employer National Insurance contributions to the supposed impact on family farm inheritance, but only rarely on the Brexit silence.

On the other hand, buried in the accompanying Office for Budget Responsibility (OBR) documents was a reminder that, taking into account what has already happened, its forecast for the impact of Brexit on trade intensity remains the same. This presumably also means that its forecast that the long-run impact will be that GDP will be 4% lower each year than it would otherwise have been also still holds (as last formally stated in May 2024). It is also implicit in the OBR figures, and confirmed explicitly by Treasury Minister Tulip Siddiq, that 60% of this damage is yet to come.

It bears repeating that, for all the tedious misleading graphs, cherry-picked data, and attempted rebuttals that still float around Brexiter-world, and get cited as ‘gotchas’ by keyboard warriors who wouldn’t know an x-axis from the X Factor or the X Files, something like this figure is given by all the major independent estimates. There’s a good discussion of this in relation to the budget by John Wilmslow in Sussex Bylines. 

The irrelevance of Brexit

All this is important, and provides a fresh example of the strange post-Brexit landscape in which the mounting economic damage is politically all but undiscussable. However, there is a sense in which the silence about Brexit in the budget was entirely justified. For the aspect which I have not seen mentioned is just how little difference Brexit has made to political debates and policy choices. Brexit was billed by its advocates as a great national liberation. This budget was a big event, setting the direction of travel for the next few years. Yet its basic parameters were indistinguishable from those of all the decades in which Britain was a member of the EU.

This is a demonstration of the fact that Brexit itself was based on an utterly false narrative of policy being substantially constrained by, or dictated by, the EU. Or, to put it another way, the false narrative that Brexit would give the UK greater ‘sovereignty’. In fact, policy remains within the familiar terrain of how much to tax, how much to borrow, and where to allocate funds.

Of course, the precise decisions made about that in this budget were distinctive, but the generic issues involved have not changed at all. It may be that in the weeds of specific measures there were some things, if so, very likely related to VAT, which would not have occurred as an EU member but, again if so, they were very marginal.

The constraints of reality

Brexiters would no doubt say this reflects the failure of the government to take advantage of ‘Brexit freedoms’ but, as the previous government found, these proved to be illusory in practice. And the reason for this is not, as Brexiters would have it, a lack of will. It is because the constraints on UK policy choices were never, in any significant sense, those arising from EU membership. In fact, as regards the budget, the principal constraints are, as was the case before Brexit and as was the case before membership of the EU, the currency and bond markets. As Labour politicians in the 1960s used to complain, it is the ‘Gnomes of Zurich’ who set the parameters of UK economic policy. That was before Britain joined the EEC, but it remained the case afterwards, as Denis Healey found in 1976.

It is still true after Brexit. That was amply demonstrated by the Truss-Kwarteng mini-budget and - though to nothing like the extent that right-wing commentators claimed (£), and perhaps hoped - by Reeves’ budget. If the Reeves budget escaped the market mauling that Kwarteng’s endured it was partly because it was accepted, for example and in particular by the IMF, that the borrowing it involved provided the basis for sustainable growth and necessary public investment. It was also because Reeves explicitly eschewed the Brexitist anti-institutional frenzy which characterized the mini-budget, a frenzy which ended with the ludicrous assertions about ‘deep state’ interference and ‘socialist’ market traders.

But it’s not just fiscal policy which has shown the irrelevance of being outside the EU. The same goes for most parts of regulatory policy, something tacitly accepted by the last government, and slightly more openly accepted by the present government. The reasons, which I’ve rehearsed endlessly on this blog, boil down to the fact that, in or out of the EU, the UK largely has little choice but to accept transnational rules. Moreover, largely for reasons of geographical reality, these are very often those of the EU itself. Even immigration, the strongest candidate for the claim that Brexit has made a difference to policy choices, doesn’t bear out the Brexiters’ thesis. The detailed inner workings and mechanisms of policy have changed, but the basic parameters are framed by the same economic and political questions as they always were.  

The constraints of domestic politics

This points to a related issue. It is not just that there are the same external constraints on policy as there were before Brexit. It is that there are the same, or similar, domestic constraints as before. It’s undoubtedly the case that many Brexiters on the free-market right saw leaving the EU as a way to introduce radical ‘neo-liberal’ [1] policies to become 'Singapore-on-Thames' (£), to use the common, though misleading, term. But the assumption that it was only EU membership which stood in the way was false.

The British electorate was and remains a major obstacle. If neo-liberals sought to achieve electoral consent for their vision via the backdoor of Brexit, it was because they had no confidence they could do so through the front door of a general election. That was actually underscored by the coalition of voters brought together by Vote Leave and, later, by Boris Johnson in the 2019 election. Many, if not most, of them wanted no such thing as the ‘Singapore Brexit’ agenda.

Hence, even after leaving the EU and after the pandemic, neither Johnson nor Sunak followed that agenda (£), much to the chagrin of its advocates. Liz Truss undoubtedly wanted (£) to go down something like that route but had not secured electoral support for doing so and, even if the bond markets hadn’t imploded her premiership, it’s far from clear she could have delivered on it politically even within her own party.

All this inflects another way. Just as many right-wing Brexiters saw the EU as a barrier to neo-liberalism, many on the left came to see it as a bulwark against such policies. This at least partly accounts for the shift from Labour’s 1983 ‘Brexit’ policy to its later, largely pro-EU, position. Of course this did not apply to some on the Labour left, who became what we now call Lexiters, but in the process that revealed another aspect of the incoherence of the Brexit coalition. For the Lexiters see the EU as neither a barrier to, nor a bulwark against, neo-liberalism, but as an incarnation of it.

The consequences of this are still playing out. At the time of the referendum, many left-wing remainers believed (and some still do) that because many neo-liberals supported Brexit then ‘therefore’ this was ‘the real purpose’ of Brexit. Ironically, this validates the neo-liberal Brexiters’ own complaint that what has been delivered is ‘not real Brexit’. For, manifestly, Brexit has not ushered in anything remotely like what they wanted.

The Freeports red herring

That ought to be seen as their problem, and as a demonstration that the neo-liberal Brexiters were as deluded and incompetent as every other brand of Brexiter. However, the insistence that this was what Brexit was ‘really all about’ lives on in the ridiculous claims about Freeports, which continue to do the rounds on social media, depicting these as being, or in the process of becoming, deregulated neo-liberal ‘zones of exception’ (there’s an irony in that, too, as it validates Brexiters’ own false claims about Freeports being, in their terms, a ‘Brexit benefit’).

In fact, they are no such thing, and the two pieces of ‘evidence’ cited to suggest otherwise are both flawed, as I discussed in more detail in a previous post. One is that these Freeports would violate ‘EU state aid rules’. It’s questionable whether this is true, but even if it is then it is an odd way to demonstrate their ‘neo-liberalism’. For, as the Lexiters insist, it is the EU’s state aid rules which are one of the principal reasons for regarding it as a neo-liberal institution. (Freeports aside, the Lexiter position on this is another example of the wider Brexiter falsity that it was EU rules, rather than the UK’s own political choices, which were the barrier to the use of state aid: whilst still in the EU the UK gave much less state aid in per capita terms than most other members.)

