The political ambitions of the libertarian wing of the Brexit Ultras have always been ambivalent. On the one hand, they have largely preferred to complain of betrayal from the sidelines rather than take any responsibility or, if accepting ministerial office, to quickly resign rather than engage with the pragmatic realities of Brexit. On the other hand, they have hankered to be in charge not just so as to create ‘true Brexit’, but the ‘real Conservatism’ of which Brexit was a part and to which it was a gateway.
With the advent of Truss’s premiership, they have eschewed the sidelines in favour of governing and, with a rapidity that even their sternest critics would have thought it cruel to predict, have been exposed as utterly incompetent, both politically and economically, and in the most basic of ways. It is deeply ironic that this has happened at the hand of ‘the markets’ which they so slavishly fetishize.
Anatomy of a crisis
The occasion, of course, was last Friday’s tax-cutting ‘mini-budget’. “At last! A true Tory Budget”, the Daily Mail drooled, whilst Nigel Farage simpered about “the best Conservative Budget since 1986”. Yet, whether despite or because of this fidelity to Conservatism, and as anticipated in my previous post, there was an immediate crisis in the currency and bond markets, with the value of the pound falling to its lowest ever level on Monday, and the cost of government borrowing in the form of gilts or bonds rising very sharply. Amongst numerous knock-on effects, pension funds, which invest heavily in such bonds, came within hours of mass insolvency on Wednesday afternoon, threatening a major breakdown of the financial system and requiring major emergency temporary action from the Bank of England. This, in combination, with a clear signal from the Bank that interest rates will rise in due course, which eased pressure on the pound, has effected a degree of stabilization, but markets remain jittery and it’s by no means clear that this crisis has run its course, especially as regards gilts.
These weren’t routine or trivial market movements, but an overwhelming and brutal vote of no confidence in the government’s plans. Specifically, they were a vote of no confidence in the decision to cut taxes, or not implement previously planned tax rises, and to fund this through borrowing. Again as anticipated in my last post, the government’s refusal to allow its plans to be scrutinised independently by the Office for Budget Responsibility added to market alarm. So, too, did Chancellor Kwasi Kwarteng’s casual reaction over the weekend, even suggesting further tax cuts to come. The rout continued on Monday when, as Paul Donovan, Chief Economist at UBS Global Wealth Management, put it, “investors seem to regard the UK Conservative Party as a doomsday cult”.
Throughout the week, the absence of public statements from Truss or Kwarteng compounded this impression, and when Truss did emerge on Thursday morning it was to re-confirm the government’s policy and downplay the market reaction, as well as denying it had anything much to do with the mini-budget. To the extent she admitted any connection it is the false one that markets didn’t like the costs of the energy bill support part of the budget, when in fact it was the tax cuts. It has since emerged that this and the equally false claim that what is happening in the markets is a global event due to the Ukraine War rather than something specifically affecting the UK are to be the government’s lines of defence.
Amongst the most significant events was when, on Tuesday, the International Monetary Fund (IMF) issued what BBC Economics Editor Faisal Islam described as a “stinging and unusual rebuke” to the UK. What made it so unusual was that such IMF warnings are usually made to emerging markets, not leading global economies. I mentioned in my previous post that aspects of the economic situation resemble those which occasioned the IMF’s 1976 bailout of the UK, and its statement this week that it is “closely monitoring” developments in the UK carried echoes of that. It was also, like the comments of other international players and the decisions taken by traders, a reminder that, no matter what Brexiter ‘sovereignty’ fantasists may think, the UK can never be ‘independent’ of the wider world within which it is a relatively small player. Most fundamentally, the Brexiters’ belief that they can create their own reality, and that all opposition can be swept aside as ‘Project Fear’ or ‘remainer sabotage’, was tested almost to the point of destruction.
These events have been widely reported and there’s no point in me adding more to that. Instead, I want to tease out more about the Brexit aspects and implications.
The Brexit mini-budget
At one level, the mini-budget had very little to do with Brexit in that, so far as I can see, the only provision within it that wouldn’t have been possible whilst a member of the EU is the planned removal of the cap on bankers’ bonuses. That isn’t unimportant, politically, but it’s not what spooked the markets. However, it is the budget of the Brexit Ultras and it is intimately bound up with Brexit. In case anyone doubts that, it was underlined by Farage’s endorsement. Even more explicitly (£), John Longworth, one of the most immoderate of the Ultras, regards it as part of Truss’s battle “for the future of Brexit Britain”. It’s a sentiment widely shared in Brexiter circles, with the Bruges Group tweeting that “remain media are talking up market panic … to derail Brexit”.
So, given that the Brexiters themselves regard the mini-budget as integral to Brexit, it’s reasonable to say, as Robert Shrimsley of the Financial Times did (£), that “Brexit ideology lies behind the UK’s market rout”. It’s abundantly clear to even the feeblest intelligence that those Brexiters now include Truss, for all the fury of Dominic Cummings’s denials (directed at me!) on the inane grounds that she supported remain in 2016. As I pointed out during the campaign, she is now a ‘born again Ultra’, perhaps the more fanatical for being so, and was extravagantly endorsed by the leading Ultras, making the fact that she was once a remainer the most tedious and least relevant thing to say about her.
As so often before, Brexiter responses to the crisis they created have been confused and contradictory. Some in the government prissily said they could not comment on market events, as if some new Trappist ordinance of political propriety has been invented. Others downplayed what has happened, suggesting that the market reaction is either trivial or transient, or even that it has little or nothing to do with the budget but is simply a result of a strengthening dollar (which doesn’t explain why the pound fell against all major currencies, or what happened in the bond market). Outrageously, some, like Crispin Odey, hedge fund manager, Tory and Vote Leave donor, and sometime employer of Kwarteng, blamed “remainers”. Peak insanity was reached by Daniel Hannan, who blamed the crash not on the mini-budget, but market fears of a Labour government!
In addition, or instead, some Brexiters blamed the Bank of England (BoE) for having failed to increase interest rates by enough, early enough, or to have reacted immediately to the crisis so as to support sterling and control inflation. That argument is more complicated than their others. There is a case that last week’s pre-budget interest rate rise should have been larger, although it’s not a straightforward one because doing so would also have been likely to impact on the cost-of-living crisis by pushing up mortgage rates.
Nevertheless, it was the government’s mini-budget, not the BoE, that caused this crisis and there is something bizarre about a government simultaneously taking inflationary measures it says will boost economic growth, whilst relying on the BoE to take measures to reduce inflation and choke off growth. Indeed, part of the reason for market nervousness is that the institutions of financial and economic governance are not acting in a consistent and coordinated way, something flagged up by Mark Carney, the former BoE Governor whose actions did much to preserve a degree of economic stability after the Brexit referendum vote. Perhaps the BoE could have acted earlier, though had it done so it's easy to predict that then it would have been accused of overreaction and of trying to undermine government policy. In any case, what is even more bizarre is the spectacle of Brexiters, with their disdain for experts, technocrats and unelected bureaucrats, positioning the BoE as having responsibility to save the government from itself. Or perhaps it is not bizarre, so much as a reflection of the Brexiters’ reflex refusal ever to take responsibility for anything even when in government.
Government by cultists
That refusal has as its counterpart the distinctively Brexity idea, now taken over wholesale by this Brexit government, that they are beleaguered revolutionaries of true Conservativism fighting the (presumably false) conservatism of ‘the Establishment’. The notion of Brexit as an anti-Establishment insurgency has been a ludicrous one ever since the 2016 referendum was won, and Brexit became adopted as the central policy and national strategy. It is even more so now that the Brexit Ultras are unequivocally in charge of government, though of course it is a standard populist trope, familiar from the Trump presidency.
What we have seen this week is that the Brexiters have added ‘the markets’ to the increasingly long and diverse list – encompassing the ‘Woke’ Blob, the civil service in general and the Treasury in particular, the BoE, remainers, rejoiners, the National Trust, the BBC – of enemy forces they must confront in the name of revolutionary purity.
Longworth explicitly included the City in this list, whilst unnamed government figures suggested that traders were enacting “a plot by the left” which will have come as a surprise to them. Similarly, the Daily Mail reported that senior Tories blame “City Boys” for “sparking economic chaos” with traders “trying to make money out of bad news”. Well colour me shocked. Haven’t these free-market ideologues worked out that ‘trying to make money’ is what traders always do, indeed it’s all that they do? Do they think that ‘City Boys’ care about making government policy look good? And aren’t these the same ‘City Boys’ who, according to Kwarteng, are the brightest and the best who must be encouraged to come to London by uncapped bonuses? Aren’t they, for that matter, good ol’ City Boys like Crispin Odey?
The IMF, which has long been on the Brexiters’ list of enemies, also came under attack for its comments. For example, Brexiter economist Andrew Lilico was outraged by its “left-wing” intervention, to the point that he advocated the UK should “withhold its IMF contributions”. It is a strange world in which the IMF is considered ‘left-wing’ (or even, as Brexit Party ex-MEP Lance Forman had it, “socialist” and under the influence of the EU), and the idea of withholding contributions seems to conjure up a vision where Brexit is the gateway to exiting any and every international institution, in a permanent revolution of endless Brexits.
Also triggered by the IMF, David Frost opined, contradictorily, that its comments were “somewhat eccentric” yet reflected its “highly conventional approach”. This is indicative of the fact that what is at stake is more than Brexiter whinging about the enemies that beset them. This government, and its semi-intellectual underlabourers in think tanks and the media, are convinced that they are the custodians of a new truth. The markets and their economists are “attached to the old way of doing things” as Patrick Minford put it, to the extent that “there is no sterling crisis except in the minds of idiots” (£). Similarly the BoE has “not got the memo” about the “economic consensus crumbling” according to Paul Marshall (£), investment manager and Vote Leave donor. Thus arch-Brexiter journalist Allister Heath insists (£) Liz Truss must “hold her nerve” and defy the “orthodoxy” of “the elites”.
Their problem is that, as the market reaction shows, the ‘old ways’ still hold and the ‘economic consensus’ remains. Calling it an “orthodoxy” is accurate, but that very accuracy shows why decisions to “defy” it are foolish. That’s why investors regard the Tory government as a ‘doomsday cult’, and responding that investors are ‘idiots’, ‘conventional’ or even ‘socialists’ makes no difference, except perhaps to re-enforce them in that view.
As I put it in my last blog, traders simply don’t care about the theories of Patrick Minford, or of the broader IEA-derived analysis of the cultist government. Indeed, one of the few semi-amusing features of Brexit is the spectacle of all these free-trade, free-market economists going into contortions to explain how erecting trade barriers doesn’t damage trade and, now, why markets don’t understand how to price currencies or debt. It’s this stupidity that accounts for the fact that, apparently, market traders talk of the demand for a “moron risk premium” in order to hold sterling assets and fund UK debt.
But is there a cunning plan?
However, there is a different interpretation of all this doing the rounds on social media*, in which, far from being utterly incompetent, the Brexit government has a skilful, if malevolent, plan. It is an interpretation which comes in two variants.
One version is that the government deliberately crashed the markets, secretly giving hedge fund traders and others – with whom the current government has strong links of networks and party funding – advance notice so that, as indeed happened, they could short the markets and make fortunes. It doesn’t really make sense, though, because no such secret information would need to be passed – it was obvious even to me, and widely predicted, what was going to happen if the mini-budget pursued the policies Truss had openly advocated during the leadership campaign. Indeed that’s why the pound was beginning to fall once it became clear she was almost certain to win.
It also doesn’t make sense given the huge political price of the crisis. Some suggest that the government is so fanatical that it does not care about winning elections, or already thinks the next election is lost, and will inflict any amount of damage in order to pave the way for disaster capitalists to swoop in. Even, some say, the government ministers devising this scenario are doing so in expectation of lucrative employment with hedge funds and the like. But I’ve never met or heard of a politician who having devoted years to a political career has so cavalier an interest in its continuing success, and it seems extremely improbable that it would characterise an entire government.
And if it really does, then why provide energy bill support, so plainly at odds with small state, libertarian ideology? Indeed that seemed to be Truss’s position early in the leadership contest, when she spoke against giving people “handouts”, only to change tack when it became clear what the political consequences would be. The same applies to the theory of a deliberately engineered market crash.
