In one way, it has been a quiet period for Brexit news since my previous, pre-Christmas, post. That is hardly surprising, given the season. But it is only true if Brexit is understood in its narrow and literal sense. Understood in the wider sense of the unfolding of populist politics, 2025 has started with a noisy tumult, of a volume and variety which make it hard to analyze. For personal reasons (my mother died this week), this is a much shorter post than usual, but there is already no doubt that this is going to be an eventful Brexit year.
Brexit costs, again
Starting with the narrower and more literal issues, there has been another outbreak of claim and counter-claim about the costs of Brexit, largely sparked by a report in The Independent trying to summarize these costs. It referred to many of the studies and estimates which I’ve discussed previously on the blog, and provoked the usual criticisms of those estimates from the usual Brexiters (£).
Some of those criticisms have a spark of validity. In particular, as I’ve pointed out before, it is correct to say it is misleading to describe the ‘divorce bill’ as a cost 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.
The only research mentioned by The Independent which I haven’t previously covered, because it came after I’d written my previous post, was a recent study by the LSE Centre for Economic Performance. As was widely reported, this estimated that in the in the first two years since the transition period ended the UK had “only” lost £27 billion in trade, and that although this had been a “disaster” for small businesses, this is less, so far, than would have been expected from the long-term (15 year) OBR prediction. This caused much back-slapping in Brexiter circles (where the usual objections of it being too early to tell, impossible to estimate, and academics all being remainer stooges were suddenly forgotten). Yet it is hard to see why they should be so gleeful, since Brexit was sold on the basis that it was going to be of positive benefit.
So this, coming up to five years since the day we formally left the EU, is the level to which the grand promises of Brexit have brought us: arguing over just how bad the damage has been. Not a single leading advocate for Brexit has ever apologized for the promises they made. At best, they shrug them off as having been thwarted by remainers and the EU.
How we got here, again
That, too, isn’t a news item, but I am in the process of reading Tim Shipman’s Out, a massive tome which provides a lot of crunchy detail about the politics of the Brexit process, and it serves as reminder of what actually happened in those years. Admittedly, it is only a reminder of a certain sort, not because it is biased in any crass way but because it takes as its frame of reference the idea that this was a negotiation in which the outcomes were about the political power-plays between Johnson’s government, the domestic ‘Bresistance’, and the EU.
In those terms, it is highly informative. But what is missing (unless it comes further on than I have yet read) is an understanding of the real legal parameters in play. In particular, on the key issue of the Northern Ireland border, it proceeds as if a borderless hard Brexit was, in principle, a possibility, and what was at stake was simply whether or not it could be negotiated. In this sense, intentionally or not, it accepts the essentially unrealistic position of the Johnson-Frost-Cummings period of Brexit.
Good evidence that my assessment is an accurate one comes from the laudatory review of Shipman’s book by David Frost himself. Hailing it as the “definitive” account “at least until [his] own book is written” (an implausible boast, but one displaying all his habitual delusion and arrogance), he praises it as “objective and fair” which, from so partisan a figure, suggests the opposite might be the case. More specifically, Frost sees the book as vindicating all his well-rehearsed criticisms of the ‘remainer parliament’ (£), the Supreme Court and, especially the Benn Act. No doubt he would always have been liable to read it in this way, but the fact that he is able to find Shipman’s book susceptible to such a reading (whilst criticising other accounts as biased) is an indication of its fundamentally uncritical framing.
Even so, precisely because of that, Shipman’s book is valuable, partly because it confirms just how ignorant those enacting Brexit were about its realities, and partly because it confirms just how monocular their focus was on ‘getting Brexit done’, regardless of how it was done. This, in itself, gives the lie to the idea that Brexit was undertaken in a form that was foisted on them: Johnson and Frost chose it. That, in turn, also gives credence to Starmer’s claim that, even within the red lines of hard Brexit’ a somewhat different arrangement could be possible. 2025 will be the year when he needs to make good on that claim, if he is ever going to, but that is likely to mean a year of slow grind rather than great fireworks.
Donald Trump, again
The opposite applies to Brexit in its wider sense. This year is going to be an important one for transatlantic populism, and though the connections with Brexit are indirect, they are real. At the most general level, there has always been a connection, acknowledged on both sides, between Trump and Brexit. But there are two more specific connections.
One is to do with how the UK navigates its relationship with the US, and whilst Trump’s second presidency would always pose issues for that, it does so with particular force now that Britain has cut itself off from the EU. Just how poisonous that relationship may become has already been suggested by the berserk ferocity of Elon Musk’s attacks on the UK, and the Starmer government specifically (£), and the frenzy it has engendered in domestic politics. No doubt there is much more to come and, given Musk’s attacks on other European countries, the sense that the UK’s shared interests lie with the EU will be all the more obvious.
The other is the extent to which Trump’s return will be associated with the continued insurgence of Nigel Farage and his Reform Party. But this has the opposite implication for UK-EU relations, because the more it seems obvious that Farage’s populism is a strong and permanent feature of UK domestic politics, the less likely it is that the EU will regard the UK as a stable and trustworthy partner for any kind of new agreements, even those as limited in scope as Labour’s ‘reset’. Just this week, Brexiter fury about the appointment of Sir Olly Robbins as Permanent Secretary at the Foreign Office was a reminder of the hold of Brexitism in the UK.
Stay cool, again
I haven’t had time this week to give much attention to these developments, which is regrettable given how extraordinary Musk’s accusations have been, and the vile manner in which they have been endorsed by some British politicians. But, in another way, it is not regrettable at all.
I pointed out in a recent post how narcissistic politicians like Trump exert power partly by generating a frenzy of comment around their each and every utterance. That’s also true of Farage. It is probably even more true of Musk, not least because he isn’t, in the normal sense of the word, a politician. It is no coincidence that his latest stuff tries to mobilize the natural revulsion most of us feel about the disgusting crimes of grooming gangs. Nor is it any coincidence that it does so in ways calculated to mobilize counter-revulsion at its opportunism and dishonesty. These people want us – need us – to be excitable, angry, confused, befuddled, and upset. They want us to be freaked out by their freakishness.
So our best response, and, actually, our best resistance, is cool, calm, considered analysis. Not only do they hate it, but it’s also the best way of keeping sane in the face of the mad psychodramas they try to create.
I have a strong feeling that this year, more than most, it is going to be important to remember that.
Showing posts with label Costs of Brexit. Show all posts
Showing posts with label Costs of Brexit. Show all posts
Friday, 10 January 2025
Friday, 27 September 2024
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.
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.
Friday, 19 January 2024
Brexit has embedded dishonesty in British politics
There has been relatively little Brexit news over the last week or so, and perhaps the most significant was Mayor of London Sadiq Khan’s high-profile Mansion House speech, in which he said “it is now obvious that Brexit isn’t working”. Drawing on research undertaken by Cambridge Econometrics, Khan stated that the UK economy as a whole is £140 billion, or 6%, smaller than it would have been without Brexit, of which £30 billion was foregone growth in London. According to the same research, by 2035, the value of goods and services produced in London will be 7.5% lower than it would have been without Brexit, and 10.1% lower for the UK as a whole, whilst investment for the UK will be a staggering 32.4% lower than it would have been.
The speech was significant for two reasons. The first is political. Khan just about stayed within the parameters of current Labour policy by calling for a “closer relationship” with the EU, but in suggesting the need for a “more honest and mature discussion” about the negative impact, and about the benefits of rejoining the single market, he strayed further beyond it than any other senior Labour politician. That won’t have any immediate impact – the politics of remain-supporting London are different from those facing Labour nationally – and Starmer’s current stance is arguably (in my view) defensible and unarguably here to stay for the foreseeable future*. But it is slender candle in the wind, which might kindle a greater flame in the future.
The second significance is the Cambridge Econometrics study itself. Inevitably, Brexiters were quick to try to rubbish it, such as in a ‘Briefings for Britain’ article (curiously, written in the first person but credited to Briefings for Britain collectively, so we’ll never be able to assess the author’s credentials). But the fact remains that there are now at least four major counterfactual estimates, from the CER, the NIESR, the OBR and, now, Cambridge Econometrics which all show that Brexit has been damaging, albeit with a range from GDP (or in the latter case GVA) being 4% lower than it would have been to 10% lower by 2035. Each comes from a credible source, each is independent, each uses a different modelling or calculating technique, and all show a negative impact. Yet, mysteriously, all of them are wrong according to the that small group of avowedly pro-Brexit economists who, as I’ve discussed before, persist in ignoring the counterfactual question in favour of various largely bogus comparisons with the EU, or the Eurozone, or individual EU countries.
Brexiter sophistry
It is especially hard to take this group seriously when one of its most active members tweets approvingly things like this week’s Express report of a “Brexit victory” because a West Midlands firm has won some new export orders. Good news, no doubt, but there’s nothing to suggest it has anything to do with Brexit. To the extent that such empty puff-pieces have any meaning at all, it is that they grow out of one of the most disingenuous rhetorical strategies of the Brexiters. One of the ways they dismissed warnings of the damage Brexit would do as ‘Project Fear’ was to create a flawed reductio ad absurdum, so that, say, warnings of reduced investment or reduced trade with the EU were rendered as claims that all investment or all trade with the EU would cease; or claims about the EU as a peace project were rendered as claims that leaving the EU would cause World War Three to break out.
Hence, now, as with the Express report of a new investment and export contract, any piece of good news can be misrepresented as discrediting the mispresented false claim that Brexit would mean no new investment or export contract. It is doubly dishonest since it also posits as the test of Brexit not whether it has had the positive effect that Brexiters promised, but whether it has not had a negative effect.
Similar sophistry greets the release of any and every report about Brexit. Thus, this week a report in the Telegraph (£), of all places, highlighted the impact of Brexit in eroding the global standing of the London stock market. Within it, quite reasonably and correctly, there was discussion of the way that Brexit is not the only factor. But, immediately, that got taken up by pro-Brexit social media accounts to show that claims it was all down to Brexit were false, even though no such claims had been made. And, again, all the Brexiter reaction was about attempts to downplay any Brexit damage rather than to argue that, in fact, Brexit had benefitted the stock market, as if the Brexiters had sold their project with the promise ‘it won’t be too bad’.
Brexiter failure to take responsibility
This failure to take responsibility for their failed project is now endemic. The latest trade figures show that the percentage of UK trade done with the EU is now higher than before the referendum, at about 53.3%. Cue for many to declare that this showed Project Fear disproven and Brexit justified once again (see, for example, many of the responses to this Tweet). But it means nothing of the sort. The explanation is that growth in trade with non-EU countries has been weaker than with the EU. This is the exact opposite of the central Brexiter proposition about trade, which is that the EU has a declining share of world economic growth and so, ‘unshackled from the corpse’ of the ‘EU protectionist racket’, the UK would re-orientate towards the fast-growing areas of the world.
That this has failed to materialize isn’t because the UK has not (or not yet) developed many major new free trade agreements, for example with the US or India. We shouldn’t by the way, let the Brexiters off the hook by saying ‘not yet’, given that David Davis, when Brexit Secretary, claimed “it will be possible to secure bilateral trade deals with the rest of the world that are larger than the value of the EU single market within two years”. But, timing aside, such deals just don’t, and can’t, make a massive difference: CPTPP membership is expected to lead to a 0.04% increase in GDP over 15 years, the Australia and New Zealand deals together 0.1%, and a deal with the US perhaps 0.16%.
In fact, the reason the Brexiter proposition has failed to materialize is because it was always a fallacy, for multiple reasons. Global economic development in previous decades has of course meant that in percentage terms the EU accounts for a declining share of world economic activity, but that doesn’t mean it is declining in absolute terms. Nor do fast growth rates in other countries mean that, even if their international trade grows at the same rate, the absolute value of increased trade with the UK necessarily grows very much (i.e. because it starts from a small base). And, in any case, whilst being in the EU assists trade with the rest of the EU, it does not preclude trading outside the EU.
Meanwhile, the basic observation of ‘trade gravity’ – that geographical proximity is a major weighting factor on where trade occurs, something denied by the Brexiter idea of ‘post-geography trading world’ – remains well-evidenced (this also makes Brexiter glee about the poor economic performance of e.g. Germany misplaced: whether in the EU or not it is bad news for the UK if its trading partners are in trouble). Indeed, that is borne out by these latest figures.