The other piece of ‘evidence’ given for deregulated Freeports is that the Retained EU Law (REUL) Act 2023 supposedly unleashed massive deregulation by scrapping 600 EU laws. But, apart from the fact that this applies across the country, not just in Freeports (so it is irrelevant to the claims about them), anyone with even a cursory understanding of this issue knows that REUL was a major disappointment to the neo-liberal Brexiters. They had wanted to scrap or automatically sunset all the estimated 4,000 EU laws by the end of 2023, and were infuriated that not only was the number scrapped so small, but that they generally related to trivialities. That decision, taken by Kemi Badenoch when she was Trade and Business Secretary, actually marked a defeat for them. That isn’t to say they may not revive in the future, and no doubt Trump’s victory will embolden their hopes of a similar resurrection, but the idea that REUL was a triumph for their version of Brexit is simply false.

The Freeports issue is an illustration of my wider point here, that the parameters of policy have not been changed by Brexit. It’s something demonstrated, if inadvertently and in a misleading way, when the Freeport alarmists talk about ‘the 86 Freeports and SEZs’ (Special Economic Zones). It’s misleading because Freeports are SEZs (so ‘Freeports and SEZs’ is a misnomer) and doing so enables them to talk of these being ‘rolled out’, when almost all of them have existed for years, and pre-date Brexit. And it’s that which illustrates the point that, both before and after Brexit, policy choices haven’t really changed. In this case, that is because SEZs were and still are predominantly areas with various business tax breaks, most if not all of which did not require Brexit. That doesn’t mean they are good, or that they are effective. It just means that they are pretty much what they have always been.

Back to the budget

This brings us back to the budget. It does so in one trivial way. Before the budget there was a report that it would announce five new Freeports. This report turned out to be mistaken, but not before much gnashing of teeth about how it ‘proved’ Labour had embraced post-Brexit neo-liberalism. Far more importantly, the budget marks a distinct break with recent economic policy, perhaps going as far back as 1979. That isn’t so much because of its taxation decisions as the role it envisages for state investment.

As such, it marks a decisive rejection of the neo-liberal ‘crowding out’ thesis – the idea that public investment crowds out private investment [2]. That was a key part of the intellectual undergirding of what became Thatcherism, and it persisted under George Osborne’s Chancellorship. Arguably, it also lay behind the Blair-Brown governments' embrace of the Private Finance Initiative (PFI). This doesn’t mean that it was the ‘socialist’ budget or the “Marxist nightmare” (£) described by the ludicrous rantings of right-wing commentators. But nor does it warrant the lazy claim that there’s no difference between Labour and the Tories. It was, as Martin Kettle of the Guardian described it, “a budget in the identifiably social democratic Labour tradition”.

Whether it succeeds in delivering the economic growth it promises, and to what extent, is another question, and one made all the more difficult to answer by Trump’s election. But, along with other Labour policies, from industrial policy to workers’ rights – even if none of these go as far as some would want – it puts paid to the idea, at least for now, that Brexit was the harbinger of a new wave of neo-liberalism. In some ways, it could even be described as bringing the UK closer to a ‘European’ economic model.

The limits and consequences of choice

That might seem ironic, but to a certain sort of Brexiter, arguably the most principled sort, it would be no such thing. Such people would say that the point of Brexit was not to usher in any particular policies, but simply to ensure that the policies in place are those chosen by British voters [3]. It is the same argument they make when saying that Brexit did not mean lower immigration, just that immigration levels would be determined solely by the elected government.

It may be a fine sentiment, but it is a naïve one, ignoring the many constraints on the choices available to voters, constraints over which their elected governments have far less control than they used to over EU laws and regulations. Like it or not, voting never has been, and never could be, the sole source of policy. On the other hand, it ignores the fact that, despite those constraints, the same kind of budget as that of last week could have been delivered with or without Brexit. That doesn’t mean that Brexit has made no difference to this and other post-Brexit budgets. It has. But the only real difference it has made is that there is less money.

In a similar way, no British voter chose Trump as American President, and most of them are unhappy about his election and concerned about its implications for Britain, but they will all have to cope with the consequences of it. That would have been true with or without Brexit, but Brexit limits the choices for how to do so.

 

Notes

[1] I’m aware that some people find ‘neo-liberal’ an imprecise, irritating, or even meaningless term. I use it here as shorthand for the broad proposition that markets are the best way of allocating resources, that they do so best when minimally regulated, and the State should be confined to relatively limited functions.

[2] I’m thinking in particular of the influence of the ‘Bacon-Eltis’ version of the crowding out thesis. Crowding out as an idea has a longer history, but in their telling it was enrolled into the wider neo-liberal narrative of ‘private good, public bad’.

[3] This was the position of the late Tony Benn, who of course was a Lexiter avant la lettre, and, certainly in his version of it, it was not the same as either ‘nationalist’ or ‘sovereigntist’ positions.

The Brexit quart won’t fit into Labour’s pint pot

The landscape of the politics of Brexit remains a broad and highly contested terrain, ranging from those convinced it was a great and necessary triumph, to be defended at all costs, to those urging its immediate reversal, with many shades of opinion between. But, under the Labour government, what might be called the immediate practical politics of Brexit operates within a far more restricted space in which only ‘micro-issues’ are subject to political decisions. Those micro-issues and decisions matter, and are worthy of attention, but, ultimately, the question is whether this disjuncture of scale is a sustainable one.

Wes Streeting’s facts of life

The Health Secretary Wes Streeting, whether intentionally or not, recently gave a very clear exposition of the perverse position the government has adopted. He was asked why the idea, not of rejoining the EU, but even of joining the single market was undiscussable. Whilst happy to recall that he, himself, had “campaigned passionately” against Brexit (this, at least, is something which is now sayable for cabinet ministers), he argued that “the people have moved on, the country has moved on and the EU has moved on”, so that there was “no appetite” for such questions to be re-opened.

This is familiar enough stuff, but Streeting then went on to say something more surprising, which I’m not sure has been explicitly expressed by any other cabinet minister: “there’s no doubt that what we warned about in advance of the referendum in terms of the impact on economic growth has come to pass, and that’s a fact of life we have to deal with. I think the sweet spot is working as closely with the European Union where we can, but also showing the agility to work with and through other partners in other markets as well …” [1]

This is different to the kind of things Keir Starmer, in particular, has said, accurately but irrelevantly, about the fact that not all Britain’s economic problems stem from Brexit. Sometimes, that has even morphed into the implication that ‘therefore’ these problems can be solved irrespective of Brexit. By contrast, the Streeting version is that the costs of Brexit are significant but just have to be accepted and, at best, mitigations made at the margin. In effect, this elevates the ‘mustn’t grumble’ mentality, which I alluded to in my most recent post, to the level of government policy.

That still leaves open the question of what Streeting means by “working as closely as possible with the EU where we can”. I wrote in a post at the end of the summer, pointing to the government’s lack of a clear and coherent post-Brexit strategy (a lack which still remains), that the most likely reading of Labour’s approach was that it would be the “maximalist” one of seeking “the maximum closeness, cooperation and alignment with the EU short of breaking the Labour manifesto commitment to its negative red lines”. Actually, it would have been more accurate to say that this is the best that can be hoped for. For that approach has yet to be demonstrated, as illustrated by the current rejection of a Youth Mobility Scheme (YMS), despite that fact it would not violate those red lines.

Backbench pressure?