The second variant of the ‘cunning plan’ interpretation is that the market reaction was anticipated by the government with the intention of providing a justification for a subsequent full budget including massive public spending cuts, as well as ‘supply side’ deregulation of labour rights, planning, and environmental standards, in order to ‘satisfy the markets’. On this account, the government manufactured the current crisis as a step to that pre-existing end goal.
In reality, it is highly unlikely that any government would deliberately create such a crisis, again because of the political consequences. Whatever any government’s agenda may be, it can only deliver it if it is in power and able to exercise power. That remains true even if the agenda is a secret one to enact some Ayn Rand-like laying waste to society and the state or, at least, a massive rolling back of the state. It still requires being in power, and being in power for a considerable amount of time, and with very little opposition or constraint. Yet some, such as Guardian journalist Polly Toynbee, think this week’s crisis will put the Conservatives out of power for a generation and many Tory MPs fear just that. But if the analysis that the government wouldn’t want a crisis because of the political consequences isn’t accepted, then why would it feel the need to provoke a crisis to justify spending cuts, rather than simply make the cuts and face the political consequences of doing so?
I suppose that those who believe the ‘cunning plan’ theory, in either variant, will never be persuaded otherwise, despite its inherent implausibility. One thing about such theories is that (ironically, rather like those of the Brexiters) they constantly twist the available evidence to ‘prove’ themselves. For example, until very recently Rishi Sunak appeared in such theories as the arch-libertarian, product of Goldman Sachs, former hedge fund partner and, supposedly, masterminding the introduction of ‘Charter Cities’ into the UK. Surely if the plan to deliberately crash the markets existed then he would be part of the government delivering it, perhaps even leading that government? And if he had been then, inevitably, that would have been cited as ‘proof’ of this secret plan. Yet, in fact, it was he who, during the leadership campaign, repeatedly denounced the “fairy tale” of Trussonomics, anticipating exactly the effects it would have on currency and bond markets and rejecting it as irresponsible.
No, just incompetence
So my own view is that, in their arrogance and delusion, this Brexit government, and its cheerleaders, really do believe it has found a new ‘unconventional’ economic model and did not expect the market reaction, and that although a full November budget was certainly planned, including the announcement of the deregulatory ‘supply side reforms’ that will supposedly deliver the growth to pay for tax cuts, it was not going to include significant spending cuts which, instead, were anticipated for after Truss had won the election on the back of what they expected to be a growing economy. Then, with the legitimacy of a fresh mandate and a compliant parliamentary majority, she would declare it was time to shrink public spending but without coupling that with the tax cuts that would already be in place.
If my interpretation is right, the government’s plan is now in tatters, and the expectation is that the November budget will feature huge spending cuts (£) (and perhaps reversing the tax cuts, as some Tory MPs want, which can’t be ruled out though it seems unlikely at the moment). That may seem to be the same outcome as version two of the ‘cunning plan’ that I’ve rejected, but my point is that the government would not, from choice, have initiated spending cuts before the election but afterwards, because of the political unpopularity of such cuts. Otherwise, why not just have held a normal budget this Autumn, featuring both tax and spending cuts, avoiding a market crisis altogether, taking a political hit, no doubt, but nothing compared to that which they now face.
For this government was already politically weak, and as a result of this crisis is now much weaker. Although the libertarian cabal has taken control of the government, both it and Truss have many opponents amongst MPs and, as I remarked in a post during the leadership campaign, the current Tory Party is so riven by factions as to be unleadable, with rebellions an ever-present possibility. This week’s crisis has laid that bare, with, almost astonishingly given how new her premiership is, reports of letters of no confidence in Truss being submitted by some MPs and threats of backbench revolts.
Crucially, the latest opinion poll, published yesterday evening, shows a massive 33% Labour lead, an increase of 16% since the mini-budget. That may not last, but it’s very possible that the government will not recover from this crisis, rather as happened after Black Wednesday in 1992 when the immediate fall in the polls was actually smaller.
It’s not just a matter of the electorate reacting fearfully to headlines of market turmoil and the sense that the government has lost control, it’s the impact on prices, most obviously petrol, and on mortgages, with several major lenders withdrawing fixed-rate offers this week and rates certain to increase, as well as predicted significant falls in house prices, perhaps by as much as 15%. This comes on top of the acute existing energy and general inflationary problems voters face, and their negative reaction can only be compounded if this crisis is immediately followed by, and seen to be the cause of, a new round of deeply unpopular ‘austerity’ spending cuts. The consequence is that Truss is now much less likely to win the next election and, possibly, won’t even survive until then.
Ultimately, the key point as regards the competence of this government by cult is that actually it’s irrelevant whether the crisis was the unexpected consequence of last Friday’s mini-budget decisions or was indeed ‘the plan’. Either the government was too incompetent to anticipate the scale of market reaction, or too incompetent to anticipate the scale of the political consequences of that reaction.
The dangers of cultism
The question about design versus incompetence has a wider significance. Throughout the Brexit process there have always been some, mainly remainers, who are adamant that it is driven by Machiavellian master strategists who conceal themselves behind a façade of stupidity and incompetence. To my mind, it is an absurd notion: not only did the Brexiters never have a single, unified, strategy but also everything I have seen or heard about them suggests that they really are just as incompetent in private as in public.
So now that we have a government of the libertarian Brexiters, it genuinely believes – egged on by its think tank advisors – that it is in possession of a new truth, one despised and ignored by the ‘experts’ whom they see as financially and intellectually invested in the ‘old way’ of doing things. That truth informs the fantasy economics of this ‘budget for growth’ but encompasses the entirety of the Brexit project, including the persistent, hubristic delusion of the UK’s power to dictate terms to the world around it and the fantasy which accompanies it about what ‘sovereignty’ means.
It rests upon a fanaticism, completely at odds with reality, shored up by the impregnable arrogance and mulish stubbornness of mediocrity. The most dangerous thing about it is not that these fanatics refuse to listen to any warnings, whoever they come from, it is that the more they hear those warnings the more convinced they are of their own rightness. This is the Brexiter logic I have written about so many times before (I think the first time was May 2017) in which every piece of evidence that proves their claims wrong is re-interpreted as proof that they are right.
That perverse logic is compounded in government by the creation of a groupthink bunker from which all dissent is banned, external constraints regarded as sabotage, and everything outside regarded as the treacherous machinations of the enemy. Some of the responses from the Brexiters to what has happened this week show the virtual insanity that is required in order to sustain this view of the world.
The bigger picture
This is an utterly disastrous approach to running the country, and it was brutally exposed as such by what happened this week. This, I think, was about much more than the government’s plans to increase debt. For one thing, it’s just the latest example of how the pound has ebbed and flowed since Brexit, always dropping when it seemed as the most extreme Brexiters would prevail (e.g. in getting ‘no deal Brexit’) and rising when it seemed that some degree of relative pragmatism was in the offing, though overall the general trend was always downwards.
Much more importantly, whilst the Donovan comment about a ‘doomsday cult’ being in charge of the UK was at one level a specific reference to Truss’s government it surely reflects a wider view of the UK since Brexit. That view isn’t simply to do with this or that budget, or even anything specific or measurable. It’s the more general reputational and cumulative effect of seeing a country which for six years has taken bizarre decisions, picked needless fights with its allies, showcased political instability, been cavalier about institutional probity, constitutional propriety and the rule of law, and all the other pathologies of Brexit and its aftermath. Throughout all of this has been the underlying presence and power of, indeed, a doomsday cult of Brexit Ultras, impregnable to evidence and reason. We are now seen, rightly, as a country which has become less reliable, less stable and less trustworthy, and, in some fundamental way, detached from reality.
So the market chaos this week and the economic crisis it has caused are contextualised by the general lack of confidence in such a country as well as providing an example of Brexiter fantasies, and specifically those of the budget, being found out by reality. In that sense, the current crisis is a crisis of Brexit.
A nation’s currency isn’t necessarily a reliable measure of its standing, and if it is then it’s a crude one and certainly not only one, and it is affected by many things. But it tells us something. Consider, then, that since the day before the referendum, when it was worth $1.49, to the pound’s lowest point of $1.03 this week – just six short years, though how long they seem – sterling has lost an astonishing one third of its value. It’s as good a measure as any of what Brexit has cost us economically, whilst symbolizing far, far more than our economic losses.
*I usually provide links when discussing the claims and arguments of others so that readers can judge whether I am representing them accurately and fairly. In this case I haven’t found any public figure making this argument which instead comes from numerous small social media accounts and it would be unfair to identify them. But the argument is being made by a significant number of such accounts, so is clearly widespread, which is why I am discussing it.
Showing posts with label Patrick Minford. Show all posts
Showing posts with label Patrick Minford. Show all posts
Friday, 30 September 2022
Friday, 24 June 2022
Brexit: the next six years
We’re now six years on from the referendum, but I’m not going to do an ‘anniversary round-up post’ because I did that in April, to mark six years since the campaign got underway. That post was entitled ‘six years of failure’, and most of it still applies, although the saga of the Northern Ireland Protocol (NIP) has moved on with the publication of the Northern Ireland Protocol Bill (NIPB), as analysed last week.
The second reading of the Bill will be on Monday, although the DUP are still refusing to take part in the power-sharing institutions*. Meanwhile, the President of the EU Commission has issued a clear statement that it will discuss implementation issues but not re-write the Protocol, and its member states have unanimously backed the Commission both in this stance and in taking legal action against the UK. It is desperately sad, but alas no surprise, to see a senior Dutch journalist, Caroline de Gruyter, drawing direct comparisons between the UK and Russia.
Brexit has failed, but what should be done about it?
There will be much more to follow on that, and of course the NIPB is in itself one important indicator of just how badly Brexit has failed. The big question emerging now, which is likely to pervade the next six years and more of politics, is what to do about that failure. It is only an ‘emerging’ question because, clearly, things are not so neat as that. Some are still fighting a rear-guard action to dismiss the damage of Brexit as the extension of ‘Project Fear’, generally invoking cherry-picked statistics or making bogus claims about vaccines or the Ukraine War, and will no doubt continue to do so forever.
However, that is increasingly the preserve of unpersuadable diehards. There will never be unanimity, but there’s no sensible way of denying that the consensus view of those economists and others with relevant expertise is that Brexit has been, and will continue to be, economically damaging. On this blog, including in the April ‘failure’ post, I’ve cited numerous studies to this effect. Under the telling headline ‘the deafening silence over Brexit’s economic fallout’, this week the Financial Times provided an overview of the evidence (£) showing the damage, drawing on studies from the LSE and the Peterson Institute amongst others. Meanwhile, the Resolution Foundation produced a major new report about the mainly negative impacts on productivity, wages, household incomes, investment and competitiveness, and three major US banks warned that the UK would experience “searing inflation” for years because of Brexit. The idea that all the academics, thinktanks, banks and consultancies have, as David Frost suggested yesterday, “an axe to grind” and their analysis should be ignored is, frankly, puerile.
Indeed, the economic damage is now built in to the government’s own budget plans and modelling and, as mentioned in several previous posts, there are many signs that Brexiters themselves are coming to accept the failure of their project. Jacob Rees-Mogg’s refusal this week to publish any assessments of the success of Brexit itself shows that the government knows it has failed, for you can be sure he would do so if even the slenderest evidence of success existed. So whilst the diehards will continue to decry the damage reports as remainer propaganda, we are seeing, as I argued in a recent post, the gradual revelation of the ‘public secret’ of Brexit’s failure. It’s on the assumption this process continues, and what a New Statesman editorial this week calls the “conspiracy of silence” over Brexit breaks, that the question of how to address its failure becomes crucial.
The Brexit Ultras’ answer
In this context, this week’s widely reported-on document from the Centre for Brexit Policy (CBP), entitled Defining Britain’s Post-Brexit Role in the World, is illustrative and important. In its own way it is an acknowledgement that Brexit has not yielded tangible success, although it ascribes that to the government’s half-hearted implementation rather than to any flaws inherent in Brexit, and tries to chart a future path that will deliver such success for the nation. Not that it is in any sense a blueprint for national unity, being a highly partisan, not to say a paranoid, document, speaking of “rejoiner plots” that are “led by Tony Blair” (p.31) and replete with disparaging references to ‘remainers’.