In fact, it looks likely that the impact of the pandemic, Ukraine and, now, attacks on shipping in the Red Sea are leading to a general trend to shorten supply chains and, therefore, to make regional economic relationships more important. The Brexiters can’t be blamed for not anticipating those events, but they can be blamed for making a major strategic error in not appreciating the economic and geo-political significance of regionalization. For that is not the wisdom of hindsight: it is exactly what I spelt out in detail in a post of January 2019 – before we left the EU, before the pandemic, before the Ukraine war, before the Houthi attacks on Red Sea shipping. It’s not, as the Brexiters have it, that these kinds of events, rather than Brexit, are what have caused all our recent economic woes. It is that, on the one hand, unlike other countries, the UK has added Brexit to the list of negatives and, on the other hand, that such events illustrate the fundamental strategic flaw within Brexit.
It's worth saying that, assuming the UK starts to introduce full import controls on EU goods at the end of this month, we will see a new iteration of all these debates. Firstly, one consequence is likely to be that the figure of 53.3% for the share of UK trade done with the EU will fall a bit. That is because – to spell it out once again – increasing trade frictions will tend to make trade growth lower than it otherwise would have been. However, it won’t mean that the Brexiter ‘post-geography’ thesis is becoming vindicated. It will just mean that the relative gap between the rates of UK-EU and UK-ROW trade growth will have shifted. Secondly, using the same old trick as they did with Covid and Ukraine, we can expect the Brexiters to use the impact of the Houthi attacks to explain away the impact of import controls.
Brexiter lack of contrition
Of course, trade wasn’t the only way that Brexit was supposed to be beneficial. Domestically, it was supposed to see a re-balancing of the UK economy away from London, and away from financial services, both in itself and as the spur to the ‘levelling-up’ agenda. That was partly predicated on the anti-London sentiment that continues to define populist politics, but it was also a recognition of legitimate grievances about regional inequality and about the consequences of decisions, many taken by the Thatcher governments, to prioritise services, and especially financial services, as the key to future national prosperity. This re-balancing was supposed to mean that, whilst financial services would benefit from Brexit by being freed from EU bureaucracy, other sectors would benefit even more.
From that point of view, Brexit has also been an abject failure. The Cambridge Econometrics report was, understandably given its context, reported mainly in terms of what Brexit means for London. But, in the process, it revealed that, whilst damaged by Brexit, London is proportionately less damaged than the rest of the country, thus actually exacerbating capital-regional inequalities. That is mainly because, indeed, London has a more services-intensive economy, and international trade in services has been less affected than goods trade by Brexit.
So although, as the Telegraph report, and another this week, from recruiters Morgan McKinley estimating that there are 79% fewer newly open jobs in banking in London since the referendum, suggest that financial services have been damaged (and there’s plenty of other evidence to support this), this isn’t offset by any benefit for other sectors which, on the contrary, are as badly or even worse affected. Again it’s the opposite of what Brexiters promised. Again, the Brexiters were warned of this. And, again, it’s no defence for them to say that some of the warnings were for even worse outcomes than have so far transpired.
This also applies to non-economic issues and, of these, perhaps none more so than Northern Ireland and the politics of the peace process. Here, the warnings were clear, and made by senior politicians with direct and deep experience, most obviously John Major and Tony Blair, but they were shrugged off dismissively by Brexiters, including DUP Brexiters who called the warnings irresponsible scaremongering. Exactly how Brexit was going to play out for Northern Ireland couldn’t be said with certainty until the exact form Brexit took was known (and, to an extent, it still can’t be said with certainty). But that it would be de-stabilizing in some way or another was inevitable, if only because the fact that both Ireland and the UK were members of the EU enabled a crucial de-dramatization or blurring of issues of identity, identification, and allegiance.
As things have turned out, what it has meant in particular is the creation of an economic border between Great Britain and Northern Ireland, with all that means, at least symbolically, for the unionist community. That Brexit, and hard Brexit at that, was and is supported by unionist political leaders doesn’t negate that. And all communities of Northern Ireland are severely affected by the ongoing collapse of the power-sharing institutions and its consequences, of which this week’s mass public sector strike is one of the most serious examples.
For none of this is there the tiniest sign of contrition from any leading Brexiter, or even any admission of responsibility. On the contrary, their only response is to talk of Brexit having been ‘botched’, ‘betrayed’, or ‘not done properly’, even in those cases where they actually voted – as MPs or MEPs – for precisely the form of Brexit that we have.
The wreck of the Brexit government
Alongside all this lies the now hideous spectacle of the Tory government tearing itself apart, on clear display this week in its battle over whether to pass the disgusting and stupid Rwanda Bill in Rishi Sunak’s preferred form, or whether to add some even more disgusting and stupid clauses. At stake, here, is the bigger battle of the ‘Five Families’ or ‘Brexitists’ to slough off the last, moth-eaten, remnants of ‘traditional’ Conservatism. Or, to put it another way, the battle between those who would prefer to think, or at least prefer others to think, that they are not ‘the nasty party’ with those who are more than happy to be just that, and perhaps even think it a badge of honour.
That battle for the meaning of ‘real conservatism’ is, as I’ve argued many times before, inseparable from Brexit and, indeed, those castigating the party for not being ‘real conservatives’ are a perfect overlap with those who decry Brexit for not being ‘real Brexit’, just as there are parallels between Sunak’s plight now and Theresa May’s. I had thought that this battle would not be fully fought until after a general election loss, but it seems as if some within the ‘Five Families’ may be too impatient to wait, or perhaps that, as they pitched it this week (£), the impending loss of the election is what motivates them.
If so, it seems unlikely that they will be satisfied with anything Sunak may do in policy terms – fundamentally, they don’t think he is a real Conservative or a real Brexiter – and yet some, such as Jacob Rees-Mogg (£), seem to have recognized that ditching yet another leader before the election would be too ludicrous to contemplate. Certainly the tide went out on the Rwanda Bill rebellion, with only eleven Tory MPs – dubbed the ‘New Spartans’ by oddball ex-MEP David Bannerman – voting against the government. One rather amusing side-story was the beaching Lee ‘prolier than thou’ Anderson, who resigned as Deputy Chairman so as to be free to rebel, but then pulled out of voting against the government because some Labour MPs laughed at him (and perhaps because he could see how few were going to join him). The Brexitists aren’t yet ready, or able, to go in for the kill.
However, others, like Andrea ‘up yours’ Jenkyns, clearly think otherwise, and it can’t altogether be discounted that a new leader, calling a snap election, might not be able to snatch an unlikely victory. For one thing, there is a kind of febrile desperation in the air in Britain today, so that, faced with a choice between the uninspiringly cautious Keir Starmer and some novel, perhaps charismatic, Tory candidate, the electorate might just opt for the latter. For another thing, it wouldn’t be the first time such sudden surges in popularity have happened – remember Cleggmania? Quite who this charismatic Tory might be, I don’t know, but, after all, such things are in the eye of the beholder. Of course, it is equally possible that the Brexitists just don’t care about electability, and, as with political extremists of all sorts, ‘purity’ matters to them more than power. In a sense, we must hope that is true.
Crippled by dishonesty
If there is a guiding theme in this week’s post, it is how mired in dishonesty British politics has become. As with Britain’s economic problems, that dishonesty isn’t solely the result of Brexit but Brexit created a tipping point, embedding dishonesty to an extent from which it seems almost impossible to recover. Yesterday’s rebuke to the government from the UK Statistics Authority for its misleading use of asylum figures is just the latest example, along with the now almost routine ‘context additions’ (aka factual discredits) placed on posts on X from Sunak, or other government ministers, or government departments, or the Conservative Party. The lies and, at best, half-truths, just pour out daily.
This makes Sadiq Khan’s call for honesty both remarkable and marginal. We can’t, collectively, talk honestly about the most fundamental change made to our country’s entire economic and geo-political strategy. Indeed, we can scarcely talk about it at all. That can be blamed on the timidity of politicians, especially Labour politicians like Starmer who opposed Brexit, and surely know, quite as well as any of us, how damaging Brexit is yet are not able to say so openly. But, more fundamentally, it is the fault of the Brexiters, in both politics and the media, who have made honest discussion so difficult and toxic as to be impossible.
In doing that, they have ironically undermined Brexit itself. A habitual taunt aimed at ‘remainers’ is that they don’t trust their own country to run itself. But running our own affairs must mean, at a minimum, that the reality of those affairs can be openly and honestly discussed. Yet, with Britain having become, in their terms, an independent country, the Brexiters have created a situation where such discussion is impossible. I think the idea that EU membership means the EU running our country was and is utterly fatuous, but, looking at the terms under which the Brexiters have ensured we ‘run ourselves’ since leaving, it might be better if it did.
*I don’t think that point is affected by Rachel Reeves’ mention of the negative impact of Brexit this week which, although of note, seemed more aimed at the political chaos around the UK’s departure from the EU rather than at Brexit itself.
The speech was significant for two reasons. The first is political. Khan just about stayed within the parameters of current Labour policy by calling for a “closer relationship” with the EU, but in suggesting the need for a “more honest and mature discussion” about the negative impact, and about the benefits of rejoining the single market, he strayed further beyond it than any other senior Labour politician. That won’t have any immediate impact – the politics of remain-supporting London are different from those facing Labour nationally – and Starmer’s current stance is arguably (in my view) defensible and unarguably here to stay for the foreseeable future*. But it is slender candle in the wind, which might kindle a greater flame in the future.
The second significance is the Cambridge Econometrics study itself. Inevitably, Brexiters were quick to try to rubbish it, such as in a ‘Briefings for Britain’ article (curiously, written in the first person but credited to Briefings for Britain collectively, so we’ll never be able to assess the author’s credentials). But the fact remains that there are now at least four major counterfactual estimates, from the CER, the NIESR, the OBR and, now, Cambridge Econometrics which all show that Brexit has been damaging, albeit with a range from GDP (or in the latter case GVA) being 4% lower than it would have been to 10% lower by 2035. Each comes from a credible source, each is independent, each uses a different modelling or calculating technique, and all show a negative impact. Yet, mysteriously, all of them are wrong according to the that small group of avowedly pro-Brexit economists who, as I’ve discussed before, persist in ignoring the counterfactual question in favour of various largely bogus comparisons with the EU, or the Eurozone, or individual EU countries.
Brexiter sophistry
It is especially hard to take this group seriously when one of its most active members tweets approvingly things like this week’s Express report of a “Brexit victory” because a West Midlands firm has won some new export orders. Good news, no doubt, but there’s nothing to suggest it has anything to do with Brexit. To the extent that such empty puff-pieces have any meaning at all, it is that they grow out of one of the most disingenuous rhetorical strategies of the Brexiters. One of the ways they dismissed warnings of the damage Brexit would do as ‘Project Fear’ was to create a flawed reductio ad absurdum, so that, say, warnings of reduced investment or reduced trade with the EU were rendered as claims that all investment or all trade with the EU would cease; or claims about the EU as a peace project were rendered as claims that leaving the EU would cause World War Three to break out.
Hence, now, as with the Express report of a new investment and export contract, any piece of good news can be misrepresented as discrediting the mispresented false claim that Brexit would mean no new investment or export contract. It is doubly dishonest since it also posits as the test of Brexit not whether it has had the positive effect that Brexiters promised, but whether it has not had a negative effect.
Similar sophistry greets the release of any and every report about Brexit. Thus, this week a report in the Telegraph (£), of all places, highlighted the impact of Brexit in eroding the global standing of the London stock market. Within it, quite reasonably and correctly, there was discussion of the way that Brexit is not the only factor. But, immediately, that got taken up by pro-Brexit social media accounts to show that claims it was all down to Brexit were false, even though no such claims had been made. And, again, all the Brexiter reaction was about attempts to downplay any Brexit damage rather than to argue that, in fact, Brexit had benefitted the stock market, as if the Brexiters had sold their project with the promise ‘it won’t be too bad’.
Brexiter failure to take responsibility
This failure to take responsibility for their failed project is now endemic. The latest trade figures show that the percentage of UK trade done with the EU is now higher than before the referendum, at about 53.3%. Cue for many to declare that this showed Project Fear disproven and Brexit justified once again (see, for example, many of the responses to this Tweet). But it means nothing of the sort. The explanation is that growth in trade with non-EU countries has been weaker than with the EU. This is the exact opposite of the central Brexiter proposition about trade, which is that the EU has a declining share of world economic growth and so, ‘unshackled from the corpse’ of the ‘EU protectionist racket’, the UK would re-orientate towards the fast-growing areas of the world.