I also pointed out in that post that one important way in which this government differs from its Tory predecessor is that the backbench pressure will be towards closer ties with the EU, rather than resistant to them or, indeed, agitating for even more distant ties. That is true, but what it is turning out to mean in practice is backbench pressure for such a ‘maximalist’ approach.

Thus, writing recently in the Guardian, Stella Creasy, the MP who chairs the Labour Movement for Europe, set out just that case. It included some of the things mentioned in my post, including seeking to join the Pan-Euro-Mediterranean Convention, and embracing, even extending, the EU’s proposals for a YMS. It also supported amendments to strengthen the governments Product Regulation and Metrology Bill (discussed in another recent post), further enhancing the way it will tend to keep many UK and EU regulations aligned.

What Creasy’s article self-avowedly did not do was make the case for rejoining the EU or for abandoning the government’s red lines. Saying that is neither praise nor criticism. It is simply a fact. What it betokens is that the practical politics of Brexit under this government is therefore now entirely about the nature and extent of Brexit damage limitation. That is, there is no dramatic difference of principle between what Streeting said and what Creasy wrote: the issue is entirely one of specific ‘micro-issues’ to be addressed within the framing they share.

That framing still leaves room for some policy debates and choices. Apart from the government’s stated ambitions, such as an SPS deal with the EU, there will be constant decisions to be made, with important upcoming examples including linking UK and EU Emissions Trading Schemes and aligning UK and EU deforestation regulations. Yet, important as these things are, they are still decisions to be made within the limited parameters of what the present government regards as practical politics.

A vanishingly small space?

A year ago I reviewed a book by Peter Foster, the Financial Times journalist who has been one of the best analysts of Brexit (I apologise for these repeated links to earlier posts, but they help, I hope, to provide context and sometimes corroboration, whist avoiding excessive repetition). That book is perhaps the most detailed articulation of what ‘maximalism’ (in this context) means in terms of specific measures.

In my review, I suggested that: “one danger which a Labour government looks likely to face is that, along with Brexiter denunciations, it will also be attacked by remainers and rejoiners as being insufficient to the magnitude of the task. The positive reading of that is it will push Labour towards Foster’s more maximalist version of its presently disclosed policy. The negative reading is that, squeezed between those who say it is too much and those who say it is too little, the space for pragmatism will remain vanishingly small.”

It's arguably too early to be sure yet, but it looks as if it is the latter outcome which is emerging. In practice this would mean that, rather than post-Brexit policy being located right up against the edge of Labour’s red lines, those lines will mark the far boundary of what is possible, and policy will settle between that and the kind of ad hoc accommodations the Sunak government was forced to make despite Brexiter opposition (e.g. watering down the scrapping of retained EU law, postponing if not effectively scrapping UKCA, agreeing the Windsor Framework). That is, if the Sunak approach is defined as minimalism, and the Creasy (or Foster) approach is defined as maximalism, the Starmer government’s approach will end up being somewhere between the two.

If this is so (and, actually, even if what emerges does turn out to be the maximalist approach), it is likely to come under increasing strain as it collides with economic reality. That was illustrated by the government’s much-vaunted International Investment Summit last week. This was the context of both the Streeting interview and the Creasy article, and it also provoked commentators to ask the question which, even if the government wants to believe that ‘the country has moved on’ will not go away: what about Brexit?

Counting the costs of Brexit: latest news

It is a question given added salience by a report the same week from Stephen Hunsaker of UKICE, calculating that, since 2017, the UK may have lost £44 billion of public investment which it would otherwise have received from the European Investment Bank. Like other counterfactual estimates (i.e. what would have happened if Brexit hadn’t happened), such as those of foregone trade, this may have little cut-through with the public. It is hard for people to get agitated about the loss of something that they ‘would have had’ in an alternative history. But for policymakers such things are, or should be, highly important and, indirectly, they do actually have a political significance: even without recognizing the mechanism, voters react negatively to the effects.

There was also a reminder of ‘the costs of Brexit’ in terms of payments made under the Brexit ‘divorce settlement’. This came as the result of a parliamentary question from SNP MP Stephen Gethins about how much has been paid so far, and how much remains to be paid, to which the answers turn out to be £24 billion and £6.4 billion respectively.

Strictly speaking, these are not ‘costs of Brexit’ because they are payments for liabilities the UK had incurred as an EU member so, in that sense, would have been paid one way or another regardless of Brexit. Nevertheless, it shouldn’t be forgotten that many Brexiters insisted, amongst them Nigel Farage, that there would be no ‘divorce settlement’ to pay or, even, that the EU would owe money to the UK. Even when installed as Foreign Secretary, Boris Johnson said the EU could “go whistle” for a financial settlement. Others of them fantasized that nothing should be agreed until the future terms of trade were also agreed, a fantasy which did not survive what turned out to be the non-existent ‘battle of the summer’ of 2017, although it still lingers on in Brexiter mythology as one of the many ways that Brexit ‘could have worked’.

More generally, the financial settlement was expected to be the most contentious aspect of the Withdrawal Agreement, and one of the more curious parts of the Brexit saga is the way that, having effectively been settled as part of the ‘phase 1 agreement’ in the autumn of 2017, it has scarcely figured in discussion since. By contrast, the issue of Northern Ireland, which had been dismissed by Brexiters as a triviality, proved to be far more toxic, festering on until the Windsor Framework was agreed in February 2023, aspects of which remain unimplemented even now, and is still a running sore to many, including many advocates of Brexit.

All this is worth recalling if only because we should never forget the grotesque ways in which Brexiters fooled themselves and misled others about the most basic realities of leaving the EU. More specifically, in the present context, it serves as another illustration of how, every step of the way, what Brexiters sold as a cost-free project has incurred cost after cost after cost.

A third recent reminder of this is the Reuters’ report that the Lord Mayor of the City of London estimates that Brexit has led to the loss of 40,000 jobs from Britain’s financial centre since 2016. It was a noteworthy report not least because, rather like the financial settlement, the figure for City job losses also has a special place in the iconography of the Brexit process.

Before the referendum, a widely cited report from accountants PWC estimated that the figure would be 70,000 to 100,000. This was dismissed as ‘Project Fear’ by leave campaigners, who later claimed vindication when, in 2022, another accounting giant, EY, estimated that the actual figure had been ‘only’ 7000 jobs. Of course, this was only a vindication because, by then, defence of Brexit had long since moved to claiming it had not been as bad as expected, rather than that it had had the positive benefits promised. If the latest 40,000 figure is correct then, on that logic, it could still be claimed as a vindication. Nevertheless, it would be closer to the lower end of the PWC estimate than to the EY estimate.

Foregoing jobs of this type, on this scale has significant implications. For example, economics commentator Jonty Bloom calculates that, if the figure is indeed 40,000, this represents well over £1 billion per year of foregone tax revenue (even conservatively assuming these jobs to have had an average salary for the sector, and considering only the income tax and national insurance they would have paid). Again, these are counterfactual costs but, whilst that inevitably means they are estimates, counterfactual analysis is the only way of assessing the effects of Brexit. Indeed Brexiters themselves recognize this whenever they claim (usually wrongly or misleadingly) that such-and-such a thing is a ‘benefit of Brexit’ because it wouldn’t otherwise have been possible.