Crucially, its collective authorship of seventeen are mostly readily identifiable as ‘the usual suspects’ associated with the CBP and similar groups, and partly as a result its proposals are both predictable and predictably flawed. So, for example, although the report is not mainly concerned with trade or economics, where these are discussed it rejects the gravity model of trade, in which geographical proximity is a key factor in trade volumes (p. 39). It’s a model endorsed by the vast majority of trade economists but there are a small number of exceptions, such as Professor Patrick Minford. And, what a surprise, amongst the collective authors we find … Patrick Minford. Reality, at least as understood by the vast majority of those competent to judge, is simply discounted (in this case by the usual trick of disaggregating EU trade into that with individual member states) which makes it hard to regard it as a serious analysis.
This same echo chamber quality permeates the report which, as regards its main geo-political focus, puts huge weight on the Special Relationship with the US (p. 41), the Anglosphere+ (Australia, New Zealand, Canada, India and, um, Japan), and the Commonwealth which, we’re told, “is much more than politics. It is the sense of instantly if indefinably feeling at home in each other’s lands; of the smells of shared, fusion cuisines, shared passions for cricket and rugby, of the Commonwealth Games, of the Duke of Edinburgh’s Award Scheme” (p.34) and which “looks to the UK for leadership” (p.56). It’s hard to know whether to laugh or cry at an analysis so naïve and so inattentive to modern history, but finding John Bolton and Alexander Downer (the former Australian Foreign Affairs Minister who is a leading opponent of Australian Republicanism) amongst the collective authorship helps to explain it.
A less partisan and more realistic account would recognize that for many years now the special relationship has been something of a diplomatic fiction, and one reduced by Brexit because of the loss of the ‘transatlantic bridge’ role. That isn’t to deny there is an important relationship, especially in intelligence services, but it shouldn’t be over-stated. Certainly the days when Australia, New Zealand and Canada looked to the ‘Mother Country’ are long gone, and Australia, in particular, is set to at least reconsider republicanism when the Queen dies. That will also be a pivotal moment for the future nature of the Commonwealth, and Professor Philip Murphy, Director of the Institute of Commonwealth Studies at the University of London thinks that “perhaps the Commonwealth has historically run its course and what you’re really seeing now is the ghost of an organization”. Murphy, who as his job title implies, is a leading expert on the topic, has also written a book that debunks many of the myths the CBP report relies on.
So, at the very least, these are questionable materials from which to build a sustainable post-Brexit future and, as with trade issues, the problem with the CBP approach is that it’s not based on the deep expertise of specialists but instead put together by those whose allegiance is to the Brexit project and discounts or downplays any expertise that contradicts what they would like to be true. The authors of the report would, no doubt, dismiss such criticisms as ‘elitist’, and perhaps enfold them into the category of the ‘declinism’ which they hold responsible both for Britain having joined the EU in the first place and for having failed to capitalise on its post-Brexit opportunities.
But this kind of Brexit ‘revivalism’ is as problematic an account of British history as declinism itself, with both being “symptoms of a nation unable to come to grips with its place in the world” as the historian Professor David Edgerton recently put it. Again, Edgerton is an expert on (and indeed himself a critic of) declinist explanations of British history. Both declinism and revivalism simply get in the way of realism, by constantly invoking historical myths or boosterish projects rather than serious strategic thinking which, to be successful, has to be based on the best available evidence. That evidence also needs to be understood, whereas Phillips O’Brien, Professor of Strategic Studies at St Andrew’s University, whose groundbreaking work on Britain and WW2 is cited in the report, says the authors do so in a way that convinces him they “have no idea what they are saying”. O’Brien also describes the report as a whole as “witch-burning” and “substanceless” and says that the authors “have no realistic understanding of Britain’s place in the world”.
Unsurprisingly, the “witch-burning” comes to a crescendo in proposals for a wholesale ‘reform’ of the Civil Service, which is depicted as being in the grip of declinism and of its supposed “bias against Brexit” and “continuing obstruction” of post-Brexit initiatives (p.87). This has been the perpetual cry of Brexiters since 2016 and it continues for the same reason: because the Civil Service has to enact real policies, it can’t indulge Brexiter fantasies. Since these fantasies persist in the echo-chamber world of bodies like the CBP, the only recourse is to posit that if the Civil Service were true believers then the fantasies would become real. But whereas expertise can be ignored and evidence cherry-picked in order to develop proposals, a Civil Service is needed to deliver policy - so the answer is to get a new one. If this becomes the template for Britain’s post-Brexit future then it will be as doomed to failure as the Brexit process itself because however strong belief is, reality always trumps it.
Why does the CBP report matter?
Despite its evident weaknesses (which would take a book to catalogue) the CBP report matters. Like several similar outfits under various names over the years, the CBP has close affiliations with the ERG MPs. Its Chairman is still the disgraced ERG ex-MP Owen Paterson, and its Fellows include ERG MPs Iain Duncan Smith and David Jones, both listed as authors of this latest report. Time and time again the propositions put forward by such groups move from being the apparently fringe meanderings of extremists to becoming pretty much government policy.
The most important example is the CBP’s July 2020 report on Replacing the Withdrawal Agreement. Some of it has been overtaken by events, but its wholesale objection to the NIP can be seen as setting the direction of travel that has resulted in the current NIPB. This, of course, was months before the NIP came into effect and so was plainly not motivated by the unexpected impacts of its operations.
The chances of the ideas in the latest CBP report, and the closely related deregulatory agenda, having an impact are considerable. That is partly because of Johnson’s current political weakness, making it easy to push him around, limited only by the fact that the Ultras’ wilder proposals would be wildly unpopular with the electorate. It is also for the more fundamental reason that – and in this respect, at least, the Brexit Ultras are right – he and his government have never had any coherent post-Brexit strategy, and indeed hardly mention it beyond boasting that it has ‘been delivered’.
Just as in 2016 there was no plan for how to do Brexit and the Institute for Government was warning that “silence is not a strategy”, so, now, the Brexit government has no plan for what to do with Brexit, as this week’s unveiling of Rees-Mogg’s risible Brexit ‘Public Dashboard’ illustrates. Now, as then, that leaves a vacuum into which the Ultras can push their agenda for the coming years. Crucially, apart from the content of that agenda, that means the continuation of an approach based on wilful distortions of evidence and reasoning, denial of reality, and hyper-partisanship.
This is the reason why things like the CBP report should be paid attention to. For what is at stake now is not Brexit – the question of whether to leave the EU or not - but the multiple severe problems Britain faces, problems which include social and regional inequality, poor productivity, crumbling infrastructure, a rentier economy, and declining living standards. No doubt there are others (including many, such as climate change, which aren’t specifically national) but as a core list it would probably be accepted by people of most political persuasions, including those with different views of Brexit.
In an interesting essay in The Atlantic this week – not all of which I agree with - Tom McTague makes the point that whilst Brexiters need to face the fact that leaving the EU has worsened many of these problems, erstwhile remainers need to accept that they did not begin with Brexit. I certainly don’t have any problems accepting that, though all it suggests to me is that Brexiters were wrong to say that the UK was not free to make its own, often poor, policy choices whilst in the EU, and then exacerbated them by leaving. The implication of that is to make better policy choices now, which includes acknowledging and limiting the damage that Brexit has done, and part of that includes – and here I agree with McTague’s implication – ceasing to treat 2016 as the sole, defining moment of recent British history.
Looking towards 2026
There’s no realistic prospect of the present government doing this. I suppose it’s remotely possible that a future Conservative government could, and Nick Tyrone, author of This Week in Brexitland, has argued that it may well be such a government that will eventually take us back into the single market and even the EU. But that is at best a very long-term prospect and what matters in the more immediate period, given there will be a General Election by 2024, is the other part of the vacuum, namely Labour’s near silence on Brexit. In a recent post I wrote about how Labour have the chance to lead the debate and, though I’m hardly the first person to have made that observation, my post attracted a fair bit of comment on Twitter with some suggesting (as indeed Tyrone argues) that this ignores the electoral risks to Labour of re-opening the Brexit debates and divisions.
I’m not, of course, unaware of those risks. I’m also aware of my own biases. I spend much of my week reading for and writing what are now normally 3000-word blog posts, and over the last six years have written, in various places, well over a million words about Brexit. So I recognize that I’m not exactly typical, that I’m far more likely than most to see merit in talking about Brexit, and therefore highly prone to understating the damage that doing so might do to the Labour Party.
Against that, Alastair Campbell – who knows more than me or most people about political strategy and communication, and who is passionately committed to Labour’s electoral success – also believes that Labour should and could be speaking more directly and forcefully about the damage of Brexit, and ways to mitigate it. Labour MP Stella Creasy has said something similar this week. And, whilst not explicitly mentioning Labour, former Foreign Secretary David Miliband has recently tweeted about the need for “an honest debate about how to limit the damage” of Brexit. Then, just yesterday, Shadow Foreign Secretary David Lammy unveiled some limited ideas on how Labour would try to develop the existing Brexit trade deal, although it remains to be seen how forcefully even these will be pursued. These ideas are a step in the right direction but as yet they fall short of providing the necessary leadership.
Why Labour needs a policy
Clearly there are electoral risks in alienating leave-voting potential Labour supporters, but there are also risks on Labour’s other flank, with its present flaccid stance alienating to the very large number of remain-voting potential Labour supporters. Of course there’s a view that Labour can afford to lose some of these to the LibDems or Greens in urban areas where Labour has huge majorities if it enables them to hold on to, or attract back, ‘Red Wall’ voters, and it may be re-enforced by today’s Wakefield by-election result. However, that ignores how Labour seats in very strongly remain-voting areas like Cambridge (26.3% leave) or Hampstead & Kilburn (23.7% leave) could be lost to the LibDems given not inconceivable swings (9% and 13% respectively), or how Conservative seats that Labour might hope to win on very small swings, like Chipping Barnet (41.1% leave, 1% swing to Labour needed) or Chingford (49.9% leave, 1.3% swing to Labour needed), might remain Conservative by virtue of disaffected remainers voting LibDem, or not voting at all.
And then there are Labour marginals like Warwick & Leamington (41.6% leave, Tories need 0.7% swing) and Canterbury (45.3% leave, Tories need 1.5% swing), which Labour could lose for lack of remainer support. Beyond such seats, even in those which had majorities, even large majorities, of leave voters, could still be affected by remainers feeling inadequately represented by Labour. In short, Labour can’t simply focus on its leave-voting actual or potential supporters and think that it can bank its remain-voting support.
This can also be put in a different way. Brexit isn’t automatically good territory for the Tories. No doubt it’s true that Johnson believes it would help him to pull Labour on to it, hence they resist going there, but that doesn’t mean he is right. It is not 2016 or even 2019 anymore. Of course the hard core of Tory leave voters will be galvanized by Brexit coming up the agenda again, but opinion polls show a clear and consistent lead for the view that Brexit was a mistake over those thinking it was right, and that many voters, including at least some who voted leave in 2016 and/or Tory in 2019, are now disillusioned by the way it has been done by Johnson including, as the NIPB amply shows, the emptiness of his promise to ‘get Brexit done’. It’s notable that yesterday, the anniversary of the referendum, two leave-voting seats rejected the Tories in by-elections. That may be more about Johnson than Brexit, but either way it is very far from clear that Labour will be monstered if they hold his Brexit record up for scrutiny. But to do that they need to a have a good and suitably crafted answer to the inevitable question: what would you do differently?
The policy that Labour needs
That does not mean a ‘rejoin’ policy, which would effectively go back to the in-out question of 2016. I don’t think that’s in prospect for years, perhaps not ever. It need not even mean a single market policy, and although some, including recently Labour frontbencher Anna McMorrin have called for that, it’s clear from what Lammy said yesterday that Labour are not going to endorse that for now, and I suspect that will hold right through to the election. However, that doesn’t mean that a Labour-led coalition – perhaps the most likely outcome - would not adopt it.
But it could certainly include a commitment to extensive regulatory alignment – perhaps, as, again, David Miliband has recently suggested, for a specified period of five or ten years – to include Sanitary and Phyto-sanitary (SPS) alignment. In itself, that makes the Irish Sea border substantially thinner. Temporarily or permanently abandoning the UKCA mark, already postponed by the government, would barely be controversial but would make life a lot easier for UK businesses. Both of these things go substantially beyond the Lammy proposals, especially as it’s not clear whether the SPS deal he alluded to implies full dynamic alignment. Proposing to add a mobility chapter to the TCA so that musicians and other service providers could more easily travel within the EU would be an equally pragmatic position, and one which Lammy appears to have suggested Labour will endorse.