That this has failed to materialize isn’t because the UK has not (or not yet) developed many major new free trade agreements, for example with the US or India. We shouldn’t by the way, let the Brexiters off the hook by saying ‘not yet’, given that David Davis, when Brexit Secretary, claimed “it will be possible to secure bilateral trade deals with the rest of the world that are larger than the value of the EU single market within two years”. But, timing aside, such deals just don’t, and can’t, make a massive difference: CPTPP membership is expected to lead to a 0.04% increase in GDP over 15 years, the Australia and New Zealand deals together 0.1%, and a deal with the US perhaps 0.16%.
In fact, the reason the Brexiter proposition has failed to materialize is because it was always a fallacy, for multiple reasons. Global economic development in previous decades has of course meant that in percentage terms the EU accounts for a declining share of world economic activity, but that doesn’t mean it is declining in absolute terms. Nor do fast growth rates in other countries mean that, even if their international trade grows at the same rate, the absolute value of increased trade with the UK necessarily grows very much (i.e. because it starts from a small base). And, in any case, whilst being in the EU assists trade with the rest of the EU, it does not preclude trading outside the EU.
Meanwhile, the basic observation of ‘trade gravity’ – that geographical proximity is a major weighting factor on where trade occurs, something denied by the Brexiter idea of ‘post-geography trading world’ – remains well-evidenced (this also makes Brexiter glee about the poor economic performance of e.g. Germany misplaced: whether in the EU or not it is bad news for the UK if its trading partners are in trouble). Indeed, that is borne out by these latest figures.
In fact, it looks likely that the impact of the pandemic, Ukraine and, now, attacks on shipping in the Red Sea are leading to a general trend to shorten supply chains and, therefore, to make regional economic relationships more important. The Brexiters can’t be blamed for not anticipating those events, but they can be blamed for making a major strategic error in not appreciating the economic and geo-political significance of regionalization. For that is not the wisdom of hindsight: it is exactly what I spelt out in detail in a post of January 2019 – before we left the EU, before the pandemic, before the Ukraine war, before the Houthi attacks on Red Sea shipping. It’s not, as the Brexiters have it, that these kinds of events, rather than Brexit, are what have caused all our recent economic woes. It is that, on the one hand, unlike other countries, the UK has added Brexit to the list of negatives and, on the other hand, that such events illustrate the fundamental strategic flaw within Brexit.
It's worth saying that, assuming the UK starts to introduce full import controls on EU goods at the end of this month, we will see a new iteration of all these debates. Firstly, one consequence is likely to be that the figure of 53.3% for the share of UK trade done with the EU will fall a bit. That is because – to spell it out once again – increasing trade frictions will tend to make trade growth lower than it otherwise would have been. However, it won’t mean that the Brexiter ‘post-geography’ thesis is becoming vindicated. It will just mean that the relative gap between the rates of UK-EU and UK-ROW trade growth will have shifted. Secondly, using the same old trick as they did with Covid and Ukraine, we can expect the Brexiters to use the impact of the Houthi attacks to explain away the impact of import controls.
Brexiter lack of contrition
Of course, trade wasn’t the only way that Brexit was supposed to be beneficial. Domestically, it was supposed to see a re-balancing of the UK economy away from London, and away from financial services, both in itself and as the spur to the ‘levelling-up’ agenda. That was partly predicated on the anti-London sentiment that continues to define populist politics, but it was also a recognition of legitimate grievances about regional inequality and about the consequences of decisions, many taken by the Thatcher governments, to prioritise services, and especially financial services, as the key to future national prosperity. This re-balancing was supposed to mean that, whilst financial services would benefit from Brexit by being freed from EU bureaucracy, other sectors would benefit even more.
From that point of view, Brexit has also been an abject failure. The Cambridge Econometrics report was, understandably given its context, reported mainly in terms of what Brexit means for London. But, in the process, it revealed that, whilst damaged by Brexit, London is proportionately less damaged than the rest of the country, thus actually exacerbating capital-regional inequalities. That is mainly because, indeed, London has a more services-intensive economy, and international trade in services has been less affected than goods trade by Brexit.
So although, as the Telegraph report, and another this week, from recruiters Morgan McKinley estimating that there are 79% fewer newly open jobs in banking in London since the referendum, suggest that financial services have been damaged (and there’s plenty of other evidence to support this), this isn’t offset by any benefit for other sectors which, on the contrary, are as badly or even worse affected. Again it’s the opposite of what Brexiters promised. Again, the Brexiters were warned of this. And, again, it’s no defence for them to say that some of the warnings were for even worse outcomes than have so far transpired.
This also applies to non-economic issues and, of these, perhaps none more so than Northern Ireland and the politics of the peace process. Here, the warnings were clear, and made by senior politicians with direct and deep experience, most obviously John Major and Tony Blair, but they were shrugged off dismissively by Brexiters, including DUP Brexiters who called the warnings irresponsible scaremongering. Exactly how Brexit was going to play out for Northern Ireland couldn’t be said with certainty until the exact form Brexit took was known (and, to an extent, it still can’t be said with certainty). But that it would be de-stabilizing in some way or another was inevitable, if only because the fact that both Ireland and the UK were members of the EU enabled a crucial de-dramatization or blurring of issues of identity, identification, and allegiance.
As things have turned out, what it has meant in particular is the creation of an economic border between Great Britain and Northern Ireland, with all that means, at least symbolically, for the unionist community. That Brexit, and hard Brexit at that, was and is supported by unionist political leaders doesn’t negate that. And all communities of Northern Ireland are severely affected by the ongoing collapse of the power-sharing institutions and its consequences, of which this week’s mass public sector strike is one of the most serious examples.
For none of this is there the tiniest sign of contrition from any leading Brexiter, or even any admission of responsibility. On the contrary, their only response is to talk of Brexit having been ‘botched’, ‘betrayed’, or ‘not done properly’, even in those cases where they actually voted – as MPs or MEPs – for precisely the form of Brexit that we have.
The wreck of the Brexit government
Alongside all this lies the now hideous spectacle of the Tory government tearing itself apart, on clear display this week in its battle over whether to pass the disgusting and stupid Rwanda Bill in Rishi Sunak’s preferred form, or whether to add some even more disgusting and stupid clauses. At stake, here, is the bigger battle of the ‘Five Families’ or ‘Brexitists’ to slough off the last, moth-eaten, remnants of ‘traditional’ Conservatism. Or, to put it another way, the battle between those who would prefer to think, or at least prefer others to think, that they are not ‘the nasty party’ with those who are more than happy to be just that, and perhaps even think it a badge of honour.
That battle for the meaning of ‘real conservatism’ is, as I’ve argued many times before, inseparable from Brexit and, indeed, those castigating the party for not being ‘real conservatives’ are a perfect overlap with those who decry Brexit for not being ‘real Brexit’, just as there are parallels between Sunak’s plight now and Theresa May’s. I had thought that this battle would not be fully fought until after a general election loss, but it seems as if some within the ‘Five Families’ may be too impatient to wait, or perhaps that, as they pitched it this week (£), the impending loss of the election is what motivates them.
If so, it seems unlikely that they will be satisfied with anything Sunak may do in policy terms – fundamentally, they don’t think he is a real Conservative or a real Brexiter – and yet some, such as Jacob Rees-Mogg (£), seem to have recognized that ditching yet another leader before the election would be too ludicrous to contemplate. Certainly the tide went out on the Rwanda Bill rebellion, with only eleven Tory MPs – dubbed the ‘New Spartans’ by oddball ex-MEP David Bannerman – voting against the government. One rather amusing side-story was the beaching Lee ‘prolier than thou’ Anderson, who resigned as Deputy Chairman so as to be free to rebel, but then pulled out of voting against the government because some Labour MPs laughed at him (and perhaps because he could see how few were going to join him). The Brexitists aren’t yet ready, or able, to go in for the kill.
However, others, like Andrea ‘up yours’ Jenkyns, clearly think otherwise, and it can’t altogether be discounted that a new leader, calling a snap election, might not be able to snatch an unlikely victory. For one thing, there is a kind of febrile desperation in the air in Britain today, so that, faced with a choice between the uninspiringly cautious Keir Starmer and some novel, perhaps charismatic, Tory candidate, the electorate might just opt for the latter. For another thing, it wouldn’t be the first time such sudden surges in popularity have happened – remember Cleggmania? Quite who this charismatic Tory might be, I don’t know, but, after all, such things are in the eye of the beholder. Of course, it is equally possible that the Brexitists just don’t care about electability, and, as with political extremists of all sorts, ‘purity’ matters to them more than power. In a sense, we must hope that is true.
Crippled by dishonesty
If there is a guiding theme in this week’s post, it is how mired in dishonesty British politics has become. As with Britain’s economic problems, that dishonesty isn’t solely the result of Brexit but Brexit created a tipping point, embedding dishonesty to an extent from which it seems almost impossible to recover. Yesterday’s rebuke to the government from the UK Statistics Authority for its misleading use of asylum figures is just the latest example, along with the now almost routine ‘context additions’ (aka factual discredits) placed on posts on X from Sunak, or other government ministers, or government departments, or the Conservative Party. The lies and, at best, half-truths, just pour out daily.
This makes Sadiq Khan’s call for honesty both remarkable and marginal. We can’t, collectively, talk honestly about the most fundamental change made to our country’s entire economic and geo-political strategy. Indeed, we can scarcely talk about it at all. That can be blamed on the timidity of politicians, especially Labour politicians like Starmer who opposed Brexit, and surely know, quite as well as any of us, how damaging Brexit is yet are not able to say so openly. But, more fundamentally, it is the fault of the Brexiters, in both politics and the media, who have made honest discussion so difficult and toxic as to be impossible.
In doing that, they have ironically undermined Brexit itself. A habitual taunt aimed at ‘remainers’ is that they don’t trust their own country to run itself. But running our own affairs must mean, at a minimum, that the reality of those affairs can be openly and honestly discussed. Yet, with Britain having become, in their terms, an independent country, the Brexiters have created a situation where such discussion is impossible. I think the idea that EU membership means the EU running our country was and is utterly fatuous, but, looking at the terms under which the Brexiters have ensured we ‘run ourselves’ since leaving, it might be better if it did.
*I don’t think that point is affected by Rachel Reeves’ mention of the negative impact of Brexit this week which, although of note, seemed more aimed at the political chaos around the UK’s departure from the EU rather than at Brexit itself.
Update (23/01.24 at 10.54): Since writing this post, the article on the Briefings for Brexit website criticising Sadiq Khan and the Cambridge Econometrics study, which originally did not identify its author, has now done so. It is Robert Colville.
Friday, 24 November 2023
An Autumn Statement of Britain's foregone future
The staggering success of Brexit in transforming Britain’s economic prospects has been such that in his Autumn Statement speech the Chancellor mentioned it, well, just once, and that to refer to the fatuous “Brexit Pubs Guarantee”. This is the policy, first trailed in Rishi Sunak’s 2021 budget, and which came into force last August, whereby duty on a pint of beer bought in a pub is guaranteed to be less than when bought in a shop. As Brexit benefits go, this might be thought rather meagre but, in fact, it’s not even a Brexit benefit, as it could have been done whilst being a member in the EU.
The reticence was scarcely surprising, though. In making a statement putting heavy emphasis on the need to boost business investment, Jeremy Hunt could hardly mention that, just the day before, the Deputy Governor of the Bank of England had told the Commons Treasury Select Committee that the decision to leave the EU had “chilled business investment” ever since the referendum. Nor, in putting heavy emphasis on the need for economic growth, was he likely to refer to the Office for Budget Responsibility’s (OBR) forecast from April 2023 that Brexit will cause UK GDP to be 4% a year lower than it would otherwise have been by 2035, even though that forecast was explicitly left unchanged in its analysis accompanying this Autumn Statement.
Hunt certainly wasn’t likely to challenge the OBR’s estimate, as Trade Secretary Kami Badenoch did the other week, since one of the big lessons learnt from Truss’s mini-budget catastrophe, which brought him to the Treasury, is that the OBR’s forecasts are crucial to gain market legitimacy. So trying to pick holes in one of those forecasts would open a can of worms that every Chancellor who follows the hapless Kwasi Kwarteng will want to remain tightly closed.