Foregone jobs aside, the wider issue is that, apart from a few pro-Brexit diehards, no one seriously thinks that, overall, Brexit has been anything other than bad for the UK financial services industry. Even the pro-Brexit Telegraph reported (£) earlier this year that Brexit was the “prime suspect in the death of the stock market” and that the referendum was a decisive moment in the City’s “brutal losing streak”. Meanwhile, a review of the sector jointly produced by the City of London Corporation and the Treasury last year (i.e. under the Tory government) identified “strengthening and deepening the EU-UK business relationship” as “a top priority for the UK based financial and professional services sector.”

There’s little sign that this priority will be delivered by the new government, for all Labour’s wooing of the Square Mile. As a recent analysis by Hannah Brenton of Politico explained in some detail, the sector remains “out in the cold”, rarely featuring in the government’s statements about the ‘reset’ with the EU, and barely mentioned in discussions with the EU. Yet, as Brenton points out, financial services account for some 12% of UK GDP and contribute £100 billion in tax revenues (2022 figures). A government which has made GDP growth its central mission and which has a pressing need for tax revenues to repair highly-stressed public services can hardly afford to ignore the sector’s stated priority needs in this way.

Some other facts of life

Constant reminders of the costs of Brexit, such as these, will continue to exert pressure on the narrowness of the political space within which Labour are willing to discuss it. Next week’s budget will be an important example. At one level, it will push discussion of Brexit even further to the margins, as commentators will find many others things in it to talk about.

At another level, it will make the costs of Brexit even more relevant. Battles between the Treasury and spending departments are a basic fact of political life, and those over the forthcoming budget are no different (rather than being, as some reports suggest, the sign of a government in chaos). Nevertheless, they have an added dimension when budgetary constraints are so much tighter than they would have been as the result of a calamitous decision about national strategy.

To put it another way, Wes Streeting may think the costs of Brexit are “just a fact of life we have to deal with”, but he must know that much of the political credibility of the government, not to mention his own career, depends on the funding settlement he obtains for the NHS. The same goes for other ministers and other public services. For this reason, even if ‘the people have moved on from Brexit’ and even if counterfactual losses have no cut-through, it doesn’t follow that bearing those costs has no political consequences. It’s another fact of political life that voters expect results. [2]

From that point of view, the limited space of Labour’s Brexit politics, and the Brexit micro-issues to which it confines the government, is always going to be faced with the question of why it is so small. The ‘macro-question’ of Brexit as a national strategy will not go away. And that isn’t solely or even, ultimately, mainly because of the question of whether Brexit was a mistake. It is for similar, if now updated, strategic reasons to those which, in the 1960s and 1970s, drove the UK repeatedly to seek membership of what was then the EEC (this argument was made with great elegance by the historian Robert Saunders, in an essay marking the day that Britain left the EU). Those reasons, too, are facts of life, deriving from those of economics, geography, and the nature of international relations.

So the issue for this and future governments is the disjuncture between what is economically (and geo-politically) desirable and what is politically viable. The present government has an answer to this, and it is not entirely without merit: it is that re-opening the macro-question of Brexit would be economically damaging because of the instability which would result from the political toxicity of doing so. On this account, there is no disjuncture: it’s not economically desirable because it’s not politically viable. And it’s true that, in particular, many big businesses which have adapted themselves to being outside the single market and customs union are not keen to have that all thrown up into the air again for an indeterminate period with an uncertain outcome.

However, whilst it isn’t unreasonable for the government to take account of those concerns, they do not define the interests of Britain’s economy as a whole, nor those of its citizens. Acting as if they do is not only unhelpful to smaller businesses and to consumer choice, it institutionalizes higher costs, lower investment, and a lower tax base than would otherwise be the case. Equally, it does little to address the geo-political damage of Brexit.

This doesn’t mean, at least in my estimation, that the present government is going to pivot to joining (or rejoining) the single market, let alone the EU. It does mean, though, that an approach based on simply “living with” the costs and damages incurred by choices made by, and in the aftermath of, the 2016 referendum is inherently fragile. It is very unlikely that the politics of Brexit can forever be contained within the small space to which it is currently confined by Labour. For it is also a fact of life that attempts to fit a quart into a pint pot – to use measures that some Brexiters might appreciate – will result in a leakage, if not indeed a flood.

 

Notes

[1] The last words of this quote seem to suggest a continuation of the last government’s faith in post-Brexit Britain’s ‘nimbleness’ in being able to set its own regulations and make its own trade deals. There’s little reason to share it. But in one respect, at least, there has been a departure from this hubris in that all the existing advisers to the Board of Trade have been dismissed, including Daniel Hannan, one of the major architects of Brexit, and Australia’s former leader Tony Abbott, one of its few international champions.

[2] In the present context, it’s an even harsher fact of political life that some voters expect results that they have denied themselves by their vote to leave the EU, or, however they voted in the referendum, by their unwillingness to see that decision revisited. But there’s nothing new about people holding perversely contradictory views, and it’s one of the tasks of political leadership to persuade them of the need to face realities. The core of the present government’s ‘Brexit problem’ is that it believes this is not possible – and it may well be right.

Britain's Brexitism test

The most significant Brexit-related development of the last fortnight was Keir Starmer’s first visit to Brussels since becoming Prime Minister. Media attention focused on his meeting with the President of the European Commission, Ursula von der Leyen, but, notably, he also met with Charles Michel, Chair of the European Council, and Roberta Metsola, President of the European Parliament.

Significant it may have been, but dramatic it certainly wasn’t, and no one should have expected otherwise. This was never likely to be the moment for some great announcement and, in fact, the joint statement of the Starmer-van der Leyen meeting, whilst positive in tone, was fairly anodyne in content. Nevertheless, it did contain some points of interest.

The Starmer-von der Leyen statement

The reaffirmation of a shared commitment to the Withdrawal Agreement, Windsor Framework, and Trade and Cooperation Agreement (TCA) could be taken as a reminder of the EU’s desire to see all of the provisions of these fully implemented, and perhaps as a pre-condition of any ‘reset’. It was certainly a reminder of the Labour government’s acceptance of the basic architecture of what was agreed by its Tory predecessors, and thus the limitations of such a reset. Yet the reference to “the unique relationship” between the EU and the UK, whilst at one level a truism, could betoken a recognition by the EU that not all its relationships with third countries are of the same order, and by the UK that the brief and hubristic days of post-Brexit ‘global Britain’, in which the EU hardly counted, are long gone.

At all events, the statement identified the desire to develop an agenda of strengthened cooperation “at pace” and, interestingly, included within that agenda were references to both climate change and energy. These had been identified by Joël Reland of the UK in a Changing Europe (UKICE) research centre in advance of the meeting as being something to watch for as neglected, but highly viable areas, for greater cooperation within the existing agreement architecture, and of potentially mutual interest to both sides.

But ‘pace’ will indeed matter. For example, the ongoing development of both UK and EU Carbon Border Adjustment Mechanisms (CBAM) and associated Emission Trading Systems (ETS) means that decisions about their possible linkage, a perfectly realistic possibility within the TCA framework, will soon become pressing. More generally, as economics commentator Simon Nixon argued in a recent post on his Wealth of Nations substack, emerging EU plans to revive EU competitiveness are likely to have major implications for the UK. In short, any reset of relations with the EU will not occur against a static background.