It's worth recalling that none of the things listed above was remotely controversial even amongst most committed Brexiters until very recently. It is only the rapid radicalization of their demands that has led to the scorched earth ‘sovereignty-first’ Brexit delivered by Johnson and Frost. Labour can, with absolute truth, say to leave voters that this was not the Brexit they were promised. Even leaving aside the whole soft versus hard Brexit issue, a core Brexiter claim was that sovereignty would mean the UK choosing for itself which rules it wanted to follow, according to its own best interests. It didn’t mean eschewing all regulations other than those unique to the UK. So it is perfectly reasonable for Labour to argue that alignment is currently in the UK’s best interest, and to commit to it.
In this way Labour could develop a position that allows them to criticise the damage Brexit is doing and provide a pragmatic alternative, and to do this not as ‘re-opening Brexit’ but as part and parcel of a wider policy offer on the economy, in particular. It won’t please everyone, but nothing will. Crucially this, or a more fully developed version of it, would be a policy rather than the present policy vacuum. That, just in itself, would change the terms of the debate. If Labour won the next election, it would also change the delivery of policy.
Beyond Brexit
The perennial political mistake is to fight yesterday’s battle. To some, that implies, indeed, that Labour should relegate Brexit to the past. But this is to fundamentally misunderstand how Brexit is a still ongoing process and that the post-Brexit condition is the necessary context of all policymaking. This means that those resisting discussing Brexit are actually trapped in yesterday’s battle, thinking it means the 2016-2019 battle over leaving the EU. Indeed Alastair Campbell (in a personal communication) “thinks Labour are fighting the last battle not the next one, which is to re-build Britain’s economy and reputation after austerity, Brexit and Covid, the ABC that has done so much damage”.
That can’t be done without mentioning the damage of Brexit, any more than it can without mentioning that caused by austerity and Covid. The Tories may want to continue to see Brexit through the prism of the dead question of leaving or remaining in the EU even if this has declining salience even in leave-voting areas (as Guardian journalist John Harris suggests, also invoking the motif of ‘generals fighting the last war’, but applying it to Johnson). Labour does not need to do so and should not do so. The new, living, Brexit question, and it is not just a question for Labour but everyone, is: what now?
At the moment, we are still on the cusp. Much of the content and terms of the debate are the same as they have been in the six years since the referendum. That won’t disappear, but it is beginning to shift and in the next years will do so even more. That’s inevitable just because of the passage of time. It’s also because one of the few Brexiter slogans which was true, albeit perhaps not as they meant it, was ‘we’re leaving the EU, we’re not leaving Europe’.
So, here we are, having left the EU but not left Europe. The question, then – and it’s a question with profound implications for economic, foreign, defence, security, science, and many other policy areas – is the nature of that inevitable relationship. This is acknowledged by the CBP report (p.75), but predictably refracted through the hostile and unrealistic lens of seeing the EU as “declining” (declinism being a permitted narrative when applied to the EU), “incoherent” and relatively unimportant, and to be approached more through bi-lateral relations with member states than with the EU bloc.
But the Brexiters do not own this question or its answers, and if they are allowed to do so by default and others’ silence then the failures of Brexit so far will be compounded by those of the coming post-Brexit period. In particular, the UK’s approach to this question needs to break with the evidence-distorting, logic-twisting, reality-denying mentality that has characterised the Brexit process so far. Crucially, whilst the question arises as a result of the referendum of six years ago the answer is not, as they want it to be, in any way specified by that referendum. This is the coming battle, and it is going to be central to the politics of Brexit for at least the next six years.
The second reading of the Bill will be on Monday, although the DUP are still refusing to take part in the power-sharing institutions*. Meanwhile, the President of the EU Commission has issued a clear statement that it will discuss implementation issues but not re-write the Protocol, and its member states have unanimously backed the Commission both in this stance and in taking legal action against the UK. It is desperately sad, but alas no surprise, to see a senior Dutch journalist, Caroline de Gruyter, drawing direct comparisons between the UK and Russia.
Brexit has failed, but what should be done about it?
There will be much more to follow on that, and of course the NIPB is in itself one important indicator of just how badly Brexit has failed. The big question emerging now, which is likely to pervade the next six years and more of politics, is what to do about that failure. It is only an ‘emerging’ question because, clearly, things are not so neat as that. Some are still fighting a rear-guard action to dismiss the damage of Brexit as the extension of ‘Project Fear’, generally invoking cherry-picked statistics or making bogus claims about vaccines or the Ukraine War, and will no doubt continue to do so forever.
However, that is increasingly the preserve of unpersuadable diehards. There will never be unanimity, but there’s no sensible way of denying that the consensus view of those economists and others with relevant expertise is that Brexit has been, and will continue to be, economically damaging. On this blog, including in the April ‘failure’ post, I’ve cited numerous studies to this effect. Under the telling headline ‘the deafening silence over Brexit’s economic fallout’, this week the Financial Times provided an overview of the evidence (£) showing the damage, drawing on studies from the LSE and the Peterson Institute amongst others. Meanwhile, the Resolution Foundation produced a major new report about the mainly negative impacts on productivity, wages, household incomes, investment and competitiveness, and three major US banks warned that the UK would experience “searing inflation” for years because of Brexit. The idea that all the academics, thinktanks, banks and consultancies have, as David Frost suggested yesterday, “an axe to grind” and their analysis should be ignored is, frankly, puerile.
Indeed, the economic damage is now built in to the government’s own budget plans and modelling and, as mentioned in several previous posts, there are many signs that Brexiters themselves are coming to accept the failure of their project. Jacob Rees-Mogg’s refusal this week to publish any assessments of the success of Brexit itself shows that the government knows it has failed, for you can be sure he would do so if even the slenderest evidence of success existed. So whilst the diehards will continue to decry the damage reports as remainer propaganda, we are seeing, as I argued in a recent post, the gradual revelation of the ‘public secret’ of Brexit’s failure. It’s on the assumption this process continues, and what a New Statesman editorial this week calls the “conspiracy of silence” over Brexit breaks, that the question of how to address its failure becomes crucial.
The Brexit Ultras’ answer
In this context, this week’s widely reported-on document from the Centre for Brexit Policy (CBP), entitled Defining Britain’s Post-Brexit Role in the World, is illustrative and important. In its own way it is an acknowledgement that Brexit has not yielded tangible success, although it ascribes that to the government’s half-hearted implementation rather than to any flaws inherent in Brexit, and tries to chart a future path that will deliver such success for the nation. Not that it is in any sense a blueprint for national unity, being a highly partisan, not to say a paranoid, document, speaking of “rejoiner plots” that are “led by Tony Blair” (p.31) and replete with disparaging references to ‘remainers’.
Crucially, its collective authorship of seventeen are mostly readily identifiable as ‘the usual suspects’ associated with the CBP and similar groups, and partly as a result its proposals are both predictable and predictably flawed. So, for example, although the report is not mainly concerned with trade or economics, where these are discussed it rejects the gravity model of trade, in which geographical proximity is a key factor in trade volumes (p. 39). It’s a model endorsed by the vast majority of trade economists but there are a small number of exceptions, such as Professor Patrick Minford. And, what a surprise, amongst the collective authors we find … Patrick Minford. Reality, at least as understood by the vast majority of those competent to judge, is simply discounted (in this case by the usual trick of disaggregating EU trade into that with individual member states) which makes it hard to regard it as a serious analysis.
This same echo chamber quality permeates the report which, as regards its main geo-political focus, puts huge weight on the Special Relationship with the US (p. 41), the Anglosphere+ (Australia, New Zealand, Canada, India and, um, Japan), and the Commonwealth which, we’re told, “is much more than politics. It is the sense of instantly if indefinably feeling at home in each other’s lands; of the smells of shared, fusion cuisines, shared passions for cricket and rugby, of the Commonwealth Games, of the Duke of Edinburgh’s Award Scheme” (p.34) and which “looks to the UK for leadership” (p.56). It’s hard to know whether to laugh or cry at an analysis so naïve and so inattentive to modern history, but finding John Bolton and Alexander Downer (the former Australian Foreign Affairs Minister who is a leading opponent of Australian Republicanism) amongst the collective authorship helps to explain it.
A less partisan and more realistic account would recognize that for many years now the special relationship has been something of a diplomatic fiction, and one reduced by Brexit because of the loss of the ‘transatlantic bridge’ role. That isn’t to deny there is an important relationship, especially in intelligence services, but it shouldn’t be over-stated. Certainly the days when Australia, New Zealand and Canada looked to the ‘Mother Country’ are long gone, and Australia, in particular, is set to at least reconsider republicanism when the Queen dies. That will also be a pivotal moment for the future nature of the Commonwealth, and Professor Philip Murphy, Director of the Institute of Commonwealth Studies at the University of London thinks that “perhaps the Commonwealth has historically run its course and what you’re really seeing now is the ghost of an organization”. Murphy, who as his job title implies, is a leading expert on the topic, has also written a book that debunks many of the myths the CBP report relies on.
So, at the very least, these are questionable materials from which to build a sustainable post-Brexit future and, as with trade issues, the problem with the CBP approach is that it’s not based on the deep expertise of specialists but instead put together by those whose allegiance is to the Brexit project and discounts or downplays any expertise that contradicts what they would like to be true. The authors of the report would, no doubt, dismiss such criticisms as ‘elitist’, and perhaps enfold them into the category of the ‘declinism’ which they hold responsible both for Britain having joined the EU in the first place and for having failed to capitalise on its post-Brexit opportunities.
But this kind of Brexit ‘revivalism’ is as problematic an account of British history as declinism itself, with both being “symptoms of a nation unable to come to grips with its place in the world” as the historian Professor David Edgerton recently put it. Again, Edgerton is an expert on (and indeed himself a critic of) declinist explanations of British history. Both declinism and revivalism simply get in the way of realism, by constantly invoking historical myths or boosterish projects rather than serious strategic thinking which, to be successful, has to be based on the best available evidence. That evidence also needs to be understood, whereas Phillips O’Brien, Professor of Strategic Studies at St Andrew’s University, whose groundbreaking work on Britain and WW2 is cited in the report, says the authors do so in a way that convinces him they “have no idea what they are saying”. O’Brien also describes the report as a whole as “witch-burning” and “substanceless” and says that the authors “have no realistic understanding of Britain’s place in the world”.
Unsurprisingly, the “witch-burning” comes to a crescendo in proposals for a wholesale ‘reform’ of the Civil Service, which is depicted as being in the grip of declinism and of its supposed “bias against Brexit” and “continuing obstruction” of post-Brexit initiatives (p.87). This has been the perpetual cry of Brexiters since 2016 and it continues for the same reason: because the Civil Service has to enact real policies, it can’t indulge Brexiter fantasies. Since these fantasies persist in the echo-chamber world of bodies like the CBP, the only recourse is to posit that if the Civil Service were true believers then the fantasies would become real. But whereas expertise can be ignored and evidence cherry-picked in order to develop proposals, a Civil Service is needed to deliver policy - so the answer is to get a new one. If this becomes the template for Britain’s post-Brexit future then it will be as doomed to failure as the Brexit process itself because however strong belief is, reality always trumps it.
Why does the CBP report matter?
Despite its evident weaknesses (which would take a book to catalogue) the CBP report matters. Like several similar outfits under various names over the years, the CBP has close affiliations with the ERG MPs. Its Chairman is still the disgraced ERG ex-MP Owen Paterson, and its Fellows include ERG MPs Iain Duncan Smith and David Jones, both listed as authors of this latest report. Time and time again the propositions put forward by such groups move from being the apparently fringe meanderings of extremists to becoming pretty much government policy.
The most important example is the CBP’s July 2020 report on Replacing the Withdrawal Agreement. Some of it has been overtaken by events, but its wholesale objection to the NIP can be seen as setting the direction of travel that has resulted in the current NIPB. This, of course, was months before the NIP came into effect and so was plainly not motivated by the unexpected impacts of its operations.