The long hand of Trussonomics
That is a reminder that, although it seems a long time ago, it is only a year since Truss’s ‘true Brexit budget’ (£) meltdown and the first Sunak-Hunt Autumn Statement that followed. At that time, I wrote that the effect of those events was to begin to break the silence about the economic damage of Brexit. That was true, so far as it went, although it hasn’t persisted to the same degree, perhaps in part because Brexit has been subsumed into the long list of things about which, as I wrote more recently, we ‘mustn’t grumble’.
It’s not just that, though. Opinion polls show that in October 2022, following the Truss debacle, 57% thought that Brexit has made the UK economy weaker than it would have been, and 11% that Brexit has made the economy stronger than it would have been, a lead for 46 percentage points for ‘weaker’, which was the highest recorded since the question was first asked in February 2022. However, in the most recent iteration of this poll, in October 2023, 49% thought ‘weaker’ and 21% thought stronger. At 28 percentage points that is still a considerable lead, but it has not only declined since its high point in October 2022 it is also the smallest lead recorded in any of the polls since the question was first asked. (The numbers responding ‘similar’ or ‘don’t know’ have remained stable throughout, at around 20% and 12% respectively).
So it looks as if the Truss mini-budget did indeed have an impact on public debate and public views about the economics of Brexit, but that this has since diminished. One reason is probably just the passage of time since the mini-budget crisis, and declining media interest in Brexit. But another may be because of the extent to which, in Conservative circles, the belief that Truss was essentially right has endured or even grown. It may not be surprising that this belief was expressed just this week by Patrick Minford (£), the ever-deluded chief economic cheerleader for Brexit and prime intellectual architect of the Truss budget. Nor is it precisely a shock that Truss herself, whose qualities do not self-evidently include that of deep introspection, should not just regard herself as blameless but in recent months have appointed herself as the standard-bearer for a ‘true Conservative’ economic policy of tax cuts and small government. But it is more surprising, given the damage she did not just to the economy but to their chances of re-election, that “so many Tories still love the failed leader”, to quote part of the headline of an insightful recent article by the Guardian’s Zoe Williams which seeks to explain Truss’s “astounding return”.
Part of Williams’ explanation relates to Brexit. She suggests that Truss and her supporters have mobilized its recurrent victimhood motif to present her as not having failed but as having been destroyed by the forces of the Blob, the Establishment – that amorphous conglomerate which, to explain Truss’s demise, has to extend even to bond market traders. This is all part of the increasingly dangerous contemporary British version of the ‘stab-in-the-back myth’ that played such an odious part in German politics after the First World War. It was on display again last week in the aftermath of Suella Braverman’s resignation.
At all events, it won’t have been lost upon Rishi Sunak that Truss’s ‘Great British Growth Rally’ upstaged him at the Tory Party’s conference, and that tax cuts are one way that he might throw some red meat to his many critics. Indeed, he even had the gall to suggest (£) that the lesson of Truss’s budget chaos lay not for the Tories but for Labour’s “dangerous” green investment plans. In any case, one of the few things known about Sunak is that he wants to be seen as an ‘instinctive tax-cutter’ and his political hero is Nigel Lawson, Thatcher’s Chancellor in the 1980s
In this way, there is now a peculiar alignment within which tax cuts are seen as symbolic both of defiance of Establishment orthodoxy and of fealty to Thatcherite orthodoxy. So it’s not surprising that Sunak and Hunt conjured some up, even if they relied on a smoke and mirrors trickery that was concisely exposed by Paul Johnson of the Institute for Fiscal Studies, and were based less on any serious economic analysis and more on a desire to lay political traps for Labour at the coming election.
Certainly the right-wing press was quick to latch on to this alignment, with both the Mail and the Telegraph carrying the identical front-page headline “Biggest tax cuts since the 1980s”. The Telegraph front page also prominently featured five pundits who it promised would provide “the best comment and analysis”. Of these, one was Allister Heath, who last year lauded Kwarteng (£) for “delivering the best budget I have ever heard a British Chancellor deliver, by a massive margin”, whilst another was none other than Kwarteng himself. Truly, the best comment and analysis anyone could imagine.
The scale of the economic damage of Brexit
Nevertheless, unlike the architects of the mini-budget, neither Sunak nor Hunt could even begin to try to pretend that the Autumn Statement was about ‘delivering Brexit’, any more than they could admit how constrained it was by the ongoing damage of Brexit, the leaden divers’ boots dragging down Britain’s economy.
Further evidence of this was provided by last week’s report from the National Institute for Economic and Social Research (NIESR), entitled Revisiting the Effects of Brexit. The first line of its conclusion is that “overall, it is certain that Brexit has had a significant effect on the British economy” [my emphasis added], and the ‘headline’ summary of that effect is that, coming up to three years after the end of the transition period, UK real GDP is between 2% and 3% lower than it would have been compared with if Brexit had not occurred, and that it is forecast to be between 5% and 6% lower than it would have been by 2035 (thus, even worse than the OBR forecast of 4%). This equates to £850 per capita and £2,300 per capita respectively. The main reasons for this are the impacts on investment, productivity, and UK-EU trade.
There are several things to say about these findings. First, they are based on modelling different scenarios and, in doing so, the impact attributed to Brexit is stripped out from the impact of other shocks, primarily those of Covid and of the Ukraine War. This also means they are based on a form of ‘counterfactual modelling’ (i.e. comparing what has actually happened so far and what is forecast to happen with what might, in other scenarios, have happened or have been forecast to happen). As such, they are, of necessity, estimates but – unlike the constant attempts by pro-Brexit economists to assess the impact of Brexit by comparing actual UK performance with actual EU, Eurozone, or individual member state performance – they do address the central relevant question: is the UK economically better off or worse off outside the EU than it would have been within the EU? By definition, this question can only be answered in counterfactual terms, and of course it is the same question as that asked in the opinion polls I referred to earlier.
The NIESR model is, however, a different to another kind of counterfactual model, the widely-quoted ‘doppelgänger’ produced by John Springford of the Centre for European Reform (CER) and, in fact, it suggests that Brexit has not been as damaging as the CER model estimates. Thus the last iteration of the CER doppelgänger showed UK GDP to be 5.5% lower than it would have been by June 2022, whereas NIESR shows it to be 2.5% lower by 2023.* It should go without saying that either figure may be right, or that the true figure may be even higher than the highest estimate, or lower than the lowest estimate, but for the time being, at least, these are the best estimates available. It should also go without saying that, on any of these estimates, it represents a huge economic hit. To get a sense of its magnitude, consider that in 2019-2020 (i.e. before the pandemic created big distortions in public finances), the UK spent 1.9% of GDP on defence, 4.2% on education and 5.8% on pensioner benefits.
It's important to understand two things about the NIESR, CER and OBR estimates. One is that people sometimes wrongly think – and, when that happens, Brexiters suddenly become sticklers for analytical rigour – that these are estimates of absolute falls in GDP. They are not, they are estimates of lost growth in GDP that would otherwise have occurred. In that sense they are about a kind of invisible immiseration, the loss of what might have been. The second is that people sometimes think – and Brexiters collude in this when they talk about the Brexit impact as being one of ‘temporary adjustment’ – that what is being estimated is a one-off event. It is not. Rather, each year, every year, actual GDP is lower than it would otherwise be, with the gap between what is and what might have been gradually increasing. In that sense they are about a kind of compound invisible immiseration.
It's also important to repeat that all these studies do seek to strip out Brexit from other effects, and in doing so they recognize that the UK economy – including the specific issues of trade performance and productivity – faces many challenges other than Brexit, including some that pre-dated Brexit. This matters when reading, for example, another recent report, this time from the Boston Consulting Group (BCG) about UK trade performance and policy. For this report, whilst making many good points about the non-Brexit challenges, still finds it necessary to repeatedly make the strawman claim that “most commentary” ascribes the challenges facing UK trade to the single factor of Brexit. In fact, it is hard to think of a single serious commentator on trade or economics who does this, and, manifestly, the NIESR, OBR and CER do not.
The issue about the economic studies is simply that, as the BCG report itself states in relation to trade, although without attempting to quantify it, “Brexit has undoubtedly had a significant impact”. Quantification is useful in estimating the extent of that impact but, fundamentally, the point is that whatever other factors are in play, in a world where economic growth is hard to find, Britain, uniquely, has chosen to make it significantly harder by the addition of Brexit to these other factors. For another way to contextualize the magnitude of estimates of lost GDP growth, such as the NIESR figure of 2.5% for 2023, is to compare them with the latest OBR forecasts of what GDP growth will be: 0.6% (2023), 0.7% (2024), 1.4% (2025).
The bitter legacy of Brexit for SMEs
The BCG report also rightly highlights that the impact of Brexit has varied between sectors, identifying pharmaceutical and automotive industries as amongst those where Brexit “is likely to have been a major factor in reducing trade”. Perhaps the most important distinction to be drawn is between large and very large businesses, on the one hand, and small and medium-sized enterprises (SMEs) on the other. The reasons are fairly obvious. Larger firms had the resources to plan for and implement the changes that Brexit brought, and were often more likely to already be familiar with procedures for trading outside the single market.
There has been ample survey evidence of how hard SMEs have been hit by Brexit, and the negative impact on specific sectors and businesses has been assiduously chronicled by Peter Foster of the Financial Times, most recently in his report on the cosmetics and beauty sector (£), itself partly based on a study conducted by Oxford Economics for the British Beauty Council. Amongst other things, Foster’s report spells out that the impact of Brexit is an ongoing one, not simply a ‘shock’ to which firms ‘adjust’ – although, in some cases, it has been just that, with the adjustment being to cease trading with the EU or to cease business altogether. Yet Hunt, despite emphasizing the need to support small businesses, had nothing to say about this.
The particular impact on SMEs is sometimes acknowledged by Brexiters, such as in the recent Institute of Economic Affairs report by pro-Brexit economist Catherine McBride (aptly described by Professor Gerhard Schnyder as “a truly fascinating piece of post-truth economics”, this is what Badenoch based her critique of the OBR forecast on). But they typically downplay its significance on the basis that, precisely because they are small, the aggregate economic effect of that impact is small.
This is misguided in two ways. One is that although big firms may be better placed to deal with Brexit this doesn’t mean, as McBride blithely puts it, that they “can easily absorb any additional costs”. It is rather that, as Allianz Trade’s Head of Economic Research recently said, Brexit has “become a structural hurdle for UK exports” (the same is true of imports, and will become even more so if the latest promise to introduce UK-EU import controls next January is kept). Many big firms may indeed ‘absorb’ these costs, but they are still real, impacting on competitiveness, prices, employment, tax base or any number of other things. But it is also misguided because of the particular economic, social, communal and, indeed, emotional and psychological costs of Brexit’s impact on SMEs.
Those costs are well-illustrated in Foster’s reports, including the one on the beauty industry, which also illustrates the micro-level equivalent of the counterfactual issue in the aggregate modelling. For, as he says of Apothecary 17, a small Doncaster-based maker of male personal grooming products, the issue is not so much that it has adjusted to now being a domestically focused business, it is the ‘counterfactual’ that it might otherwise have continued to expand as an international business. That in turn has implications for the people it might have employed, the foreign currency it might have earned, the taxes it might have paid, and its resilience in the event of a domestic downturn.
There are numerous similar examples highlighted in Brexit and Businesses: In their own words, a recent European Movement (EM) report in which, along with survey results, individual SME owners and managers explain what Brexit has meant for them. Issues include not just the new complexities of trade and regulatory change, but labour shortages. Here, too, it is important to understand how SMEs often struggle more than large businesses because, although net migration figures remain at similar levels to before Brexit, the costs and bureaucracy of hiring workers from overseas are far greater than was the case under freedom of movement of people within the EU. Moreover, sectors like hospitality which are more likely to need workers who don’t qualify for visas are also more likely to have large numbers of small firms within them.
Sometimes, the profiles in the EM report are painful to read, as with that of Carol, who ran a niche bridal lingerie business in Devon. The last line is “Brexit was the final nail in the coffin of the business” (p. 12). Or that of Darren, who ran a specialist motorsport vehicle engineering firm in Cornwall and Essex. His profile concludes “our business is finished” (p. 17). These are affecting, personal stories of individual dreams shattered, whilst at the same time implicitly telling of damage to whole families and to local communities, often in ‘left-behind areas’.
It is ironic to think how fervently Tory politicians used to, and still sometimes do, declaim themselves to be the party of entrepreneurs, and to insist that small businesses were the bedrock of the British economy, and yet they presided over Brexit. Ironic, too, how so many Brexiters claimed that it was only ‘big Business’ that felt threatened by Brexit, and what mattered were the true, British, salt of the earth, small businesses, and yet now dismiss the effects on SMEs as all but irrelevant because big Business has been more able to weather the Brexit storm.