The main substantive announcement in the joint statement was of agreement to begin holding regular EU-UK summits, starting early next year. Anton Spisak of the Centre for European Reform, and a seasoned analyst of Brexit, pointed out that the significance of this should not be downplayed, given the unwillingness of both parties to entertain the idea in the past. Small as it may be, it is a sign of progress, and was welcomed as such by the European Movement UK.*

Testing questions for the ‘reset’

How far that progress goes, and what it consists of, remains to be seen, not least because, as I discussed in a recent post, it’s unclear what the government means by ‘the reset’. But, whatever its intentions, many commentaries on the Brussels’ meeting focused on UKICE Director Professor Anand Menon’s remark that to pursue them the UK needs to show the EU “a token of good faith” by agreeing to a Youth Mobility Scheme (YMS). Yet, beyond the obvious fact that this would do much to enhance the credibility of the UK’s commitment to a genuine reset, what I have not seen discussed is exactly why such a gesture is needed and what it would betoken.

I think the answer to that is bound up with the entire post-Brexit question. To what extent has the UK, not just in its government but in its wider political culture, banished or at least decisively marginalized ‘Brexitism’? I’ve argued in the past that it is this which will be the key test for the viability of any idea of ultimately joining the EU or the single market. It isn’t enough for there to be majority support for doing so in the opinion polls. The credibility question, for the EU, is whether or not there is any danger that a move to join would subsequently be reversed, and the trauma of Brexit repeated. If there is such a danger, there is no attraction for the EU in entertaining UK accession.

That is not in prospect, but the same argument applies, though arguably to a lesser extent, to the far more limited aspirations for rapprochement envisaged by the current government. To what extent can they be taken as a reliable, permanent, feature of UK-EU relations? Or will this ‘reset’ be followed, a few years down the line, by another reset, back in the direction of the Brexit Ultras’ desire for separation, antagonism, maximum distance, and ‘sovereignty’ above all else? Is the UK now, in fact, a reliable interlocutor again, or is the Brexit virus liable to break out again, as shingles may for anyone who has had a bout of chicken pox?

In this sense, complaints that the EU’s original proposal for a YMS deal were made at a time that was unhelpful (£) to the then Labour opposition missed the point: these questions aren’t (just) about any particular party or government, but about the British polity. If the EU still has to tip-toe around the Brexit eggshells of UK politics, then that in itself answers the question of whether or not Brexitism has been marginalized.

There is also a deeper, or, anyway, different version of this same question, which is also highly germane to the viability of a substantive reset in relations. Brexit aside, the UK’s attitude to the EU during the years in which it was a member was very much characterized by grudging transactionalism, rather than by any commitment to European ideals. Brussels was the place the UK went to bang the table with a handbag, and extract the most it could whilst giving the least possible in return. Now that the UK is outside, is that still the approach, rather than, as a reset might imply, one of genuine partnership?

Oddly, and perhaps unintentionally, the comments of some ‘post-Brexit realists’, who, whilst understanding very well the folly of Brexit, discuss Labour’s reset in terms of negotiating strategies and ‘offensive’ and ‘defensive’ objectives, reinforce the impression that this transactionalism persists. At all events, a genuine reset needs to entail more than regret about the way in which May, Davis, Johnson, and Frost went about divorce proceedings. If the marriage is to be replaced by friendship, it is also necessary for there to be a genuine desire to avoid repeating the behaviour which preceded the divorce.

The YMS test

On these questions, YMS is quite a good test to set, relating as it does to the neuralgic issue of immigration which played such a central role in the vote for Brexit. YMS manifestly doesn’t cross the Labour red line on the restoration of freedom of movement of people, so if the government still sees it as too politically toxic to pursue that suggests two, related, things. One is that within the British polity, generally, the experience of Brexit has still not lanced the populist boil about immigration. The other is that the Labour government is not minded to challenge, but to accept, the orthodoxy of anti-immigration sentiment.

It would seem as if that test has already been failed. Unsurprisingly, anti-immigration politics still suffuses Farage’s Reform Party as, hardly any more unsurprisingly, it does the Tory Party, whoever its new leader turns out to be. The Tories did have the possibility of saying that, with Brexit, they had delivered the ‘points-based’ system which Brexiters like Farage used to say was all they wanted. They could then have initiated the ‘honest conversation’ everyone says they want to have about immigration, for example by decoupling it from asylum-seeking, and by challenging the voters about their view that immigration in general should be significantly reduced whilst those same voters, including Conservative voters, do not support reductions in almost every specific category of immigration. But, whether from fear of Reform, their own preferences, or some combination of the two, the Tories have not chosen to take this opportunity.

Nor is there any sign that the Labour government will do so. That clearly extends even to YMS, with reports that the cabinet is split over whether to agree to it, and identifying Home Secretary Yvette Cooper as the main opponent. Cooper played a pivotal and praiseworthy role in preventing Boris Johnson’s government enacting a ‘no deal Brexit’, and a courageous one, too, given the horrendous abuse and threats she faced. So it might be tempting to see her stance on YMS as the latest example of the Home Office capturing its Secretary of State. After all, Theresa May went from challenging her party to stop being ‘nasty’ to being a distinctly nasty Home Secretary, and the department seems to have had similarly radicalizing effect on one-time Immigration Minister, then Tory leadership candidate, Robert Jenrick.

In fact, Cooper has been arguing against freedom of movement since at least December 2016. And although she must know very well that YMS would not mean anything like its restoration she insists that the EU “see this in the context of free movement”, whatever that is supposed to mean, or why it even affects the issue. But it isn’t just Cooper. Starmer, too, despite being enthusiastic about the case for freedom of movement as recently as January 2020, is reported to fear the reaction from the pro-Brexit press to a YMS deal. So even on this quite limited measure it seems Labour have no appetite to take on Brexitism, thus failing first part of the YMS test, namely, whether has Brexitism been marginalized.

This does not mean that YMS will not be agreed in the end. Many people (including me, for what it is worth) expect that it will be. However, the consequence of having failed the first test is that, if and when YMS is agreed, the UK will also fail the second test. For if it is agreed as, or is presented as having been agreed as, part of some quid pro quo deal to obtain some softening of the economic damage of Brexit, such as an SPS deal, then it will be clear that the UK’s relationship with the EU remains within the same transactionalist frame as it has always been. That needn’t preclude a ‘reset’ but places limits upon it, and defines the future ‘partnership’ in relatively shallow terms.

The ECHR test

Whilst the YMS is a good test of the question of whether the UK has left Brexitism behind, there is a different test, which is whether the UK is likely to go even further down the path it took with Brexit by embracing a ‘Brexit 2.0’ of leaving the European Convention on Human Rights (ECHR) and its associated Court. That, too, is largely bound up with immigration, to the extent that ECHR derogation is almost invariably presented as being a means of ‘stopping the small boats’ (in this sense, it is also bound up with the failure to differentiate immigration from asylum-seeking).

Here the text of the Starmer-von der Leyen statement was revealing in “re-affirming” the parties’ mutual commitment to the Convention. It’s not clear that Rishi Sunak could have done the same thing, given his repeated pandering to the possibility of derogation over the ‘Rwanda plan’. By contrast, on this, Starmer’s resolve is unequivocal: a government under his leadership will never leave the ECHR. Given all his priors, it is unthinkable that he will renege on this.

However, it is very far from obvious that this is the settled view of the British polity. Again, it is unsurprising that Farage and Reform UK are adamantly opposed to ECHR membership, whilst support for it within the Tory Party is fragile. Of the remaining leadership candidates, Robert Jenrick has unreservedly advocated leaving and, despite having initially rejected the idea, Kemi Badenoch now says that she would consider doing so.