The chances of the ideas in the latest CBP report, and the closely related deregulatory agenda, having an impact are considerable. That is partly because of Johnson’s current political weakness, making it easy to push him around, limited only by the fact that the Ultras’ wilder proposals would be wildly unpopular with the electorate. It is also for the more fundamental reason that – and in this respect, at least, the Brexit Ultras are right – he and his government have never had any coherent post-Brexit strategy, and indeed hardly mention it beyond boasting that it has ‘been delivered’.
Just as in 2016 there was no plan for how to do Brexit and the Institute for Government was warning that “silence is not a strategy”, so, now, the Brexit government has no plan for what to do with Brexit, as this week’s unveiling of Rees-Mogg’s risible Brexit ‘Public Dashboard’ illustrates. Now, as then, that leaves a vacuum into which the Ultras can push their agenda for the coming years. Crucially, apart from the content of that agenda, that means the continuation of an approach based on wilful distortions of evidence and reasoning, denial of reality, and hyper-partisanship.
This is the reason why things like the CBP report should be paid attention to. For what is at stake now is not Brexit – the question of whether to leave the EU or not - but the multiple severe problems Britain faces, problems which include social and regional inequality, poor productivity, crumbling infrastructure, a rentier economy, and declining living standards. No doubt there are others (including many, such as climate change, which aren’t specifically national) but as a core list it would probably be accepted by people of most political persuasions, including those with different views of Brexit.
In an interesting essay in The Atlantic this week – not all of which I agree with - Tom McTague makes the point that whilst Brexiters need to face the fact that leaving the EU has worsened many of these problems, erstwhile remainers need to accept that they did not begin with Brexit. I certainly don’t have any problems accepting that, though all it suggests to me is that Brexiters were wrong to say that the UK was not free to make its own, often poor, policy choices whilst in the EU, and then exacerbated them by leaving. The implication of that is to make better policy choices now, which includes acknowledging and limiting the damage that Brexit has done, and part of that includes – and here I agree with McTague’s implication – ceasing to treat 2016 as the sole, defining moment of recent British history.
Looking towards 2026
There’s no realistic prospect of the present government doing this. I suppose it’s remotely possible that a future Conservative government could, and Nick Tyrone, author of This Week in Brexitland, has argued that it may well be such a government that will eventually take us back into the single market and even the EU. But that is at best a very long-term prospect and what matters in the more immediate period, given there will be a General Election by 2024, is the other part of the vacuum, namely Labour’s near silence on Brexit. In a recent post I wrote about how Labour have the chance to lead the debate and, though I’m hardly the first person to have made that observation, my post attracted a fair bit of comment on Twitter with some suggesting (as indeed Tyrone argues) that this ignores the electoral risks to Labour of re-opening the Brexit debates and divisions.
I’m not, of course, unaware of those risks. I’m also aware of my own biases. I spend much of my week reading for and writing what are now normally 3000-word blog posts, and over the last six years have written, in various places, well over a million words about Brexit. So I recognize that I’m not exactly typical, that I’m far more likely than most to see merit in talking about Brexit, and therefore highly prone to understating the damage that doing so might do to the Labour Party.
Against that, Alastair Campbell – who knows more than me or most people about political strategy and communication, and who is passionately committed to Labour’s electoral success – also believes that Labour should and could be speaking more directly and forcefully about the damage of Brexit, and ways to mitigate it. Labour MP Stella Creasy has said something similar this week. And, whilst not explicitly mentioning Labour, former Foreign Secretary David Miliband has recently tweeted about the need for “an honest debate about how to limit the damage” of Brexit. Then, just yesterday, Shadow Foreign Secretary David Lammy unveiled some limited ideas on how Labour would try to develop the existing Brexit trade deal, although it remains to be seen how forcefully even these will be pursued. These ideas are a step in the right direction but as yet they fall short of providing the necessary leadership.
Why Labour needs a policy
Clearly there are electoral risks in alienating leave-voting potential Labour supporters, but there are also risks on Labour’s other flank, with its present flaccid stance alienating to the very large number of remain-voting potential Labour supporters. Of course there’s a view that Labour can afford to lose some of these to the LibDems or Greens in urban areas where Labour has huge majorities if it enables them to hold on to, or attract back, ‘Red Wall’ voters, and it may be re-enforced by today’s Wakefield by-election result. However, that ignores how Labour seats in very strongly remain-voting areas like Cambridge (26.3% leave) or Hampstead & Kilburn (23.7% leave) could be lost to the LibDems given not inconceivable swings (9% and 13% respectively), or how Conservative seats that Labour might hope to win on very small swings, like Chipping Barnet (41.1% leave, 1% swing to Labour needed) or Chingford (49.9% leave, 1.3% swing to Labour needed), might remain Conservative by virtue of disaffected remainers voting LibDem, or not voting at all.
And then there are Labour marginals like Warwick & Leamington (41.6% leave, Tories need 0.7% swing) and Canterbury (45.3% leave, Tories need 1.5% swing), which Labour could lose for lack of remainer support. Beyond such seats, even in those which had majorities, even large majorities, of leave voters, could still be affected by remainers feeling inadequately represented by Labour. In short, Labour can’t simply focus on its leave-voting actual or potential supporters and think that it can bank its remain-voting support.
This can also be put in a different way. Brexit isn’t automatically good territory for the Tories. No doubt it’s true that Johnson believes it would help him to pull Labour on to it, hence they resist going there, but that doesn’t mean he is right. It is not 2016 or even 2019 anymore. Of course the hard core of Tory leave voters will be galvanized by Brexit coming up the agenda again, but opinion polls show a clear and consistent lead for the view that Brexit was a mistake over those thinking it was right, and that many voters, including at least some who voted leave in 2016 and/or Tory in 2019, are now disillusioned by the way it has been done by Johnson including, as the NIPB amply shows, the emptiness of his promise to ‘get Brexit done’. It’s notable that yesterday, the anniversary of the referendum, two leave-voting seats rejected the Tories in by-elections. That may be more about Johnson than Brexit, but either way it is very far from clear that Labour will be monstered if they hold his Brexit record up for scrutiny. But to do that they need to a have a good and suitably crafted answer to the inevitable question: what would you do differently?
The policy that Labour needs
That does not mean a ‘rejoin’ policy, which would effectively go back to the in-out question of 2016. I don’t think that’s in prospect for years, perhaps not ever. It need not even mean a single market policy, and although some, including recently Labour frontbencher Anna McMorrin have called for that, it’s clear from what Lammy said yesterday that Labour are not going to endorse that for now, and I suspect that will hold right through to the election. However, that doesn’t mean that a Labour-led coalition – perhaps the most likely outcome - would not adopt it.
But it could certainly include a commitment to extensive regulatory alignment – perhaps, as, again, David Miliband has recently suggested, for a specified period of five or ten years – to include Sanitary and Phyto-sanitary (SPS) alignment. In itself, that makes the Irish Sea border substantially thinner. Temporarily or permanently abandoning the UKCA mark, already postponed by the government, would barely be controversial but would make life a lot easier for UK businesses. Both of these things go substantially beyond the Lammy proposals, especially as it’s not clear whether the SPS deal he alluded to implies full dynamic alignment. Proposing to add a mobility chapter to the TCA so that musicians and other service providers could more easily travel within the EU would be an equally pragmatic position, and one which Lammy appears to have suggested Labour will endorse.
It's worth recalling that none of the things listed above was remotely controversial even amongst most committed Brexiters until very recently. It is only the rapid radicalization of their demands that has led to the scorched earth ‘sovereignty-first’ Brexit delivered by Johnson and Frost. Labour can, with absolute truth, say to leave voters that this was not the Brexit they were promised. Even leaving aside the whole soft versus hard Brexit issue, a core Brexiter claim was that sovereignty would mean the UK choosing for itself which rules it wanted to follow, according to its own best interests. It didn’t mean eschewing all regulations other than those unique to the UK. So it is perfectly reasonable for Labour to argue that alignment is currently in the UK’s best interest, and to commit to it.
In this way Labour could develop a position that allows them to criticise the damage Brexit is doing and provide a pragmatic alternative, and to do this not as ‘re-opening Brexit’ but as part and parcel of a wider policy offer on the economy, in particular. It won’t please everyone, but nothing will. Crucially this, or a more fully developed version of it, would be a policy rather than the present policy vacuum. That, just in itself, would change the terms of the debate. If Labour won the next election, it would also change the delivery of policy.
Beyond Brexit
The perennial political mistake is to fight yesterday’s battle. To some, that implies, indeed, that Labour should relegate Brexit to the past. But this is to fundamentally misunderstand how Brexit is a still ongoing process and that the post-Brexit condition is the necessary context of all policymaking. This means that those resisting discussing Brexit are actually trapped in yesterday’s battle, thinking it means the 2016-2019 battle over leaving the EU. Indeed Alastair Campbell (in a personal communication) “thinks Labour are fighting the last battle not the next one, which is to re-build Britain’s economy and reputation after austerity, Brexit and Covid, the ABC that has done so much damage”.
That can’t be done without mentioning the damage of Brexit, any more than it can without mentioning that caused by austerity and Covid. The Tories may want to continue to see Brexit through the prism of the dead question of leaving or remaining in the EU even if this has declining salience even in leave-voting areas (as Guardian journalist John Harris suggests, also invoking the motif of ‘generals fighting the last war’, but applying it to Johnson). Labour does not need to do so and should not do so. The new, living, Brexit question, and it is not just a question for Labour but everyone, is: what now?
At the moment, we are still on the cusp. Much of the content and terms of the debate are the same as they have been in the six years since the referendum. That won’t disappear, but it is beginning to shift and in the next years will do so even more. That’s inevitable just because of the passage of time. It’s also because one of the few Brexiter slogans which was true, albeit perhaps not as they meant it, was ‘we’re leaving the EU, we’re not leaving Europe’.
So, here we are, having left the EU but not left Europe. The question, then – and it’s a question with profound implications for economic, foreign, defence, security, science, and many other policy areas – is the nature of that inevitable relationship. This is acknowledged by the CBP report (p.75), but predictably refracted through the hostile and unrealistic lens of seeing the EU as “declining” (declinism being a permitted narrative when applied to the EU), “incoherent” and relatively unimportant, and to be approached more through bi-lateral relations with member states than with the EU bloc.
But the Brexiters do not own this question or its answers, and if they are allowed to do so by default and others’ silence then the failures of Brexit so far will be compounded by those of the coming post-Brexit period. In particular, the UK’s approach to this question needs to break with the evidence-distorting, logic-twisting, reality-denying mentality that has characterised the Brexit process so far. Crucially, whilst the question arises as a result of the referendum of six years ago the answer is not, as they want it to be, in any way specified by that referendum. This is the coming battle, and it is going to be central to the politics of Brexit for at least the next six years.
*Note: Updated/ corrected at 10.40 on 24/06/22 because an earlier version of this post incorrectly stated that no date had been set for the second reading of the NIPB.
Friday, 22 May 2020
"It does not have to be like this". But it is
This week the UK government, belatedly, made public its draft legal texts for an agreement with the EU, for the first time authorising them to be communicated to EU Member States. They are, necessarily, lengthy and highly technical documents which have already begun to be picked over by numerous independent trade experts such as David Henig, Sam Lowe, Dr Anna Jerzewska, Dmitry Grozoubinski, and Iana Dreyer. No doubt more will appear as they and others digest the contents of these documents.
They were accompanied by a covering letter - described by Daniel Boffey of The Guardian as “extraordinary” - from David Frost to Michel Barnier which gives much insight into how the UK is approaching the negotiations. Much of it is not surprising. Repeatedly, it invokes arguments which are now familiar and which I have discussed in several previous posts.
First, it envisages a “suite of agreements” rather than the kind of over-arching Association Agreement sought by the EU. Secondly, it constantly invokes supposed “precedents” based upon a variety of other agreements that the EU has with third countries. As I discussed in my recent blog, this is profoundly unrealistic. However, what I didn’t say there and which has only become clear (to me, at least) with the publication of the draft texts, and the commentary of those listed and linked to earlier, is the cumulative effect of these two things.
For, despite being predicated on the idea that the UK is not asking for anything that other third countries don’t have, stitching them together creates what overall is an unprecedented ask (£), without apparently offering much, if anything, in return. There’s nothing wrong with trying that, of course, but it is disingenuous to suggest at the same time that it is a modest, minimal or straightforward demand, and absurd to complain if it gets rejected.