Britain limps on
Back, then, to this week’s Autumn Statement, when it was clear, though again not surprising, that the Labour Party are as taciturn as the government about the damage of Brexit. Thus Shadow Chancellor Rachel Reeves’ response speech made no mention of it at all. As if it were the seedy uncle who has to be tolerated at family get-togethers, everyone is too embarrassed to comment on the dubiously-stained mac, the off-colour jokes and the whisky-fumed breath that Brexit brings to the parties.
For the Tories, the embarrassment is the result of having been the architects of Brexit. For Labour, it is because, otherwise, they would be forced to explain why they don’t propose to seek to reverse it, even to the extent of seeking single market membership. The political reasons for that, both domestic and as regards the EU, are understandable and, in my view, justifiable. But, whether justifiable or not, they don’t change the basic fact that the country is accepting – or being forced to accept – that, year after year, it is going to get poorer and poorer than it would otherwise have been.
I’ve argued before that, even so, Labour’s post-Brexit policy is a real, if limited, alternative to that of the Tories. But no-one should think, and Labour shouldn’t pretend, that the accommodations that are possible within the Trade and Cooperation Agreement (TCA) framework will make much economic difference. Equally, as Michel Barnier has said in a recent interview (£), there’s no prospect of the EU re-visiting the basic architecture of the TCA. Yet, although Reeves made no mention of it, other Labour politicians, such as Shadow Business Secretary Jonathan Reynolds [approximately 10 minutes in], are including changes to the TCA as one of the ways a Labour government would boost growth.
And so Britain is set to limp on, if not the sick man of Europe then, at least, the only one who has shot himself in the foot. Sunak talks of making tough “long-term decisions for a brighter future”, and in his recent conference speech Keir Starmer said that under Labour “Britain will get its future back”, but the truth is that by far the biggest long-term decision of recent times was made in 2016. It wasn’t a ‘tough’ decision: it was made glibly, carelessly, almost casually. But its consequences are certainly tough, and not at all bright. What that bland and, to some, obscure little word ‘counterfactual’ in the economic estimates means is that each year those consequences will get tougher as Britain pays the growing price of a foregone future.
*The basic difference between the models, as I (a non-economist) understand it, is that the NIESR model compares UK actual and forecasted performance since Brexit with a UK counterfactual scenario in which Brexit had not happened, whereas Springford’s CER doppelgänger compares UK actual and forecasted performance since Brexit with the actual and forecasted performance of a weighted basket of economies which pre-Brexit were comparable to the UK and so is taken to be the counterfactual scenario for the UK had Brexit not happened. Springford has commented on Bluesky on how the NIESR model differs from his, and on some of the advantages and disadvantages of each. Springford’s model has been criticised by some pro-Brexit economists, and he has responded to, and rejected, their critique. Separately, Professor Jonathan Portes of King’s College London has argued that not only is their critique theoretically flawed but that their preferred model actually yields similar results to Springford’s doppelgänger.
The reticence was scarcely surprising, though. In making a statement putting heavy emphasis on the need to boost business investment, Jeremy Hunt could hardly mention that, just the day before, the Deputy Governor of the Bank of England had told the Commons Treasury Select Committee that the decision to leave the EU had “chilled business investment” ever since the referendum. Nor, in putting heavy emphasis on the need for economic growth, was he likely to refer to the Office for Budget Responsibility’s (OBR) forecast from April 2023 that Brexit will cause UK GDP to be 4% a year lower than it would otherwise have been by 2035, even though that forecast was explicitly left unchanged in its analysis accompanying this Autumn Statement.
Hunt certainly wasn’t likely to challenge the OBR’s estimate, as Trade Secretary Kami Badenoch did the other week, since one of the big lessons learnt from Truss’s mini-budget catastrophe, which brought him to the Treasury, is that the OBR’s forecasts are crucial to gain market legitimacy. So trying to pick holes in one of those forecasts would open a can of worms that every Chancellor who follows the hapless Kwasi Kwarteng will want to remain tightly closed.
The long hand of Trussonomics
That is a reminder that, although it seems a long time ago, it is only a year since Truss’s ‘true Brexit budget’ (£) meltdown and the first Sunak-Hunt Autumn Statement that followed. At that time, I wrote that the effect of those events was to begin to break the silence about the economic damage of Brexit. That was true, so far as it went, although it hasn’t persisted to the same degree, perhaps in part because Brexit has been subsumed into the long list of things about which, as I wrote more recently, we ‘mustn’t grumble’.
It’s not just that, though. Opinion polls show that in October 2022, following the Truss debacle, 57% thought that Brexit has made the UK economy weaker than it would have been, and 11% that Brexit has made the economy stronger than it would have been, a lead for 46 percentage points for ‘weaker’, which was the highest recorded since the question was first asked in February 2022. However, in the most recent iteration of this poll, in October 2023, 49% thought ‘weaker’ and 21% thought stronger. At 28 percentage points that is still a considerable lead, but it has not only declined since its high point in October 2022 it is also the smallest lead recorded in any of the polls since the question was first asked. (The numbers responding ‘similar’ or ‘don’t know’ have remained stable throughout, at around 20% and 12% respectively).
So it looks as if the Truss mini-budget did indeed have an impact on public debate and public views about the economics of Brexit, but that this has since diminished. One reason is probably just the passage of time since the mini-budget crisis, and declining media interest in Brexit. But another may be because of the extent to which, in Conservative circles, the belief that Truss was essentially right has endured or even grown. It may not be surprising that this belief was expressed just this week by Patrick Minford (£), the ever-deluded chief economic cheerleader for Brexit and prime intellectual architect of the Truss budget. Nor is it precisely a shock that Truss herself, whose qualities do not self-evidently include that of deep introspection, should not just regard herself as blameless but in recent months have appointed herself as the standard-bearer for a ‘true Conservative’ economic policy of tax cuts and small government. But it is more surprising, given the damage she did not just to the economy but to their chances of re-election, that “so many Tories still love the failed leader”, to quote part of the headline of an insightful recent article by the Guardian’s Zoe Williams which seeks to explain Truss’s “astounding return”.
Part of Williams’ explanation relates to Brexit. She suggests that Truss and her supporters have mobilized its recurrent victimhood motif to present her as not having failed but as having been destroyed by the forces of the Blob, the Establishment – that amorphous conglomerate which, to explain Truss’s demise, has to extend even to bond market traders. This is all part of the increasingly dangerous contemporary British version of the ‘stab-in-the-back myth’ that played such an odious part in German politics after the First World War. It was on display again last week in the aftermath of Suella Braverman’s resignation.
At all events, it won’t have been lost upon Rishi Sunak that Truss’s ‘Great British Growth Rally’ upstaged him at the Tory Party’s conference, and that tax cuts are one way that he might throw some red meat to his many critics. Indeed, he even had the gall to suggest (£) that the lesson of Truss’s budget chaos lay not for the Tories but for Labour’s “dangerous” green investment plans. In any case, one of the few things known about Sunak is that he wants to be seen as an ‘instinctive tax-cutter’ and his political hero is Nigel Lawson, Thatcher’s Chancellor in the 1980s
In this way, there is now a peculiar alignment within which tax cuts are seen as symbolic both of defiance of Establishment orthodoxy and of fealty to Thatcherite orthodoxy. So it’s not surprising that Sunak and Hunt conjured some up, even if they relied on a smoke and mirrors trickery that was concisely exposed by Paul Johnson of the Institute for Fiscal Studies, and were based less on any serious economic analysis and more on a desire to lay political traps for Labour at the coming election.
Certainly the right-wing press was quick to latch on to this alignment, with both the Mail and the Telegraph carrying the identical front-page headline “Biggest tax cuts since the 1980s”. The Telegraph front page also prominently featured five pundits who it promised would provide “the best comment and analysis”. Of these, one was Allister Heath, who last year lauded Kwarteng (£) for “delivering the best budget I have ever heard a British Chancellor deliver, by a massive margin”, whilst another was none other than Kwarteng himself. Truly, the best comment and analysis anyone could imagine.
The scale of the economic damage of Brexit
Nevertheless, unlike the architects of the mini-budget, neither Sunak nor Hunt could even begin to try to pretend that the Autumn Statement was about ‘delivering Brexit’, any more than they could admit how constrained it was by the ongoing damage of Brexit, the leaden divers’ boots dragging down Britain’s economy.
Further evidence of this was provided by last week’s report from the National Institute for Economic and Social Research (NIESR), entitled Revisiting the Effects of Brexit. The first line of its conclusion is that “overall, it is certain that Brexit has had a significant effect on the British economy” [my emphasis added], and the ‘headline’ summary of that effect is that, coming up to three years after the end of the transition period, UK real GDP is between 2% and 3% lower than it would have been compared with if Brexit had not occurred, and that it is forecast to be between 5% and 6% lower than it would have been by 2035 (thus, even worse than the OBR forecast of 4%). This equates to £850 per capita and £2,300 per capita respectively. The main reasons for this are the impacts on investment, productivity, and UK-EU trade.
There are several things to say about these findings. First, they are based on modelling different scenarios and, in doing so, the impact attributed to Brexit is stripped out from the impact of other shocks, primarily those of Covid and of the Ukraine War. This also means they are based on a form of ‘counterfactual modelling’ (i.e. comparing what has actually happened so far and what is forecast to happen with what might, in other scenarios, have happened or have been forecast to happen). As such, they are, of necessity, estimates but – unlike the constant attempts by pro-Brexit economists to assess the impact of Brexit by comparing actual UK performance with actual EU, Eurozone, or individual member state performance – they do address the central relevant question: is the UK economically better off or worse off outside the EU than it would have been within the EU? By definition, this question can only be answered in counterfactual terms, and of course it is the same question as that asked in the opinion polls I referred to earlier.
The NIESR model is, however, a different to another kind of counterfactual model, the widely-quoted ‘doppelgänger’ produced by John Springford of the Centre for European Reform (CER) and, in fact, it suggests that Brexit has not been as damaging as the CER model estimates. Thus the last iteration of the CER doppelgänger showed UK GDP to be 5.5% lower than it would have been by June 2022, whereas NIESR shows it to be 2.5% lower by 2023.* It should go without saying that either figure may be right, or that the true figure may be even higher than the highest estimate, or lower than the lowest estimate, but for the time being, at least, these are the best estimates available. It should also go without saying that, on any of these estimates, it represents a huge economic hit. To get a sense of its magnitude, consider that in 2019-2020 (i.e. before the pandemic created big distortions in public finances), the UK spent 1.9% of GDP on defence, 4.2% on education and 5.8% on pensioner benefits.
It's important to understand two things about the NIESR, CER and OBR estimates. One is that people sometimes wrongly think – and, when that happens, Brexiters suddenly become sticklers for analytical rigour – that these are estimates of absolute falls in GDP. They are not, they are estimates of lost growth in GDP that would otherwise have occurred. In that sense they are about a kind of invisible immiseration, the loss of what might have been. The second is that people sometimes think – and Brexiters collude in this when they talk about the Brexit impact as being one of ‘temporary adjustment’ – that what is being estimated is a one-off event. It is not. Rather, each year, every year, actual GDP is lower than it would otherwise be, with the gap between what is and what might have been gradually increasing. In that sense they are about a kind of compound invisible immiseration.
It's also important to repeat that all these studies do seek to strip out Brexit from other effects, and in doing so they recognize that the UK economy – including the specific issues of trade performance and productivity – faces many challenges other than Brexit, including some that pre-dated Brexit. This matters when reading, for example, another recent report, this time from the Boston Consulting Group (BCG) about UK trade performance and policy. For this report, whilst making many good points about the non-Brexit challenges, still finds it necessary to repeatedly make the strawman claim that “most commentary” ascribes the challenges facing UK trade to the single factor of Brexit. In fact, it is hard to think of a single serious commentator on trade or economics who does this, and, manifestly, the NIESR, OBR and CER do not.
The issue about the economic studies is simply that, as the BCG report itself states in relation to trade, although without attempting to quantify it, “Brexit has undoubtedly had a significant impact”. Quantification is useful in estimating the extent of that impact but, fundamentally, the point is that whatever other factors are in play, in a world where economic growth is hard to find, Britain, uniquely, has chosen to make it significantly harder by the addition of Brexit to these other factors. For another way to contextualize the magnitude of estimates of lost GDP growth, such as the NIESR figure of 2.5% for 2023, is to compare them with the latest OBR forecasts of what GDP growth will be: 0.6% (2023), 0.7% (2024), 1.4% (2025).