Whichever of them wins will undoubtedly find much support for making leaving the ECHR official party policy, since doing so is now an article of faith to those on the right. At the same time, former candidate Tom Tugendhat’s foolish attempt to court the right by contingently supporting leaving indicates that even on the more ‘centrist’ wing of the party it is no longer seen as unthinkable. At the very least, his having done so will have weakened what remains of the One Nation Tories’ ability to oppose it. Meanwhile, Boris Johnson, with his usual opportunism, this week called for a referendum on membership.

So it certainly can’t be said, despite all the miseries that Brexit has caused, and despite its unpopularity with the public, that Brexit 2.0 can be ruled out, or that demands for it will be confined to the margins of politics. That seems all the more the case given the faltering first 100 days of the Labour administration. Of course, it is too early to judge, but the possibility of a two-term hegemony, in which Labour might re-write British politics, looks less likely now than it did in the immediate aftermath of the election, whilst the possibility of a disillusioned electorate turning to nationalist populism has become more feasible.

The Gibraltar test

Whatever the truth of that turns out to be, it is abundantly clear that the populist and pro-Brexit media has not been cowed by the new government, and continues to exert a very considerable influence upon it. Many believed that a huge Labour majority would somewhat tame that media, for the general reason that the centre of political gravity would have shifted, and the specific one that journalists would become somewhat beholden to the new regime.

That hasn’t really happened, and certainly not to the extent that it did in 1997, with the result that Starmer’s government has immediately become embroiled in controversies, leaks and scandals (some of them highly confected), and has already been forced to engage in a domestic re-set. That has multiple implications, including for the prospects of a ‘reset’ of relations with the EU.

A clear example was the furore over the announcement that the UK has agreed to cede sovereignty of the Chagos Islands to Mauritius. This is itself, in part, a Brexit story because, as the BBC report of it mentioned, Brexit meant that many EU nations were no longer prepared to back the UK’s case for retaining control of the territory. It’s a point that Brexiters should heed, since it a reminder of how Brexit has weakened the UK geo-politically as well as economically.

However, more to the present point is the way that the agreement was represented by Brexiters and the right-wing press as showing “weakness” and even “treason”, ignoring the fact that the negotiations which led to the agreement had been started by the previous Tory government. This was then linked to ridiculous claims (ridiculous as there is zero connection) that it would be followed by similar deals to cede sovereignty of the Falklands and Gibraltar (£).

It’s the latter claim which relates most directly to Brexit, since the post-Brexit situation of Gibraltar remains unresolved and under negotiation, and resolving it is, in itself, now a test of Starmer’s desire for a reset with the EU. In principle this is becoming urgent, with the new Entry/Exit System (EES) Schengen border controls due to begin in early November although, as I write, reports are confirming the recent rumours that these will be postponed again. But the new controls will, eventually, happen and this matters, since a key issue is maintaining an open border between Gibraltar and Spain, and the associated question of the management of border controls at Gibraltar’s port and airport (which is also an RAF base).

The last time I discussed Gibraltar in detail on this blog was in April, when it seemed that a deal was imminent. A deal, that is, brokered by the Tory government. Since then, reports of the negotiations have been sparse, although last weekend it emerged (£) that the government was about to make formal complaints to Spain about its military overflights of the territory, which doesn’t augur well. But if, and I would think when, a deal is done it will almost certainly involve ‘concessions’ to the EU and Spain, reportedly already made by the previous government, on who undertakes border controls.

This will be the cue for Brexiters to cry ‘betrayal’, as they would have done under the Tories but now, no doubt, with the support of the Tory leadership. Such protest may be marginal, and easily batted away by the government. But the reaction to the Chagos agreement suggests the possibility of a Gibraltar deal being woven into a wider narrative of Starmer being ‘weak’ and ‘not standing up for’ Britain, both generally and in relation to the EU. If that narrative gains ground it will be another indication that Brexitism exerts a profound hold on the UK, whatever its government may be.

Still not done

The question of how Brexit will continue to unfold is a crucial one for our country, so it was with considerable regret that I learned that Yorkshire Bylines’ Davis Downsides Dossier is to be discontinued. It has been a huge, and I think unique, resource for collating media reports about the practical consequences of Brexit, and I’ve referred to it many times.

That isn’t the only loss. At the high-profile end of things, the decision to end the European Scrutiny Committee, for all its problems, without any replacement is a big setback for scrutiny and accountability of the government’s post-Brexit policies, as Jill Rutter and Hannah White of the Institute for Government explain. I’m particularly saddened by the decision to stop funding UKICE from April 2025. UKICE has been a consistently outstanding source of reliable data, incisive analysis, and intelligent comment about Brexit, and an invaluable public resource, not least for this blog where I have cited its work in, very possibly, the majority of posts.

At, if they will forgive me, the lower-profile end of the spectrum, Nick Tyrone has now ended his ‘Week in Brexitland’ newsletter, and Gerhard Schnyder has ended regular posts of his Brexit Impact Tracker blog. Again, I have often cited these sources on this blog and it is a shame that they are gone.

These losses contribute to a growing sense that Brexit (somewhat like Covid) is regarded if not as over, then as something that just has to be put up with, like the British, or more accurately English, weather. It’s a sense I tried to capture in more detail about a year ago in my post entitled “mustn’t grumble”. So continuing with this blog, even on its new fortnightly basis, feels like ploughing an increasingly lonely furrow, but I think it is still a worthwhile one. And this week, just over eight years since I launched it, the blog received its ten millionth visit, and the readership via email sign-ups continues to hold up, so hopefully I am not the only one to think so.

After all, as this post shows, Brexit is very far from ‘being done’, and that was without even mentioning the latest postponement to an aspect of import controls, this time that of digital product safety declarations. And as this post also shows, we are also far from done with Brexitism.   

 

*Another small step of note was the this week announcement of a new agreement between the UK’s Office of National Statistics and EU’s Eurostat, severed since Brexit. It’s not really an example of ‘the reset’, since it was anticipated by the TCA and has been under discussion for a while, but it has a significance beyond itself in that it facilitates UK participation in EU programmes such as Horizon Europe. At the same time, it’s yet another reminder of the extent to which Brexit has caused so many utterly pointless, yet damaging, ruptures, large and small.

Accommodating Brexit

Are there any expressions other than ‘the elephant in the room’ to connote the ignoring of big, obvious things? If so, it would be useful to know them as that poor old elephant is now the most clichéd of clichés to describe the government’s attitude to Brexit. In their speeches to this week’s Labour Party conference, Rachel Reeves mentioned it only briefly and in passing, and Keir Starmer not at all. It’s absurd, especially as the guiding theme of both speeches, as of the government’s entire incoming communications message, is that of the dire inheritance bequeathed by its Tory predecessors. Brexit can hardly be excluded from that reckoning.

It's tedious to go on and on making that observation, and it’s certainly not made with any surprise on my part that Nellie is still ignored in the corner, but it remains a necessary one, for two reasons. One is because, mentioned or not, Brexit continues week-in and week-out to exert its damaging effects. Ignoring them doesn’t make them go away. The other is that, in the continued absence of discernible post-Brexit strategy, this means that the government’s approach is one of ‘accommodating’ Brexit. That is perhaps slightly different to ignoring Brexit, as it is a kind of acknowledgement of Jumbo’s existence alongside a dogged determination to live with it.  