It’s not fair!
That brings us to the third feature of the letter, which was more surprising and, indeed, extraordinary. For it reads as, first, a letter of complaint, in which the EU is ‘told off’ for having taken an unsatisfactory stance and, second, as a submission to an academic seminar on political theory in which various “arguments” are discussed and (supposedly) refuted. However the overall tenor is, more than anything else, like the familiar refrain of childhood: ‘but it’s not fair’. In that last respect it is very much in line with what Bobby McDonagh, writing in the Irish Times but before the letter appeared, described as Britain’s “Brexit tantrum”.
Thought of in these terms, a useful question to ask is – what reaction from the EU is anticipated? If a letter of complaint – ‘we’re sorry, we got it wrong’? If an academic seminar – ‘good point, we hadn’t thought of that’? If a childish lament – ‘there, there, mummy’s here now’? What, precisely, is envisaged? In the event, the response from Barnier was to point out that such posturing “cannot be a substitute for serious engagement and detailed negotiations”. Well, quite.
For those who insist, as many Brexiters do, on the dignity and indeed the pride of the British nation it was a remarkably undignified and petulant statement. More to the point, it’s simply irrelevant as regards an international (trade) negotiation. For such negotiations are not about winning arguments or making complaints. They are about cold, hard power, interests, and trade-offs. Not only do argument and complaint cut no ice, but they show that you have already lost. It’s as simple and as brutal as a playground fight – the person who wants to reason with their opponent is the one who has already lost.
Does that make the EU a bully, administering ‘punishment beatings’? It’s a meaningless question. Power is just power. What is surprising is that Brexiters who have spent decades saying how awful the EU is are now pearl-clutching about its ‘viciousness’, as if what they expected was charity, or special treatment. And that is the more surprising since they have spent those decades insulting the EU, and yet now imagine that they will be the recipient of its kindness. What, for example, did Brexit Party MPs who last July were childishly turning their backs when the European anthem was played in the European Parliament think? That it would endear Britain to the EU? Did those repeatedly comparing the EU to Nazi Germany or the USSR think doing so would make securing a good deal easier?
So at one level the letter is an expression of the continuing naivety of Brexiters. At another, of course, it’s not about negotiations with the EU at all. Instead, it’s part of a concerted campaign to depict the EU, to the UK domestic audience, as unreasonable. And, indeed, the claim that Barnier is “losing the argument” is now being deployed routinely in support of this. It is as silly as Jeremy Corbyn’s widely-mocked claim that Labour ‘won the argument’ in the 2019 General Election in that, whether or not it’s true, it’s irrelevant to the only issue that matters.
Yet it has a serious implication to the extent that it will morph into blaming the EU if there is no deal, and all the attendant chaos of that, come next January. And if that happens then, no doubt, many will buy that line and forget all the promises made by Brexiters about how Britain ‘held all the cards’. What will matter, politically, is how many do so, if fresh chaos is heaped on a nation still reeling from coronavirus. If it’s, say, 50% or more then the gamble will have worked (in a political sense – of course the economic damage will be unaffected by where the blame goes). If it’s, say, 30% or less then the gamble will have failed. No doubt the question of where, within that kind of range, public opinion might land is what Boris Johnson will be calculating over the next month or so as the decision on transition period extension has to be reached.
The extension debate
With respect to that, fierce debate continues to rage. The Brexit Ultras associated with Patrick Minford et al - in yet another incarnation, this time the “Centre for Brexit Policy” – produced a predictable call against extension. Based, as usual, on the discredited ‘Cardiff model’, it recycled all the usual Ultra lines of which perhaps the most egregious is that whereas, if necessary, ‘WTO terms’ are perfectly viable for UK-EU trade, the key to post-Brexit prosperity is negotiating preferential trade terms with non-EU countries. (And if the predictable recycling of discredited arguments is your thing, look no further than David Davis’ suggestion on Radio 4 this week that – yes - ‘German car makers’ are about to ride to the UK’s rescue, as well as his prognostications about the trade negotiations. But always remember that Davis is the man who invariably gets everything about Brexit wrong).
On the other side of the argument, warnings about the impossibility of completing a deal without an extension abound, both from (pro-Brexit) columnists (£) and health experts, whilst Nicole Sykes of the CBI tweeted eloquently about the problems for businesses of preparing for a December end to transition whilst dealing with the coronavirus crisis. However, in general terms, businesses have been remarkably quiet about this, perhaps because in the current situation they are so heavily dependent upon government support. But several business-savvy journalists are speaking up, including Martin Wolf in a powerfully argued FT column yesterday (£). I’ve made my own arguments for extending the transition before, and won’t repeat them here.
One interesting intervention in the extension debate came this week from Raoul Ruparel – formerly Theresa May’s Special Advisor on Europe – in an article in Politico. It is a serious piece from a serious author, and proposed a ‘conditional extension’ to be agreed by the end of June, effectively to implement any deal agreed by, say, October. One merit lies in its recognition, often absent from this debate, of the key problem of business preparedness. Another lies in the implication – correct, I think – that the most likely route to extension in terms of UK political realities would be some form, even if not this form, of re-badging and re-designing.
That said, Ruparel’s proposal has several problems, both of timing (a deal by October) and of its legal basis (which he questionably suggests that Article 50 provides) but the one which I think is particularly important, because it has a wider implication, is the suggestion that such a conditional extension could be preceded by a UK parliamentary vote “to indicate that initial political agreement has been reached between the two sides on what their future relationship will be”.
The obvious problem here is that there has already been a not dissimilar kind of vote, when parliament approved the Political Declaration on, precisely, the outlines of the future relationship. This included a commitment to Level Playing Field conditions, specifically linked in the text to geographical and economic closeness, that the UK now openly disavows. It is therefore difficult to see what confidence could be placed in a parliamentary vote of the sort proposed.
A country that can no longer be trusted
For the bitter truth – bitter, that is, to have to say it about one’s own country – is that the way the UK has conducted itself these last four years means that the EU has very little grounds for confidence in us. That is both because we – or more accurately our governments - have repeatedly shown ourselves to be untrustworthy but also to be incompetent – either reneging on, or apparently failing to understand the implications of, what has been agreed to, for example, but also especially, as regards Northern Ireland. It doesn’t need a PhD in textual analysis to realise that when Michel Barnier wrote in his reply to Frost’s letter this week that “I would not like the tone you have taken to impact the mutual trust … that is essential between us” it was diplomatic code for the fact that it already has done so.
But this is not just a matter of a single letter £). The shrivelling of national reputation has been long in the making and, again, for this we must thank the Brexit Ultras such as Jacob Rees-Mogg who over a year ago proposed that the UK should use an (Article 50) extension period to make things “as difficult as possible” for the EU. Or David Davis who disowned the phase 1 agreement within hours of the UK signing it. Or the entire legion – Andrew Bridgen, John Redwood, Nigel Farage - who have made it clear that they regard the financial settlement as illegitimate.
And this is also relevant to the Ruparel proposal (or similar ones that may be made in the future) more generally. For whilst, as I agree, some re-badging and indeed repackaging is likely to be a politically necessary for the UK to agree to any form of extension, the question is – why is this so? The answer is solely in order to once more dance around the sensibilities of the Brexit Ultras – the same old dance that has driven the entire Brexit saga from the decision to hold a Referendum onwards. Again, it’s rather as with a spoiled child who is constantly indulged and, of course, whose behaviour gets ever worse the longer the indulgence goes on.
It is a national tragedy for us but, more importantly in the present context, it is a game the EU is no long willing and no longer needs to play. Having for decades offered compromises and opt-outs to satisfy British Euroscepticism, our domestic political poison is, luckily for the EU, no longer its problem. I don’t sense any appetite within the EU to indulge Britain further.
The brutal truth is that neither Britain, nor Brexit, really matter very much anymore for the EU. Except, to an extent, for Ireland, Brexit is scarcely discussed in the European media, doesn’t figure in the political debates of the member states, and is well near the bottom of EU priorities. The passage of time and the press of coronavirus means that almost no one outside the UK cares now. Yes, the EU would much prefer a deal, but not at any price. So there’s going to be little flex from the EU side because it cares so little about Brexit and, apparently, none from the UK government because it cares too much about Brexit.
For these various reasons, and despite my previous opinion that an extension would probably end up happening because of the overwhelming rationality of the case for it, I agree with Tom Hayes’ excellent discussion in his latest BEERG Brexit Blog which suggests that the transition period will almost certainly end as scheduled, and with no future terms deal in place.
Post-Brexit Britain is coming in to view
Whether or not that proves right, we are now seeing more and more detail of what kind of post-Brexit Britain is envisaged by the government. This is being revealed by, for example, the ongoing parliamentary passage of legislation such as the Agriculture Bill, the dangers of which for animal welfare and product standards were analysed by veterinary surgeon Anna Bramall in Prospect this week. It is also revealed by the Immigration Bill which gleefully cements the end of freedom of movement rights. Though it is rarely stated, this includes the end of those rights for British people - on the other hand, they are awarded the special Brexit bonus of having the lowest paid jobs reserved specially for them! There’s even now a dedicated ‘pick for Britain’ website to facilitate this.
This has been an unusually busy week for Brexit-related stories, and also a busy one for me, so there are several important developments and reports that I have not been able to discuss in this post. So I will just briefly mention some of them.
First, the UK announced the new Global Tariff schedule it will apply to countries with whom it does not have a trade agreement from the end of the transition period. If that includes the EU, then the cost of food and cars imported to the UK from there “will rise sharply” (£). At the same time, the new Customs Academy – set up to train the estimated 50,000 new customs agents that will be needed after Brexit – is reported to have neither the money nor anything like enough trainees to deliver them.
Second, there was a good BBC report on the complex issue of fishing quotas, where all the Brexiter promises are unravelling. Third, there was an analysis of the intricacies of the Irish Sea border by Dr Katy Hayward and Tony Smith on the LSE Brexit site, plus a wider discussion of Brexit and Irish border issues by Dr Andrew Blick at Federal Trust. That is the same Irish border that, before the Referendum, Boris Johnson said would be unaffected by Brexit and about which, since, he denied the consequences of what he signed up to with EU.
Disparate as these and the other stories in this post are, they all point towards what is emerging for Britain. A country that is poorer and meaner, in antagonistic relation with its neighbours and natural friends. A country mired in complex and intractable problems that are entirely of its own making. A country that in the name of taking back control and animated by nationalist chauvinism is now reduced to childish whining when the world outside does not do its bidding and scarcely even registers its complaints.
What makes us “so unworthy”? “It does not have to be like this”, David Frost caterwauled in his letter to Barnier, like a spurned teenager berating the intransigence of a lost first love. Well, certainly, it did not need to be like this and wouldn’t have been – without Brexit, of course, but also without the utterly cack-handed way in which Brexit has been pursued. But it is like this, and it will go on being like this. As indeed the Brexiter faux-patriots were warned from the start and throughout these years of negotiations in which they have, by their own choices and incompetence, dragged our country into internal distress and external disrepute.
They were accompanied by a covering letter - described by Daniel Boffey of The Guardian as “extraordinary” - from David Frost to Michel Barnier which gives much insight into how the UK is approaching the negotiations. Much of it is not surprising. Repeatedly, it invokes arguments which are now familiar and which I have discussed in several previous posts.
First, it envisages a “suite of agreements” rather than the kind of over-arching Association Agreement sought by the EU. Secondly, it constantly invokes supposed “precedents” based upon a variety of other agreements that the EU has with third countries. As I discussed in my recent blog, this is profoundly unrealistic. However, what I didn’t say there and which has only become clear (to me, at least) with the publication of the draft texts, and the commentary of those listed and linked to earlier, is the cumulative effect of these two things.
For, despite being predicated on the idea that the UK is not asking for anything that other third countries don’t have, stitching them together creates what overall is an unprecedented ask (£), without apparently offering much, if anything, in return. There’s nothing wrong with trying that, of course, but it is disingenuous to suggest at the same time that it is a modest, minimal or straightforward demand, and absurd to complain if it gets rejected.
It’s not fair!