The bitter legacy of Brexit for SMEs
The BCG report also rightly highlights that the impact of Brexit has varied between sectors, identifying pharmaceutical and automotive industries as amongst those where Brexit “is likely to have been a major factor in reducing trade”. Perhaps the most important distinction to be drawn is between large and very large businesses, on the one hand, and small and medium-sized enterprises (SMEs) on the other. The reasons are fairly obvious. Larger firms had the resources to plan for and implement the changes that Brexit brought, and were often more likely to already be familiar with procedures for trading outside the single market.
There has been ample survey evidence of how hard SMEs have been hit by Brexit, and the negative impact on specific sectors and businesses has been assiduously chronicled by Peter Foster of the Financial Times, most recently in his report on the cosmetics and beauty sector (£), itself partly based on a study conducted by Oxford Economics for the British Beauty Council. Amongst other things, Foster’s report spells out that the impact of Brexit is an ongoing one, not simply a ‘shock’ to which firms ‘adjust’ – although, in some cases, it has been just that, with the adjustment being to cease trading with the EU or to cease business altogether. Yet Hunt, despite emphasizing the need to support small businesses, had nothing to say about this.
The particular impact on SMEs is sometimes acknowledged by Brexiters, such as in the recent Institute of Economic Affairs report by pro-Brexit economist Catherine McBride (aptly described by Professor Gerhard Schnyder as “a truly fascinating piece of post-truth economics”, this is what Badenoch based her critique of the OBR forecast on). But they typically downplay its significance on the basis that, precisely because they are small, the aggregate economic effect of that impact is small.
This is misguided in two ways. One is that although big firms may be better placed to deal with Brexit this doesn’t mean, as McBride blithely puts it, that they “can easily absorb any additional costs”. It is rather that, as Allianz Trade’s Head of Economic Research recently said, Brexit has “become a structural hurdle for UK exports” (the same is true of imports, and will become even more so if the latest promise to introduce UK-EU import controls next January is kept). Many big firms may indeed ‘absorb’ these costs, but they are still real, impacting on competitiveness, prices, employment, tax base or any number of other things. But it is also misguided because of the particular economic, social, communal and, indeed, emotional and psychological costs of Brexit’s impact on SMEs.
Those costs are well-illustrated in Foster’s reports, including the one on the beauty industry, which also illustrates the micro-level equivalent of the counterfactual issue in the aggregate modelling. For, as he says of Apothecary 17, a small Doncaster-based maker of male personal grooming products, the issue is not so much that it has adjusted to now being a domestically focused business, it is the ‘counterfactual’ that it might otherwise have continued to expand as an international business. That in turn has implications for the people it might have employed, the foreign currency it might have earned, the taxes it might have paid, and its resilience in the event of a domestic downturn.
There are numerous similar examples highlighted in Brexit and Businesses: In their own words, a recent European Movement (EM) report in which, along with survey results, individual SME owners and managers explain what Brexit has meant for them. Issues include not just the new complexities of trade and regulatory change, but labour shortages. Here, too, it is important to understand how SMEs often struggle more than large businesses because, although net migration figures remain at similar levels to before Brexit, the costs and bureaucracy of hiring workers from overseas are far greater than was the case under freedom of movement of people within the EU. Moreover, sectors like hospitality which are more likely to need workers who don’t qualify for visas are also more likely to have large numbers of small firms within them.
Sometimes, the profiles in the EM report are painful to read, as with that of Carol, who ran a niche bridal lingerie business in Devon. The last line is “Brexit was the final nail in the coffin of the business” (p. 12). Or that of Darren, who ran a specialist motorsport vehicle engineering firm in Cornwall and Essex. His profile concludes “our business is finished” (p. 17). These are affecting, personal stories of individual dreams shattered, whilst at the same time implicitly telling of damage to whole families and to local communities, often in ‘left-behind areas’.
It is ironic to think how fervently Tory politicians used to, and still sometimes do, declaim themselves to be the party of entrepreneurs, and to insist that small businesses were the bedrock of the British economy, and yet they presided over Brexit. Ironic, too, how so many Brexiters claimed that it was only ‘big Business’ that felt threatened by Brexit, and what mattered were the true, British, salt of the earth, small businesses, and yet now dismiss the effects on SMEs as all but irrelevant because big Business has been more able to weather the Brexit storm.
Britain limps on
Back, then, to this week’s Autumn Statement, when it was clear, though again not surprising, that the Labour Party are as taciturn as the government about the damage of Brexit. Thus Shadow Chancellor Rachel Reeves’ response speech made no mention of it at all. As if it were the seedy uncle who has to be tolerated at family get-togethers, everyone is too embarrassed to comment on the dubiously-stained mac, the off-colour jokes and the whisky-fumed breath that Brexit brings to the parties.
For the Tories, the embarrassment is the result of having been the architects of Brexit. For Labour, it is because, otherwise, they would be forced to explain why they don’t propose to seek to reverse it, even to the extent of seeking single market membership. The political reasons for that, both domestic and as regards the EU, are understandable and, in my view, justifiable. But, whether justifiable or not, they don’t change the basic fact that the country is accepting – or being forced to accept – that, year after year, it is going to get poorer and poorer than it would otherwise have been.
I’ve argued before that, even so, Labour’s post-Brexit policy is a real, if limited, alternative to that of the Tories. But no-one should think, and Labour shouldn’t pretend, that the accommodations that are possible within the Trade and Cooperation Agreement (TCA) framework will make much economic difference. Equally, as Michel Barnier has said in a recent interview (£), there’s no prospect of the EU re-visiting the basic architecture of the TCA. Yet, although Reeves made no mention of it, other Labour politicians, such as Shadow Business Secretary Jonathan Reynolds [approximately 10 minutes in], are including changes to the TCA as one of the ways a Labour government would boost growth.
And so Britain is set to limp on, if not the sick man of Europe then, at least, the only one who has shot himself in the foot. Sunak talks of making tough “long-term decisions for a brighter future”, and in his recent conference speech Keir Starmer said that under Labour “Britain will get its future back”, but the truth is that by far the biggest long-term decision of recent times was made in 2016. It wasn’t a ‘tough’ decision: it was made glibly, carelessly, almost casually. But its consequences are certainly tough, and not at all bright. What that bland and, to some, obscure little word ‘counterfactual’ in the economic estimates means is that each year those consequences will get tougher as Britain pays the growing price of a foregone future.
*The basic difference between the models, as I (a non-economist) understand it, is that the NIESR model compares UK actual and forecasted performance since Brexit with a UK counterfactual scenario in which Brexit had not happened, whereas Springford’s CER doppelgänger compares UK actual and forecasted performance since Brexit with the actual and forecasted performance of a weighted basket of economies which pre-Brexit were comparable to the UK and so is taken to be the counterfactual scenario for the UK had Brexit not happened. Springford has commented on Bluesky on how the NIESR model differs from his, and on some of the advantages and disadvantages of each. Springford’s model has been criticised by some pro-Brexit economists, and he has responded to, and rejected, their critique. Separately, Professor Jonathan Portes of King’s College London has argued that not only is their critique theoretically flawed but that their preferred model actually yields similar results to Springford’s doppelgänger.
Friday, 25 November 2022
The Brexit silence is breaking
There has been a palpable change in the last week. Brexit is suddenly being more widely talked about again, and not just talked about but questioned and criticised. Despite having scarcely been mentioned in last week’s ‘budget’ statement or Labour’s response, it was that budget which was the spark, although the tinder was already there in the things set out in my post of 4 November.
Why is Brexit being talked about again?
In brief, I suggested that four factors were coming together.
First, the Liz Truss mini-budget had tested almost to destruction the theocratic Brexiter idea that belief could trump reality and the nationalist Brexiter idea that the UK was strong enough to buck what they call ‘the global Establishment’. At the same time, it made economic growth central to defining what Brexit was supposed to deliver.
Second, the disastrous collapse of the mini-budget and, with it, the Truss premiership, brought Rishi Sunak to power on the sole basis of his supposed economic competence and realism.
Third, this happened against a background where opinion polls show ‘the economy’ to be by far the biggest issue of concern to the public.
Fourth, it happened against the background of opinion polls which for many months have shown a growing majority for the view that Brexit was a mistake, and a majority view that Brexit has been economically damaging.
It was thus highly likely that once the delayed Budget statement occurred these things would coalesce around the question of how can the government claim to be economically competent and realistic, and how can it promote growth, if it does not address the economic damage of the unpopular policy of Brexit.
This is exactly what has happened this week, and it has been given added bite by a fifth factor, namely the way that George Eustice’s comments last week finally opened up for debate the inadequacy of the Brexiters’ sole claim to an economic benefit, that of making independent free trade agreements. With that has come a realization that Brexit Britain’s ‘trade honeymoon’ is over, though the red herring of CPTPP membership still lingers.
Although some media coverage talks as if the issue of Brexit has suddenly re-appeared, the truth is that it has never gone away, as anyone reading this blog regularly will know. Whilst media and political attention may have been much reduced, the reality is that neither leaving the EU, nor the Trade and Cooperation Agreement (TCA) that followed, provided a sustainable resolution to the Brexit debate.
The Brexiters’ political failure
That is partly because of the economic damage but, more fundamentally, because the Brexiters have totally failed to build a political consensus for Brexit. Even now, the only thing they can point to as the basis for such a consensus is the 2016 referendum result. But that narrow victory should have been only the beginning. If they had been serious about embedding Brexit as the new, accepted reality amongst a sustainable and growing majority of people they needed to show that it could work, and also to reach out to those who had opposed it.
Instead, they were not only unable to show it could work but, in many cases, actively decried what was being done as ‘not real Brexit’ whilst at the same time expecting those who had never believed in it to be persuaded to accept something they, themselves, were criticising. As for reaching out to opponents, they simply made no attempt at all. Only ‘true believers’ were regarded as having any right to shape Brexit, whilst remainers were treated with contempt. And so, quietly, and without much political leadership or media attention, opposition to Brexit has hardened amongst almost all of those who had always opposed it whilst the growing evidence of its failure reduced the number who supported it, with 20% of those who voted leave now regretting it. In short, the Brexiters won the referendum, but have failed to ‘seal the deal’ with the British people.
The aftermath of the budget
Now, in the aftermath of the budget, that is coming back to haunt them. Crucially, what is happening is not just a revival of ‘remainer’ criticisms. The pro-Brexit Telegraph is awash with articles bemoaning the “squandering” of Brexit (£) and of its “failure to deliver” benefits (£), to the point of recognizing that it might even be reversed. As for the Express, that other bastion of the true believers, it has recently gone remarkably quiet about Brexit. But, even there, an article by Tim Newark this week pronounced that, with the demise of Truss, “Tory MPs blew their one chance to re-commit to Brexit”.
Most strikingly, in an article in the Mail, veteran political journalist Andrew Neil wrote that “this is the week that Brexit died”. Neil has never declared how he voted in 2016, or whether he voted at all and, to be fair, his interviewing of Brexiters has generally been as robust as it has been of anti-Brexiters, although the tone of his writings does suggest a certain sympathy for Brexit. But, if anything, that gives an added authority to his remarks which, broadly, argue that leaving the EU was “supposed to create a post-Brexit, low-tax, low-regulation, free-wheeling economic environment” and has not done so.
It is not a new critique. The free-market right have been making it for at least a year. The difference now is that the Truss government, which vowed to deliver this version of Brexit, collapsed, and that the Sunak-Hunt budget shows, as Neil and Newark argue, that it will never be delivered. There is a deep flaw in this argument, of course, because neither this nor any other specific version of Brexit was ever proposed at the time of the referendum and nor was it at the 2019 General Election. What these right-wing ‘Singapore’ Brexiters tried to do was to use Brexit as a cover to deliver an agenda which no one was ever asked to vote on, and which it is unlikely a majority would have voted for had it been presented to them.
So, again, it shows the failure to build a political consensus, this time not just for ‘Brexit’ but for their version of Brexit, perhaps because they knew that no such consensus was attainable. In passing, I have never been convinced by the argument of some people who oppose Brexit that ‘low-tax, low-regulation Brexit’ was the ‘real agenda’ all along. Of course it was, by definition, the agenda of those many and powerful Brexiters who wanted that form of Brexit. But to say it was ‘the real agenda’ of Brexit is actually to concede to them the wholly dishonest idea that this was the true and necessary meaning of Brexit.