The ongoing damage of Brexit

As for the first of these, the latest news on the economic damage of Brexit comes with a new study by Professor Jun Du and others of Aston University. Apart from providing new evidence of the already well-attested “profound and ongoing” dampening effect of post-Brexit trade barriers on UK-EU goods trade, it identifies two, more specific, things. One is the particular effect of reducing the varieties of goods traded, sharply and continuously in the case of UK exports to the EU; declining, sharply recovering, then slowly declining again in the case of UK imports from the EU.

My reading, although it isn’t stated quite in these terms in the report, is that what has happened is that small product lines (and especially those of smaller firms) have simply been dropped as not being worth the extra costs. That has happened continuously as regard UK exports because the EU introduced full import controls immediately. In the other direction, it was discontinuous presumably because the initial impact of customs and VAT charges had an immediate effect, which was then adjusted to, but more recently the gradual introduction of UK import controls has produced a new decline.

Whatever the process, the result is that specialist products are now less likely to be traded. That has an economic impact on the firms affected, of course, but it also reduces consumer choice, with effects which are not just economic but adversely affect quality of life. Delicatessens are a good example, as trade in small batches of artisanal food products is exactly the kind of thing which has suffered. It’s easy for Brexiters to sneer that, like post-Brexit travel barriers to fancy foreign holidays, such things are the complaint of the effete metropolitan elite. But, whatever purveyors of this new politics of envy may imply, it is hardly the case that everyone other than middle-class Londoners holidays, if at all, in Bridlington, and subsists solely on bread and dripping apart from an orange at Christmas. (An orange, you say? You had it lucky!)

The other noteworthy finding of the Aston study is that Brexit has “heavily disrupted and weakened” UK-EU supply chains. This isn’t surprising, and confirms earlier research by, for example, the Resolution Foundation, but, apart from providing valuable new empirical evidence, it is worth highlighting because it strikes at the heart of one of the Brexiters’ many stupidities. Because they thought of the single market as being a kind of trade agreement, potentially replicable by a new trade agreement, they entirely failed to understand its role in integrating supply chains. Obtaining, as the UK did, a (largely) ‘tariff-free’ trade agreement with the EU did little to address this, and now we are living with the consequences.

It’s worth stressing again that, as with the consequences for trade, these are ongoing. As I pointed out when the transition period ended: “what is underway is a fundamental shift in the ‘tectonic plates’ of the UK trading economy and its supply chains, happening in real time and under our noses, but with little comment on the aggregate picture. And it is going to get worse when all the new rules are stringently applied on the EU side and applied at all on the UK side. It is reaching, or will reach, into every niche of economic life …”

What has changed now, of course, is that it is becoming possible to see the aggregate picture, with the Aston study being the latest instalment.

Mutual recognition - again

Press reports of the government’s reaction (£) to the Aston study just repeated the standard mantras about “improving” trade terms with the EU by “tearing down unnecessary barriers”, which doesn’t begin to address the problems. The study’s policy proposals for doing so include regulatory alignment, which seems likely to be consistent with government policy, but rightly recognize that to significantly reduce trade frictions such alignment would need to be accompanied by ‘mutual recognition’ of regulations as between the UK and the EU.

To a degree, that too is consistent with government policy, at least as regards its stated intention to seek mutual recognition of professional qualifications. However, there are significant obstacles even to that, and far more to the extensive use of Mutual Recognition Agreements (MRAs). The EU does enter into some MRAs with third countries, but it was a persistent folly of some of the more ‘sophisticated’ Brexiters to believe that the single market could be extensively replicated by a patchwork of such MRAs, a folly embraced by Theresa May in her March 2018 Mansion House speech when she called for “a comprehensive system of mutual recognition”. However, there was simply no possibility of the EU agreeing to this, as it would effectively end the single market, for reasons set out elegantly and in detail by Professor Stephen Weatherill of Oxford University at the time of May’s speech. That analysis still holds.

It’s true that the Aston proposals are nothing like as unrealistic as Theresa May’s were, in that they refer to a small number of “key sectors”, but, although MRAs in such sectors can’t entirely be ruled out, there is unlikely to be much appetite within the EU to entertain them. Not only would doing so begin to make the EU’s relationship with the UK look rather like that which it regards as complex and cumbersome with Switzerland, it would do so without the UK accepting, as the Swiss do, freedom of movement of people. We’ve been all round these loops before, both before the UK left the EU and afterwards, most recently in November 2022. As the reference to May’s 2018 speech also illustrates, in many ways the UK is still stuck on what in the past I’ve called the Mobius Strip of trying to square the circle of Brexit, by endlessly revisiting solutions to the impossible conundrum of how to be ‘out’ and yet be ‘in’.

The one area where that circle might be squared is that of what seems to be Labour’s ‘flagship’ post-Brexit policy of seeking a Sanitary and Phytosanitary (SPS) regulation deal with the EU. I’ve written about this numerous times but, even there, if the government intends to seek, as at one time the Tories did, an SPS deal based on ‘regulatory equivalence’ then it will not be agreed by the EU. And this is because such a deal would (in effect, even if not in formal terms) be a form of MRA, with both the UK and the EU mutually recognizing each other’s regulations as ‘equivalent’.

If the EU agrees any SPS deal, it will be based on ‘dynamic alignment’ with ECJ jurisdiction and, in that de-limited sense is often described as a ‘Swiss-style’ agreement. It could also be described as, within the SPS domain, the UK being ‘in’ whilst in all other respects being ‘out’. But this would be an exceptional deal, conceivable because it has in the past been offered by the EU (and rejected by Johnson’s government as violating UK sovereignty), and not a template for other sectoral carve-outs.

Regulatory alignment of product standards

An SPS deal may be one of the main ways that the government will seek to accommodate Brexit, but some of the issues wrapped up in those of regulatory alignment and mutual recognition surface in other policy developments.

A key example is the Product Regulation and Metrology Bill (PRMB). I’ve mentioned this Bill a couple of times since it was unveiled in the King’s Speech, referring to it in terms of providing the legal basis for the UK to continue to follow EU safety regulations and, as such, being an important indication of the government’s commitment to regulatory alignment. What I failed to spot, but was alerted to by Nigel Haigh of the Institute of Environmental Policy UK, is that whereas in the King’s Speech the Bill was indeed entitled the Product Safety and Metrology Bill, in its published form the word ‘safety’ was replaced with ‘regulation’, and that betokens a much wider ambit. Just how much wider remains to be seen, but one important clause in the Bill refers to potentially tracking EU regulations relating to the environmental impact of products.

No matter how wide its ambit turns out to be, this doesn’t amount to ‘dynamic alignment’ with EU product regulations, in that, whilst creating an easy mechanism for the UK to follow such regulations as they change in the future, it does not create any commitment automatically to do so. In this sense, despite Brexiters’ horrified reactions to the Bill, it does not actually violate sovereignty, even in their highly restricted meaning of the term. However, it does at least imply a commitment to ongoing regulatory alignment as the norm rather than the exception.