That brings us to the third feature of the letter, which was more surprising and, indeed, extraordinary. For it reads as, first, a letter of complaint, in which the EU is ‘told off’ for having taken an unsatisfactory stance and, second, as a submission to an academic seminar on political theory in which various “arguments” are discussed and (supposedly) refuted. However the overall tenor is, more than anything else, like the familiar refrain of childhood: ‘but it’s not fair’. In that last respect it is very much in line with what Bobby McDonagh, writing in the Irish Times but before the letter appeared, described as Britain’s “Brexit tantrum”.
Thought of in these terms, a useful question to ask is – what reaction from the EU is anticipated? If a letter of complaint – ‘we’re sorry, we got it wrong’? If an academic seminar – ‘good point, we hadn’t thought of that’? If a childish lament – ‘there, there, mummy’s here now’? What, precisely, is envisaged? In the event, the response from Barnier was to point out that such posturing “cannot be a substitute for serious engagement and detailed negotiations”. Well, quite.
For those who insist, as many Brexiters do, on the dignity and indeed the pride of the British nation it was a remarkably undignified and petulant statement. More to the point, it’s simply irrelevant as regards an international (trade) negotiation. For such negotiations are not about winning arguments or making complaints. They are about cold, hard power, interests, and trade-offs. Not only do argument and complaint cut no ice, but they show that you have already lost. It’s as simple and as brutal as a playground fight – the person who wants to reason with their opponent is the one who has already lost.
Does that make the EU a bully, administering ‘punishment beatings’? It’s a meaningless question. Power is just power. What is surprising is that Brexiters who have spent decades saying how awful the EU is are now pearl-clutching about its ‘viciousness’, as if what they expected was charity, or special treatment. And that is the more surprising since they have spent those decades insulting the EU, and yet now imagine that they will be the recipient of its kindness. What, for example, did Brexit Party MPs who last July were childishly turning their backs when the European anthem was played in the European Parliament think? That it would endear Britain to the EU? Did those repeatedly comparing the EU to Nazi Germany or the USSR think doing so would make securing a good deal easier?
So at one level the letter is an expression of the continuing naivety of Brexiters. At another, of course, it’s not about negotiations with the EU at all. Instead, it’s part of a concerted campaign to depict the EU, to the UK domestic audience, as unreasonable. And, indeed, the claim that Barnier is “losing the argument” is now being deployed routinely in support of this. It is as silly as Jeremy Corbyn’s widely-mocked claim that Labour ‘won the argument’ in the 2019 General Election in that, whether or not it’s true, it’s irrelevant to the only issue that matters.
Yet it has a serious implication to the extent that it will morph into blaming the EU if there is no deal, and all the attendant chaos of that, come next January. And if that happens then, no doubt, many will buy that line and forget all the promises made by Brexiters about how Britain ‘held all the cards’. What will matter, politically, is how many do so, if fresh chaos is heaped on a nation still reeling from coronavirus. If it’s, say, 50% or more then the gamble will have worked (in a political sense – of course the economic damage will be unaffected by where the blame goes). If it’s, say, 30% or less then the gamble will have failed. No doubt the question of where, within that kind of range, public opinion might land is what Boris Johnson will be calculating over the next month or so as the decision on transition period extension has to be reached.
The extension debate
With respect to that, fierce debate continues to rage. The Brexit Ultras associated with Patrick Minford et al - in yet another incarnation, this time the “Centre for Brexit Policy” – produced a predictable call against extension. Based, as usual, on the discredited ‘Cardiff model’, it recycled all the usual Ultra lines of which perhaps the most egregious is that whereas, if necessary, ‘WTO terms’ are perfectly viable for UK-EU trade, the key to post-Brexit prosperity is negotiating preferential trade terms with non-EU countries. (And if the predictable recycling of discredited arguments is your thing, look no further than David Davis’ suggestion on Radio 4 this week that – yes - ‘German car makers’ are about to ride to the UK’s rescue, as well as his prognostications about the trade negotiations. But always remember that Davis is the man who invariably gets everything about Brexit wrong).
On the other side of the argument, warnings about the impossibility of completing a deal without an extension abound, both from (pro-Brexit) columnists (£) and health experts, whilst Nicole Sykes of the CBI tweeted eloquently about the problems for businesses of preparing for a December end to transition whilst dealing with the coronavirus crisis. However, in general terms, businesses have been remarkably quiet about this, perhaps because in the current situation they are so heavily dependent upon government support. But several business-savvy journalists are speaking up, including Martin Wolf in a powerfully argued FT column yesterday (£). I’ve made my own arguments for extending the transition before, and won’t repeat them here.
One interesting intervention in the extension debate came this week from Raoul Ruparel – formerly Theresa May’s Special Advisor on Europe – in an article in Politico. It is a serious piece from a serious author, and proposed a ‘conditional extension’ to be agreed by the end of June, effectively to implement any deal agreed by, say, October. One merit lies in its recognition, often absent from this debate, of the key problem of business preparedness. Another lies in the implication – correct, I think – that the most likely route to extension in terms of UK political realities would be some form, even if not this form, of re-badging and re-designing.
That said, Ruparel’s proposal has several problems, both of timing (a deal by October) and of its legal basis (which he questionably suggests that Article 50 provides) but the one which I think is particularly important, because it has a wider implication, is the suggestion that such a conditional extension could be preceded by a UK parliamentary vote “to indicate that initial political agreement has been reached between the two sides on what their future relationship will be”.
The obvious problem here is that there has already been a not dissimilar kind of vote, when parliament approved the Political Declaration on, precisely, the outlines of the future relationship. This included a commitment to Level Playing Field conditions, specifically linked in the text to geographical and economic closeness, that the UK now openly disavows. It is therefore difficult to see what confidence could be placed in a parliamentary vote of the sort proposed.
A country that can no longer be trusted
For the bitter truth – bitter, that is, to have to say it about one’s own country – is that the way the UK has conducted itself these last four years means that the EU has very little grounds for confidence in us. That is both because we – or more accurately our governments - have repeatedly shown ourselves to be untrustworthy but also to be incompetent – either reneging on, or apparently failing to understand the implications of, what has been agreed to, for example, but also especially, as regards Northern Ireland. It doesn’t need a PhD in textual analysis to realise that when Michel Barnier wrote in his reply to Frost’s letter this week that “I would not like the tone you have taken to impact the mutual trust … that is essential between us” it was diplomatic code for the fact that it already has done so.
But this is not just a matter of a single letter £). The shrivelling of national reputation has been long in the making and, again, for this we must thank the Brexit Ultras such as Jacob Rees-Mogg who over a year ago proposed that the UK should use an (Article 50) extension period to make things “as difficult as possible” for the EU. Or David Davis who disowned the phase 1 agreement within hours of the UK signing it. Or the entire legion – Andrew Bridgen, John Redwood, Nigel Farage - who have made it clear that they regard the financial settlement as illegitimate.
And this is also relevant to the Ruparel proposal (or similar ones that may be made in the future) more generally. For whilst, as I agree, some re-badging and indeed repackaging is likely to be a politically necessary for the UK to agree to any form of extension, the question is – why is this so? The answer is solely in order to once more dance around the sensibilities of the Brexit Ultras – the same old dance that has driven the entire Brexit saga from the decision to hold a Referendum onwards. Again, it’s rather as with a spoiled child who is constantly indulged and, of course, whose behaviour gets ever worse the longer the indulgence goes on.
It is a national tragedy for us but, more importantly in the present context, it is a game the EU is no long willing and no longer needs to play. Having for decades offered compromises and opt-outs to satisfy British Euroscepticism, our domestic political poison is, luckily for the EU, no longer its problem. I don’t sense any appetite within the EU to indulge Britain further.
The brutal truth is that neither Britain, nor Brexit, really matter very much anymore for the EU. Except, to an extent, for Ireland, Brexit is scarcely discussed in the European media, doesn’t figure in the political debates of the member states, and is well near the bottom of EU priorities. The passage of time and the press of coronavirus means that almost no one outside the UK cares now. Yes, the EU would much prefer a deal, but not at any price. So there’s going to be little flex from the EU side because it cares so little about Brexit and, apparently, none from the UK government because it cares too much about Brexit.
For these various reasons, and despite my previous opinion that an extension would probably end up happening because of the overwhelming rationality of the case for it, I agree with Tom Hayes’ excellent discussion in his latest BEERG Brexit Blog which suggests that the transition period will almost certainly end as scheduled, and with no future terms deal in place.
Post-Brexit Britain is coming in to view
Whether or not that proves right, we are now seeing more and more detail of what kind of post-Brexit Britain is envisaged by the government. This is being revealed by, for example, the ongoing parliamentary passage of legislation such as the Agriculture Bill, the dangers of which for animal welfare and product standards were analysed by veterinary surgeon Anna Bramall in Prospect this week. It is also revealed by the Immigration Bill which gleefully cements the end of freedom of movement rights. Though it is rarely stated, this includes the end of those rights for British people - on the other hand, they are awarded the special Brexit bonus of having the lowest paid jobs reserved specially for them! There’s even now a dedicated ‘pick for Britain’ website to facilitate this.
This has been an unusually busy week for Brexit-related stories, and also a busy one for me, so there are several important developments and reports that I have not been able to discuss in this post. So I will just briefly mention some of them.
First, the UK announced the new Global Tariff schedule it will apply to countries with whom it does not have a trade agreement from the end of the transition period. If that includes the EU, then the cost of food and cars imported to the UK from there “will rise sharply” (£). At the same time, the new Customs Academy – set up to train the estimated 50,000 new customs agents that will be needed after Brexit – is reported to have neither the money nor anything like enough trainees to deliver them.
Second, there was a good BBC report on the complex issue of fishing quotas, where all the Brexiter promises are unravelling. Third, there was an analysis of the intricacies of the Irish Sea border by Dr Katy Hayward and Tony Smith on the LSE Brexit site, plus a wider discussion of Brexit and Irish border issues by Dr Andrew Blick at Federal Trust. That is the same Irish border that, before the Referendum, Boris Johnson said would be unaffected by Brexit and about which, since, he denied the consequences of what he signed up to with EU.
Disparate as these and the other stories in this post are, they all point towards what is emerging for Britain. A country that is poorer and meaner, in antagonistic relation with its neighbours and natural friends. A country mired in complex and intractable problems that are entirely of its own making. A country that in the name of taking back control and animated by nationalist chauvinism is now reduced to childish whining when the world outside does not do its bidding and scarcely even registers its complaints.
What makes us “so unworthy”? “It does not have to be like this”, David Frost caterwauled in his letter to Barnier, like a spurned teenager berating the intransigence of a lost first love. Well, certainly, it did not need to be like this and wouldn’t have been – without Brexit, of course, but also without the utterly cack-handed way in which Brexit has been pursued. But it is like this, and it will go on being like this. As indeed the Brexiter faux-patriots were warned from the start and throughout these years of negotiations in which they have, by their own choices and incompetence, dragged our country into internal distress and external disrepute.
Friday, 26 October 2018
The business and economic effects of Brexit matter: ask Brexiters
As the
politics of Brexit continues to go round in circles, there is an increasing
atmosphere of concern, possibly even desperation, amongst British businesses.
The latest
CBI Industrial Trends survey, published this week, showed new manufacturing
domestic and export orders falling at the fastest pace for three years and
optimism regarding export prospects falling at the fastest pace for six years.
Meanwhile, concerns about access to skills and labour are the highest they have
been since 1974, and manufacturing investment is set to fall at the fastest
rate since the financial crisis.
A separate new CBI survey, of both large and small businesses’ Brexit preparedness, shows some even more alarming trends. These include that 80% of firms surveyed said Brexit has had a negative effect on their investment plans (up from 36% a year ago). Of course Tory Brexit Ultras such as Steve Baker have, in a rather extraordinary about-turn considering the historic link between the Conservatives and the CBI, nowadays written off the business group as a “grave menace”, whilst Boris Johnson’s view of business concerns about Brexit is well known.
In another new set of figures, the Society for Motor Manufacturers and Traders (SMMT) has announced a 16.8% fall in UK car manufacturing in September, the fourth consecutive month in which output has fallen. This comes amid ever-louder warnings from the industry of the damage Brexit could cause, the most recent being a very unusual public intervention from the global President of Toyota.