If one strand of the budget aftermath is right-wing Brexiters bemoaning that they will never get the extreme form of Brexit they wanted, the other strand is to re-open the question about whether the form of Brexit we have is too extreme. This was in evidence in the rumours that surfaced last weekend that the government was considering seeking a ‘Swiss-style Brexit’ for the relationship with the single market. Inevitably that also opens the door to the entire question of Brexit itself, especially given the polls showing clear public opposition to it.
Thus, to take a high-profile example, Piers Morgan – a remainer in 2016, but one who has hitherto been vociferous in arguing that Brexit should go ahead because of the vote – forcefully made the obvious point that “Brexit has been a disaster” and called for a referendum on re-joining. Arch-Brexiters like John Longworth may protest that “there should be no discussion now about EU membership” but to no avail. It is being discussed and it’s likely to go on being.
Back on the endless Brexit doom-loop?
Whether this revived discussion is a sign of moving forward is a moot point, however. The reports about moving to a ‘Swiss-style Brexit’ suggested that, even after all these years, quite basic things about Brexit are still not understood. Thus “senior government sources” apparently still believe that it would be possible to have Swiss-style Brexit without freedom of movement of people, and that the UK could get such a deal “because it is overwhelmingly in the business interests of both sides”. So here we are again, with the same old refusal to understand the single market and its inseparability from freedom of movement, and what is in effect a reprise of the ‘German car makers’ argument. It’s truly pathetic.
And that is even before considering that the Swiss model of multiple bi-lateral agreements with the EU is one that the EU itself regards as cumbersome and unworkable, would never be entertained with Switzerland were the relationship starting again now, and would not even be considered as a basis for EU-UK relations. Indeed, one of the core EU positions from the beginning was that the TCA would contain, in one architecture, the entirety of the post-Brexit arrangements, rather than making piecemeal deals. That certainly isn’t going to change now.
In any case, Sunak quickly disowned these reports (£), and he and Jeremy Hunt seem now to have the idea that post-Brexit barriers to trade can be reduced within the TCA framework. There is indeed some scope for that, although, at most, it is a limited scope, certainly not amounting to anything remotely like the “unfettered trade” Hunt has spoken of. That scope will be reduced to the point of non-existence (£) if, as he pledged this week, Sunak maintains the UK ‘red lines’ of refusing not only freedom of movement, but any role for the ECJ and any alignment with EU regulations. This also seems to bode ill for the ongoing Northern Ireland Protocol negotiations where, astonishingly, it is now reported that Steve Baker’s plan is to revisit the ‘sequencing’ row of the summer of 2017, which David Davis lost. So, once again, we seem to be going round in circles.
Needless to say, all this gave the hard Brexiters a fit of the vapours, with a 'new Tory civil war’ threatened and a revival of all the tired old talk of Brexit ‘betrayal’. In the process, there was a reminder of precisely the cultism with prevented them from building a consensus, with a “senior Tory backbencher” saying that “I and many of my colleagues have never regarded Rishi as a true Brexiteer”. Meanwhile, remain-voting Hunt was called on to “personally deny” the rumours, as a heretic might be called on to publicly recant. Outside the Tory Party, Nigel Farage made his habitual threat to ‘return to front-line politics’ if the government were to seek to ‘betray’ Brexit with a Swiss-style deal (he has apparently forgotten all the times he advocated such a model).
These reactions can also be seen as a re-hash of all the debates since 2016. They show that, even if Sunak is genuinely an ‘economic realist’ who can see the damage Brexit is causing, he, like any Tory leader, is hamstrung by the fanaticism of the Brexit Ultras in his party, a fanaticism which far from having been assuaged by Brexit has been inflamed by it. Equally, they show how, despite the idea that Brexit would kill off the external threat to the Tory Party from Farage, he continues to have the capacity to scare, and hence to control, it.
But this time is different
However, despite their familiarity, what is happening now is more than simply a re-run of old myths and old arguments. Before Britain left the EU, it was still possible for Brexiters to promise Brexit benefits and to decry ‘Project Fear’. Now, although they still try to do so, there is more than enough evidence to see the realities, especially the economic realities, of Brexit. That includes the evidence that the central premise of Brexit as regards trade – that increased trade barriers with the EU would be more than off-set by growing trade with non-EU countries – has been discredited.
In short, Brexit is no longer hypothetical and that, in principle, makes a rational discussion of its economic consequences easier or, at least, ought to make an irrational discussion more difficult. That is made more so by the collapse of the Truss mini-budget because it so manifestly discredited the Brexiters’ claims that economic reality could be wished away, as the province of the ‘remainer Establishment’. Relatedly, the fact that the ‘intellectual’ basis of the mini-budget came from precisely the same group of economists who provided the economic case for Brexit itself has served to further undermine that case. Whenever their fantasies meet reality they fall apart.
And this extends beyond the purely economic frame. Especially as a result of the Ukraine war, the realities of the shared geo-political interests of the EU and the UK are more obvious. So, too, can it be seen that, far from ‘getting Brexit done’ with an ‘oven-ready deal’, the Northern Ireland issue that proved so central in the Brexit process has not, in fact been resolved. And since that is in large part because Brexiters have insisted that what was agreed and signed up to should not really be binding, then that undermines their equally loud insistence that every other aspect of the Brexit Boris Johnson agreed is, for all time, sacrosanct.
Moreover, before Britain left the EU, Brexiters could claim that they were seeking to ensure that ‘true Brexit’ was delivered. But, now, they are adamant that it has not been delivered. So often have they said that was we have got is ‘Brexit in name only’ (BRINO) that it takes away the force of their attempt to portray a softer Brexit than we currently have as BRINO. For if we really only have BRINO then why not have a different, less expensive BRINO? Or no Brexit at all? Or, to put it another way, if they insist that ‘Brexit has died’ because the ‘benefits’ (as they cast them) of a low-tax, low-regulation economy have been killed off, then the argument (in their terms) for undertaking Brexit has disappeared. So why not soften, or even reverse, it?
All of this means that the current, revived, Brexit debate is occurring against a different background to that of the pre-2020 debate. In one way, that background is worse for erstwhile remainers because, of course, there is no prospect of ‘remaining’, as sometimes seemed possible up until the result of the 2019 election. In another way, it is much worse for the Brexiters, because the very fact it is occurring is a sign of Brexit’s failure and, as the desperate tone of their attempts to ‘save’ Brexit shows, they know that it is a fragile and unpopular project. As if to provide a timely metaphor, this week Unboxed, the rebranded version of the Festival of Brexit, came to an end amid a welter of criticisms of it for being unpopular failure (£) and a waste of public money.
That unpopularity in turn means that the biggest battering-ram argument they used to constantly invoke, that Brexit is “the will of the people”, is now little more than a crumbling cudgel. Which people? The ones who, not just in the odd survey, but over and over again in every opinion poll say in a clear majority that Brexit was a mistake? Just for how long and how far can a referendum, the mandate of which has now been fully discharged, be used in defence of a version of Brexit that was not even the subject of that vote?
It all comes down to the Labour Party now
So in all these ways, something important is changing in the Brexit saga and that has become apparent this week. It is possible that the latest debate will all die down again, but that is unlikely because the underlying issues of the damage, especially the economic damage, of Brexit will persist. So, assuming economic performance continues to be the defining theme of Sunak’s government, then the debate will continue, and with it the daily new examples of Brexit’s failure and damage.
However, the unchanged dynamics of the Tory Party mean that Sunak will not be able to address, still less resolve, the problems of Brexit. There’s certainly little sign he can end the Northern Ireland Protocol row, because of those dynamics. It’s not even clear he will be able to stop adding to the damage, for example by dropping the EU Retained Law Bill, now widely recognized as being a recipe for administrative and business chaos but beloved by the Brexit Ultras in his party.
So if dealing with the damage of Brexit is to happen in any reasonable time-frame then it will fall to the Labour Party, assuming they win the next election. In any case, they can hardly stay mute as the Brexit debate revives. That makes it crucial, as pollster Peter Kellner argues, that Labour go into the next election with a clear policy to undo the worst of the economic damage of Brexit. It has to be clear, because otherwise they will not have a clear mandate if they win. And it needs to go well beyond the timidity, and vacuity, of ‘making Brexit work’ to some form of single market membership and a customs treaty.
In turn, that means breaking with its caution about immigration, the legacy not just of Brexit but of Gordon Brown’s ‘Mrs Duffy’ moment in 2010, and still in evidence this week in Keir Starmer’s comments about immigration at the CBI conference. In any case, the salience to the public of immigration as a political issue has steadily fallen from its peak in 2015, when 71% thought it was one of the top three most important issues facing the country, to as low as 14% in April 2020 and 22% at the beginning of October this year. It’s true that this has since risen to 37%, but that is almost certainly because the survey treats “immigration and asylum” as one issue which, for that matter, almost certainly makes all of the scores higher than they would be for ‘immigration’ alone. In short, Labour needs to be sure they are not fighting yesterday’s political battles on immigration.
As the staunchly Labour-supporting Associate Editor of the Mirror, Kevin Maguire, put it this week, Labour is “out of step with public opinion” on Brexit. I would put it more strongly than that. For once, Labour has a rare, perhaps generational, chance to stake out a position which is true to its values and those of its leader – for no one can seriously doubt, as they could of Corbyn, that Starmer thinks Brexit was a huge mistake – and which catches the tidal flow of the public mood, makes its economic policy credible, and is in the national interest. It’s a huge prize, if Labour can grab it.
Central to that happening is for this emergent new Brexit context to be fully understood and, in particular, for Labour to lose their apparent terror of being branded ‘enemies of the people’. That headline, with all the wider freight it carries, comes from 2016. Times have changed: Brexit has changed them. The people have changed: time and Brexit have changed them. The country and the world have changed: Brexit can change with them. But can Labour change? That remains to be seen but, right now, it is the only question that really matters.
Why is Brexit being talked about again?
In brief, I suggested that four factors were coming together.
First, the Liz Truss mini-budget had tested almost to destruction the theocratic Brexiter idea that belief could trump reality and the nationalist Brexiter idea that the UK was strong enough to buck what they call ‘the global Establishment’. At the same time, it made economic growth central to defining what Brexit was supposed to deliver.
Second, the disastrous collapse of the mini-budget and, with it, the Truss premiership, brought Rishi Sunak to power on the sole basis of his supposed economic competence and realism.
Third, this happened against a background where opinion polls show ‘the economy’ to be by far the biggest issue of concern to the public.
Fourth, it happened against the background of opinion polls which for many months have shown a growing majority for the view that Brexit was a mistake, and a majority view that Brexit has been economically damaging.
It was thus highly likely that once the delayed Budget statement occurred these things would coalesce around the question of how can the government claim to be economically competent and realistic, and how can it promote growth, if it does not address the economic damage of the unpopular policy of Brexit.
This is exactly what has happened this week, and it has been given added bite by a fifth factor, namely the way that George Eustice’s comments last week finally opened up for debate the inadequacy of the Brexiters’ sole claim to an economic benefit, that of making independent free trade agreements. With that has come a realization that Brexit Britain’s ‘trade honeymoon’ is over, though the red herring of CPTPP membership still lingers.
Although some media coverage talks as if the issue of Brexit has suddenly re-appeared, the truth is that it has never gone away, as anyone reading this blog regularly will know. Whilst media and political attention may have been much reduced, the reality is that neither leaving the EU, nor the Trade and Cooperation Agreement (TCA) that followed, provided a sustainable resolution to the Brexit debate.
The Brexiters’ political failure
That is partly because of the economic damage but, more fundamentally, because the Brexiters have totally failed to build a political consensus for Brexit. Even now, the only thing they can point to as the basis for such a consensus is the 2016 referendum result. But that narrow victory should have been only the beginning. If they had been serious about embedding Brexit as the new, accepted reality amongst a sustainable and growing majority of people they needed to show that it could work, and also to reach out to those who had opposed it.