To the extent that this implication is realized in practice it will have the effect, amongst other things, of somewhat mitigating the costs of Brexit, since it means that businesses only need to produce to a single standard whether selling in the UK or the EU. To a degree, that may not make much difference. We’ve already seen, most famously with ‘tethered plastic bottle tops’, that firms sometimes choose to follow EU product standards even without any corresponding change in UK law, so as to avoid the costs of dual production lines. However, the PRMB should mean that businesses, when selling to the EU, are relieved of much of the burden of having to establish for themselves what EU regulations they need to conform to, since this would be done by the government. It also prevents firms, whether in the UK or overseas, from ‘dumping’ what might be considered sub-standard products on the UK market. It should also serve to ‘thin’ the Irish Sea Border, to the extent that it reduces the possibility of passive divergence between product standards in Great Britain and Northern Ireland.

Nevertheless, it can’t be emphasized often enough that simply having the same regulatory standards as the EU, to the extent that the PRMB will deliver that within some regulatory domains, whilst reducing some of the costs and inconveniences of having left the single market, in no way provides the benefits of single market membership. Alignment is not access (£): the PRMB still means that we are ‘out’ and not ‘in’. To put it another way, there is no ‘mutual recognition’ in any of this, which is the flipside of it being something that the UK can do unilaterally, without the need for any agreement with the EU. The fact that the UK may choose to align with EU regulations does not make those regulations ‘recognized’ by the EU. What it does show is that the UK recognizes (in a different sense of the word) the pragmatic benefits of having regulations which are aligned with those of the EU.

So whilst the PRMB does not in fact violate the Brexiters’ idea of sovereignty – the UK is making its own laws – it does show just how facile that idea is. For what it really demonstrates is that the practical realities of the UK’s economic proximity to the EU mean that regulatory alignment is still its best option, despite Brexit, whilst massively reducing its benefits, because of Brexit. The UK may, in the Brexiters’ terms, have regained sovereignty, and paid the price for doing so, but it can’t afford to use it. The PRMB is simply a (limited) acknowledgment of this reality, and an attempt to accommodate to it by ‘making the best of a bad job’*.

‘Not for EU’ labels

Some of these issues appear in a different way in one of the most abstruse of Brexit topics, that of ‘Not for EU” (NFEU) labelling. As I discussed in a detailed post last October, NFEU labels are, in part, a particular illustration of the difference between alignment and access. They don’t necessarily mean, as many mistakenly believe, that the product they are attached to does not conform to EU standards, but rather that, whether or not they do so, they are not certified for sale in the EU single market.

Without re-hashing that long and complicated post, the labels arise as part of the Windsor Framework as a requirement for certain goods produced in Great Britain (GB) but sold in Northern Ireland (NI), preventing them being legally sold in (the Republic of) Ireland (or, of course, anywhere in the EU, but it is primarily aimed at the possibility of them entering Ireland). The decision to extend their use to GB was an entirely unilateral one taken by the UK government, largely as a sop to NI unionists as it assuaged their concerns about NI being treated differently to the rest of the UK. In a way, this could be regarded as yet another way of acting as if Brexit hadn’t really happened, in the particular sense of trying to act as if the Irish Sea Border Brexit has given rise to didn’t really exist. 

NFEU labels were due to become a legal requirement in GB at the beginning of October for meat and dairy products (fish, fruit and vegetables were set to follow next July), although many firms began to introduce them in advance of the deadline. However, at almost the last minute, the new government announced this month that the requirement has been indefinitely postponed, with a review to be undertaken. To avoid any misunderstanding: this does not mean the end of NFEU labels in NI, where they have been required since last October and will continue to be used, because doing so is part of the Windsor Framework agreed with the EU. Rather, it is the UK’s unilateral decision to extend to their use in GB which has been reversed.

But not for GB

At one level, it’s yet another example of the mess and chaos which Brexit has brought in its train, and especially of the consequences not just of the UK leaving the EU single market but of the way that Brexit has fractured the UK single market. It is also, of course, an eruption of the consequences of the insoluble ‘Northern Ireland Trilemma’. But it is particularly fascinating because the business economics of NFEU labels point in contradictory directions.

For some firms, in some respects, it is quite desirable for NFEU to apply in GB, given that it applies in the NI. If they are selling in both territories then it reduces costs, as it avoids having to have different labels, and increases flexibility, as it allows stock to be distributed to wherever in the UK it is needed. This would be the case for those supermarket chains which extend across the UK, for example, and, indeed, there was some business lobbying of government to introduce the GB policy. It also explains why some chains began to implement the policy before it was legally required.

Against that, however, is the fact that mistaken as it is, the impression that the goods marked NFEU are sub-standard may deter some consumers from purchasing them. I suppose they might be offset by fanatically pro-Brexit consumers, who read the label as denoting some special Brexity product, denied to envious continentals, but it is surely hard to imagine them to be very numerous. Meanwhile, for firms which only sell in GB, including chains which have no presence in NI, there is no upside to NFEU, only downside. Hence there has also been business lobbying to abandon the GB policy.

It's probably sensible to have postponed, and very likely to have halted, NFEU labels for GB, but doing so will inevitably provoke unionist grievance in NI. And, as with the postponement of UKCA marking, it is another case where those firms which incurred costs to comply in advance of the now abandoned deadlines have wasted money. That may not amount to much in the overall scheme of Brexit costs, but it’s yet another example of how those costs just keep mounting, and how even modest attempts to reduce them are not, themselves, cost-free.

The bigger picture

One of the difficulties of analysing Brexit is that it is hard (and, for any one individual, I would say it is impossible), to grasp it in its totality. That is mainly because of its scale and the technical complexity of each of its elements, but also because of the ways in which those elements interact and interlink with each other.

For example, in relation to this post, the need for NFEU labeling would disappear if there were to be an SPS agreement, and I assume that this is what the government hopes will ultimately be its fate. By extension, this is one reason why the EU is likely to be amenable to an SPS agreement. For the original offer of one was made in the context of the then ongoing row about the Northern Ireland Protocol and it arose because the EU has a strategic and principled interest in ameliorating the problem Brexit created for Ireland, as was demonstrated from the very first days after the referendum result. It is unclear that this interest exists in relation to any other regulatory area.

There is also a potential interrelationship with the PRMB, because although we don’t yet know its full ambit, we do know the areas it will exclude, as they are listed in a schedule at the end of the Bill. For the most part, they are things like food, plants, and products or by-products of animal origin: in short, the kinds of products that SPS regulations relate to, and, moreover, listed with reference to their definitions in EU law. No reason is given for their exclusion so this is pure, very possibly stupid, speculation on my part, but I wonder if it is because the government anticipates an SPS deal with the EU which would entail standards for these products being dynamically aligned with the EUs and, as such, treated separately from all other product standards?

Whether or not that is the case, the wider point is that with which I began, and which I’ve written about in the last couple of posts: the government’s lack of a post-Brexit strategy. For the implication of the interlinked nature of Brexit issues is that they are not really amenable to piece-by-piece attempts to accommodate to being out of the EU. Whilst that strategic absence persists, there will still be plenty of Brexit news to discuss but it won’t add up to a coherent picture and, in the absence of that, many of the old debates will continue.

This is the first post of the ninth year I have been writing this blog. There’s still little sign Britain has accommodated itself to Brexit, or even has any idea of how to do so.

 

*A more extensive acknowledgement of this reality could lead, even within Labour’s red lines, to a new post-Brexit settlement along the lines of the Ukraine model. If it is objected (let’s go round the loop again) that this would make the UK a rule-taker, then it would show a failure to recognize that, as things stand, the UK is already a de facto rule-taker, but with few of the benefits.