Brexiters dismiss business concerns
Again none of this matters to hardcore Brexiters. A dismissive article by Iain Duncan Smith the other day (cheered on by pro-Brexit economist Ruth Lea) railed against the car industry’s “prophets of doom” suggesting that the industry was of little account anyway. Strangely, the overwhelming importance they ascribe to the German car industry is not matched in Brexiters' regard for that of their own country. But apart from the disdain shown by this former leader of what was formerly called the party of business, the article contained at least two howlers.
One was the observation that UK auto manufacturing had been greatly “rejuvenated by the arrival of the Japanese under Lady Thatcher” – apparently in ignorance of the fact that she attracted them by virtue of British membership of the EU and the single market. The other was an apparent failure to understand the difference between global supply chains and regional just in time supply chains. Duncan Smith appears to think that since car makers source parts from outside of the EU single market and customs union, this must be through the same technique as those sourced from within. Thus he is able to conclude that all those car firm bosses don’t, in fact, understand their businesses in the way he does.
Duncan Smith calls on Anthony Bamford of JCB to pray in aid for his analysis, but he’d do better to look to James Dyson, the second of the triumvirate of businessmen invariably called upon by Brexiters (the third being Tim Martin. In passing, these three feature so regularly because there are so very few pro-Brexit business people – Duncan Smith also invokes the CFO of Aston Martin for the less than ringing endorsement that “Brexit doesn’t materially impact our plans”).
Dyson is relevant here in relation to his announcement this week that he would build his electric car in Singapore. The main discussion about this has been whether or not that is hypocritical in view of his pro-Brexit stance. But that isn’t really the key issue. Rather, it is his stated reason for doing so: “the decision of where to build our car is complex, based on supply chains, access to markets, and the availability of expertise …”. In other words, precisely those matters that UK car makers keep trying, unsuccessfully, to get Duncan Smith and the other Brexit Ultras to understand.
In any case, even if the car industry were as insignificant as the article imagines – and, apart from the fact that it actually employs about 1 million people directly or indirectly and accounts for 12% of UK goods exports, it’s important to consider the strategic significance of the industry as an R&D intensive (£3.65billion per year), high skill hub of the wider economy – it is hardly the case that it is the only one issuing “dire warnings”. Aerospace, pharmaceuticals, financial services … well, why bother to list them: it’s difficult to think of any sector of business, either in manufacturing or in services which is not issuing ever-greater cries of alarm. Brexiters write each individual one of them off, and in the process write off the greater part of the collective voice of business.
The paradox of Brexiters’ economic analysis
The most striking thing of all, though, is the way in which they do so. A few – a very few – Brexiters are quite open in saying that they are advocating and pursuing a policy which will cause considerable economic damage, but judge it to be worthwhile, normally on grounds of sovereignty. A much larger number of Brexiters – and no small number of bien-pensant remainers – chide the remain cause and especially its referendum campaign for over-focussing on economics and on dry analysis, thus misunderstanding what motivated leave voters. Yet, in fact, most Brexiters are at pains to try to make, precisely, economic arguments for what they are doing. Indeed, Duncan Smith’s article is replete with such arguments.
So too was a recent piece in the Daily Express by Jacob Rees-Mogg, claiming Brexit would bring about a leap in prosperity. Just as Brexiters always turn to the same tiny minority of business leaders, so too do they look to a similarly small group of economists. In the case of the Rees-Mogg article it won’t be a surprise to learn that, yet again, Patrick Minford and the Economists for Free Trade (EFT, formerly called Economists for Brexit) are cited for the evidence (as they are in Duncan Smith’s piece).
This time it was their recent ‘Budget for Brexit’ report, which had already been comprehensively taken to pieces by trade expert Frances Coppola, whilst former Chief Economist at the Cabinet Office, Jonathan Portes, tweeted that it “contained fantasy numbers” and was “an insult to the intelligence of its readers” (this, interestingly, in relation to a specific claim about the small size of the auto industry, which is apparently the Brexiter meme de jour).
None of this should be a surprise: the underlying basis of the EFT’s analysis of Brexit has been discredited over and over again (see a previous post for links to several examples). Moreover, whilst Rees-Mogg correctly acknowledges that Minford’s is a minority view he is surely wrong to say it should be given attention because of his “remarkable record” of successful forecasting, as – to take one of many examples - this chart from Chris Giles, Economics Editor of the FT, shows.
Of course, no matter how often this is pointed out and whoever does so it will make no difference. But it reveals again the fact that the Brexiter case is very much based on economics and that they are more than happy – indeed seek – to bolster that case by appealing to expert authority. Contrary to what seems to be the received wisdom on all sides of the debate, the question of whether Brexit will or will not make people worse off is still a key battleground. One of the achievements of the Brexiters is to continue to fight on that ground whilst, paradoxically, arguing with some success that it is not the ground that actually matters.
The enduring importance of economics
Yet it is clear that the reason both remain and leave advocates continue to discuss Brexit in economic terms is because it is a key dividing line amongst remain and leave voters. Polling evidence shows that some 56% of leave supporters (compared with 6% of remainers) think the economy will be better as a result of Brexit, whilst 69% of remainers (12% of leavers) think it will be worse as a result. It’s not at all clear where the cause and effect lie here (i.e. if people’s views of the economic impact explain their position on Brexit or vice versa), but it does suggest that economics – or perhaps more accurately people’s jobs, standard of living, taxes and public services – has not ceased to matter.
And we are no longer in the territory of forecasts. The latest (30 September) assessment by the Centre for European Reform’s Deputy Director John Springford is that the UK economy is 2.5% smaller than it would be had the vote been to remain in the EU, with a knock on effect of £26billion on public finances. The test of whether or not these and other economic effects of Brexit matter to voters is this: do Brexit advocates say that they do not matter? Or do they deny that the effects are happening and/or say that they are nothing to do with Brexit? The answer, almost invariably, is the latter.
A separate new CBI survey, of both large and small businesses’ Brexit preparedness, shows some even more alarming trends. These include that 80% of firms surveyed said Brexit has had a negative effect on their investment plans (up from 36% a year ago). Of course Tory Brexit Ultras such as Steve Baker have, in a rather extraordinary about-turn considering the historic link between the Conservatives and the CBI, nowadays written off the business group as a “grave menace”, whilst Boris Johnson’s view of business concerns about Brexit is well known.
In another new set of figures, the Society for Motor Manufacturers and Traders (SMMT) has announced a 16.8% fall in UK car manufacturing in September, the fourth consecutive month in which output has fallen. This comes amid ever-louder warnings from the industry of the damage Brexit could cause, the most recent being a very unusual public intervention from the global President of Toyota.
Brexiters dismiss business concerns
Again none of this matters to hardcore Brexiters. A dismissive article by Iain Duncan Smith the other day (cheered on by pro-Brexit economist Ruth Lea) railed against the car industry’s “prophets of doom” suggesting that the industry was of little account anyway. Strangely, the overwhelming importance they ascribe to the German car industry is not matched in Brexiters' regard for that of their own country. But apart from the disdain shown by this former leader of what was formerly called the party of business, the article contained at least two howlers.
One was the observation that UK auto manufacturing had been greatly “rejuvenated by the arrival of the Japanese under Lady Thatcher” – apparently in ignorance of the fact that she attracted them by virtue of British membership of the EU and the single market. The other was an apparent failure to understand the difference between global supply chains and regional just in time supply chains. Duncan Smith appears to think that since car makers source parts from outside of the EU single market and customs union, this must be through the same technique as those sourced from within. Thus he is able to conclude that all those car firm bosses don’t, in fact, understand their businesses in the way he does.
Duncan Smith calls on Anthony Bamford of JCB to pray in aid for his analysis, but he’d do better to look to James Dyson, the second of the triumvirate of businessmen invariably called upon by Brexiters (the third being Tim Martin. In passing, these three feature so regularly because there are so very few pro-Brexit business people – Duncan Smith also invokes the CFO of Aston Martin for the less than ringing endorsement that “Brexit doesn’t materially impact our plans”).
Dyson is relevant here in relation to his announcement this week that he would build his electric car in Singapore. The main discussion about this has been whether or not that is hypocritical in view of his pro-Brexit stance. But that isn’t really the key issue. Rather, it is his stated reason for doing so: “the decision of where to build our car is complex, based on supply chains, access to markets, and the availability of expertise …”. In other words, precisely those matters that UK car makers keep trying, unsuccessfully, to get Duncan Smith and the other Brexit Ultras to understand.
In any case, even if the car industry were as insignificant as the article imagines – and, apart from the fact that it actually employs about 1 million people directly or indirectly and accounts for 12% of UK goods exports, it’s important to consider the strategic significance of the industry as an R&D intensive (£3.65billion per year), high skill hub of the wider economy – it is hardly the case that it is the only one issuing “dire warnings”. Aerospace, pharmaceuticals, financial services … well, why bother to list them: it’s difficult to think of any sector of business, either in manufacturing or in services which is not issuing ever-greater cries of alarm. Brexiters write each individual one of them off, and in the process write off the greater part of the collective voice of business.
The paradox of Brexiters’ economic analysis
The most striking thing of all, though, is the way in which they do so. A few – a very few – Brexiters are quite open in saying that they are advocating and pursuing a policy which will cause considerable economic damage, but judge it to be worthwhile, normally on grounds of sovereignty. A much larger number of Brexiters – and no small number of bien-pensant remainers – chide the remain cause and especially its referendum campaign for over-focussing on economics and on dry analysis, thus misunderstanding what motivated leave voters. Yet, in fact, most Brexiters are at pains to try to make, precisely, economic arguments for what they are doing. Indeed, Duncan Smith’s article is replete with such arguments.
So too was a recent piece in the Daily Express by Jacob Rees-Mogg, claiming Brexit would bring about a leap in prosperity. Just as Brexiters always turn to the same tiny minority of business leaders, so too do they look to a similarly small group of economists. In the case of the Rees-Mogg article it won’t be a surprise to learn that, yet again, Patrick Minford and the Economists for Free Trade (EFT, formerly called Economists for Brexit) are cited for the evidence (as they are in Duncan Smith’s piece).
This time it was their recent ‘Budget for Brexit’ report, which had already been comprehensively taken to pieces by trade expert Frances Coppola, whilst former Chief Economist at the Cabinet Office, Jonathan Portes, tweeted that it “contained fantasy numbers” and was “an insult to the intelligence of its readers” (this, interestingly, in relation to a specific claim about the small size of the auto industry, which is apparently the Brexiter meme de jour).
None of this should be a surprise: the underlying basis of the EFT’s analysis of Brexit has been discredited over and over again (see a previous post for links to several examples). Moreover, whilst Rees-Mogg correctly acknowledges that Minford’s is a minority view he is surely wrong to say it should be given attention because of his “remarkable record” of successful forecasting, as – to take one of many examples - this chart from Chris Giles, Economics Editor of the FT, shows.
Of course, no matter how often this is pointed out and whoever does so it will make no difference. But it reveals again the fact that the Brexiter case is very much based on economics and that they are more than happy – indeed seek – to bolster that case by appealing to expert authority. Contrary to what seems to be the received wisdom on all sides of the debate, the question of whether Brexit will or will not make people worse off is still a key battleground. One of the achievements of the Brexiters is to continue to fight on that ground whilst, paradoxically, arguing with some success that it is not the ground that actually matters.
The enduring importance of economics
Yet it is clear that the reason both remain and leave advocates continue to discuss Brexit in economic terms is because it is a key dividing line amongst remain and leave voters. Polling evidence shows that some 56% of leave supporters (compared with 6% of remainers) think the economy will be better as a result of Brexit, whilst 69% of remainers (12% of leavers) think it will be worse as a result. It’s not at all clear where the cause and effect lie here (i.e. if people’s views of the economic impact explain their position on Brexit or vice versa), but it does suggest that economics – or perhaps more accurately people’s jobs, standard of living, taxes and public services – has not ceased to matter.
And we are no longer in the territory of forecasts. The latest (30 September) assessment by the Centre for European Reform’s Deputy Director John Springford is that the UK economy is 2.5% smaller than it would be had the vote been to remain in the EU, with a knock on effect of £26billion on public finances. The test of whether or not these and other economic effects of Brexit matter to voters is this: do Brexit advocates say that they do not matter? Or do they deny that the effects are happening and/or say that they are nothing to do with Brexit? The answer, almost invariably, is the latter.
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