Instead, they were not only unable to show it could work but, in many cases, actively decried what was being done as ‘not real Brexit’ whilst at the same time expecting those who had never believed in it to be persuaded to accept something they, themselves, were criticising. As for reaching out to opponents, they simply made no attempt at all. Only ‘true believers’ were regarded as having any right to shape Brexit, whilst remainers were treated with contempt. And so, quietly, and without much political leadership or media attention, opposition to Brexit has hardened amongst almost all of those who had always opposed it whilst the growing evidence of its failure reduced the number who supported it, with 20% of those who voted leave now regretting it. In short, the Brexiters won the referendum, but have failed to ‘seal the deal’ with the British people.
The aftermath of the budget
Now, in the aftermath of the budget, that is coming back to haunt them. Crucially, what is happening is not just a revival of ‘remainer’ criticisms. The pro-Brexit Telegraph is awash with articles bemoaning the “squandering” of Brexit (£) and of its “failure to deliver” benefits (£), to the point of recognizing that it might even be reversed. As for the Express, that other bastion of the true believers, it has recently gone remarkably quiet about Brexit. But, even there, an article by Tim Newark this week pronounced that, with the demise of Truss, “Tory MPs blew their one chance to re-commit to Brexit”.
Most strikingly, in an article in the Mail, veteran political journalist Andrew Neil wrote that “this is the week that Brexit died”. Neil has never declared how he voted in 2016, or whether he voted at all and, to be fair, his interviewing of Brexiters has generally been as robust as it has been of anti-Brexiters, although the tone of his writings does suggest a certain sympathy for Brexit. But, if anything, that gives an added authority to his remarks which, broadly, argue that leaving the EU was “supposed to create a post-Brexit, low-tax, low-regulation, free-wheeling economic environment” and has not done so.
It is not a new critique. The free-market right have been making it for at least a year. The difference now is that the Truss government, which vowed to deliver this version of Brexit, collapsed, and that the Sunak-Hunt budget shows, as Neil and Newark argue, that it will never be delivered. There is a deep flaw in this argument, of course, because neither this nor any other specific version of Brexit was ever proposed at the time of the referendum and nor was it at the 2019 General Election. What these right-wing ‘Singapore’ Brexiters tried to do was to use Brexit as a cover to deliver an agenda which no one was ever asked to vote on, and which it is unlikely a majority would have voted for had it been presented to them.
So, again, it shows the failure to build a political consensus, this time not just for ‘Brexit’ but for their version of Brexit, perhaps because they knew that no such consensus was attainable. In passing, I have never been convinced by the argument of some people who oppose Brexit that ‘low-tax, low-regulation Brexit’ was the ‘real agenda’ all along. Of course it was, by definition, the agenda of those many and powerful Brexiters who wanted that form of Brexit. But to say it was ‘the real agenda’ of Brexit is actually to concede to them the wholly dishonest idea that this was the true and necessary meaning of Brexit.
If one strand of the budget aftermath is right-wing Brexiters bemoaning that they will never get the extreme form of Brexit they wanted, the other strand is to re-open the question about whether the form of Brexit we have is too extreme. This was in evidence in the rumours that surfaced last weekend that the government was considering seeking a ‘Swiss-style Brexit’ for the relationship with the single market. Inevitably that also opens the door to the entire question of Brexit itself, especially given the polls showing clear public opposition to it.
Thus, to take a high-profile example, Piers Morgan – a remainer in 2016, but one who has hitherto been vociferous in arguing that Brexit should go ahead because of the vote – forcefully made the obvious point that “Brexit has been a disaster” and called for a referendum on re-joining. Arch-Brexiters like John Longworth may protest that “there should be no discussion now about EU membership” but to no avail. It is being discussed and it’s likely to go on being.
Back on the endless Brexit doom-loop?
Whether this revived discussion is a sign of moving forward is a moot point, however. The reports about moving to a ‘Swiss-style Brexit’ suggested that, even after all these years, quite basic things about Brexit are still not understood. Thus “senior government sources” apparently still believe that it would be possible to have Swiss-style Brexit without freedom of movement of people, and that the UK could get such a deal “because it is overwhelmingly in the business interests of both sides”. So here we are again, with the same old refusal to understand the single market and its inseparability from freedom of movement, and what is in effect a reprise of the ‘German car makers’ argument. It’s truly pathetic.
And that is even before considering that the Swiss model of multiple bi-lateral agreements with the EU is one that the EU itself regards as cumbersome and unworkable, would never be entertained with Switzerland were the relationship starting again now, and would not even be considered as a basis for EU-UK relations. Indeed, one of the core EU positions from the beginning was that the TCA would contain, in one architecture, the entirety of the post-Brexit arrangements, rather than making piecemeal deals. That certainly isn’t going to change now.
In any case, Sunak quickly disowned these reports (£), and he and Jeremy Hunt seem now to have the idea that post-Brexit barriers to trade can be reduced within the TCA framework. There is indeed some scope for that, although, at most, it is a limited scope, certainly not amounting to anything remotely like the “unfettered trade” Hunt has spoken of. That scope will be reduced to the point of non-existence (£) if, as he pledged this week, Sunak maintains the UK ‘red lines’ of refusing not only freedom of movement, but any role for the ECJ and any alignment with EU regulations. This also seems to bode ill for the ongoing Northern Ireland Protocol negotiations where, astonishingly, it is now reported that Steve Baker’s plan is to revisit the ‘sequencing’ row of the summer of 2017, which David Davis lost. So, once again, we seem to be going round in circles.
Needless to say, all this gave the hard Brexiters a fit of the vapours, with a 'new Tory civil war’ threatened and a revival of all the tired old talk of Brexit ‘betrayal’. In the process, there was a reminder of precisely the cultism with prevented them from building a consensus, with a “senior Tory backbencher” saying that “I and many of my colleagues have never regarded Rishi as a true Brexiteer”. Meanwhile, remain-voting Hunt was called on to “personally deny” the rumours, as a heretic might be called on to publicly recant. Outside the Tory Party, Nigel Farage made his habitual threat to ‘return to front-line politics’ if the government were to seek to ‘betray’ Brexit with a Swiss-style deal (he has apparently forgotten all the times he advocated such a model).
These reactions can also be seen as a re-hash of all the debates since 2016. They show that, even if Sunak is genuinely an ‘economic realist’ who can see the damage Brexit is causing, he, like any Tory leader, is hamstrung by the fanaticism of the Brexit Ultras in his party, a fanaticism which far from having been assuaged by Brexit has been inflamed by it. Equally, they show how, despite the idea that Brexit would kill off the external threat to the Tory Party from Farage, he continues to have the capacity to scare, and hence to control, it.
But this time is different
However, despite their familiarity, what is happening now is more than simply a re-run of old myths and old arguments. Before Britain left the EU, it was still possible for Brexiters to promise Brexit benefits and to decry ‘Project Fear’. Now, although they still try to do so, there is more than enough evidence to see the realities, especially the economic realities, of Brexit. That includes the evidence that the central premise of Brexit as regards trade – that increased trade barriers with the EU would be more than off-set by growing trade with non-EU countries – has been discredited.
In short, Brexit is no longer hypothetical and that, in principle, makes a rational discussion of its economic consequences easier or, at least, ought to make an irrational discussion more difficult. That is made more so by the collapse of the Truss mini-budget because it so manifestly discredited the Brexiters’ claims that economic reality could be wished away, as the province of the ‘remainer Establishment’. Relatedly, the fact that the ‘intellectual’ basis of the mini-budget came from precisely the same group of economists who provided the economic case for Brexit itself has served to further undermine that case. Whenever their fantasies meet reality they fall apart.
And this extends beyond the purely economic frame. Especially as a result of the Ukraine war, the realities of the shared geo-political interests of the EU and the UK are more obvious. So, too, can it be seen that, far from ‘getting Brexit done’ with an ‘oven-ready deal’, the Northern Ireland issue that proved so central in the Brexit process has not, in fact been resolved. And since that is in large part because Brexiters have insisted that what was agreed and signed up to should not really be binding, then that undermines their equally loud insistence that every other aspect of the Brexit Boris Johnson agreed is, for all time, sacrosanct.
Moreover, before Britain left the EU, Brexiters could claim that they were seeking to ensure that ‘true Brexit’ was delivered. But, now, they are adamant that it has not been delivered. So often have they said that was we have got is ‘Brexit in name only’ (BRINO) that it takes away the force of their attempt to portray a softer Brexit than we currently have as BRINO. For if we really only have BRINO then why not have a different, less expensive BRINO? Or no Brexit at all? Or, to put it another way, if they insist that ‘Brexit has died’ because the ‘benefits’ (as they cast them) of a low-tax, low-regulation economy have been killed off, then the argument (in their terms) for undertaking Brexit has disappeared. So why not soften, or even reverse, it?
All of this means that the current, revived, Brexit debate is occurring against a different background to that of the pre-2020 debate. In one way, that background is worse for erstwhile remainers because, of course, there is no prospect of ‘remaining’, as sometimes seemed possible up until the result of the 2019 election. In another way, it is much worse for the Brexiters, because the very fact it is occurring is a sign of Brexit’s failure and, as the desperate tone of their attempts to ‘save’ Brexit shows, they know that it is a fragile and unpopular project. As if to provide a timely metaphor, this week Unboxed, the rebranded version of the Festival of Brexit, came to an end amid a welter of criticisms of it for being unpopular failure (£) and a waste of public money.
That unpopularity in turn means that the biggest battering-ram argument they used to constantly invoke, that Brexit is “the will of the people”, is now little more than a crumbling cudgel. Which people? The ones who, not just in the odd survey, but over and over again in every opinion poll say in a clear majority that Brexit was a mistake? Just for how long and how far can a referendum, the mandate of which has now been fully discharged, be used in defence of a version of Brexit that was not even the subject of that vote?
It all comes down to the Labour Party now
So in all these ways, something important is changing in the Brexit saga and that has become apparent this week. It is possible that the latest debate will all die down again, but that is unlikely because the underlying issues of the damage, especially the economic damage, of Brexit will persist. So, assuming economic performance continues to be the defining theme of Sunak’s government, then the debate will continue, and with it the daily new examples of Brexit’s failure and damage.
However, the unchanged dynamics of the Tory Party mean that Sunak will not be able to address, still less resolve, the problems of Brexit. There’s certainly little sign he can end the Northern Ireland Protocol row, because of those dynamics. It’s not even clear he will be able to stop adding to the damage, for example by dropping the EU Retained Law Bill, now widely recognized as being a recipe for administrative and business chaos but beloved by the Brexit Ultras in his party.
So if dealing with the damage of Brexit is to happen in any reasonable time-frame then it will fall to the Labour Party, assuming they win the next election. In any case, they can hardly stay mute as the Brexit debate revives. That makes it crucial, as pollster Peter Kellner argues, that Labour go into the next election with a clear policy to undo the worst of the economic damage of Brexit. It has to be clear, because otherwise they will not have a clear mandate if they win. And it needs to go well beyond the timidity, and vacuity, of ‘making Brexit work’ to some form of single market membership and a customs treaty.
In turn, that means breaking with its caution about immigration, the legacy not just of Brexit but of Gordon Brown’s ‘Mrs Duffy’ moment in 2010, and still in evidence this week in Keir Starmer’s comments about immigration at the CBI conference. In any case, the salience to the public of immigration as a political issue has steadily fallen from its peak in 2015, when 71% thought it was one of the top three most important issues facing the country, to as low as 14% in April 2020 and 22% at the beginning of October this year. It’s true that this has since risen to 37%, but that is almost certainly because the survey treats “immigration and asylum” as one issue which, for that matter, almost certainly makes all of the scores higher than they would be for ‘immigration’ alone. In short, Labour needs to be sure they are not fighting yesterday’s political battles on immigration.
As the staunchly Labour-supporting Associate Editor of the Mirror, Kevin Maguire, put it this week, Labour is “out of step with public opinion” on Brexit. I would put it more strongly than that. For once, Labour has a rare, perhaps generational, chance to stake out a position which is true to its values and those of its leader – for no one can seriously doubt, as they could of Corbyn, that Starmer thinks Brexit was a huge mistake – and which catches the tidal flow of the public mood, makes its economic policy credible, and is in the national interest. It’s a huge prize, if Labour can grab it.
Central to that happening is for this emergent new Brexit context to be fully understood and, in particular, for Labour to lose their apparent terror of being branded ‘enemies of the people’. That headline, with all the wider freight it carries, comes from 2016. Times have changed: Brexit has changed them. The people have changed: time and Brexit have changed them. The country and the world have changed: Brexit can change with them. But can Labour change? That remains to be seen but, right now, it is the only question that really matters.
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