Wednesday 23 November 2022

Johnson's deal is dead

Andrew Neil may have told readers of the Daily Mail that Brexit is dead but the government has yet to declare it all over. What we can say for certain is the Brexit that Johnson negotiated is dead. The CBI wants some growth policies and is pressing for more immigration. Hunt talks of removing the "vast majority" of trade barriers and even Kier Starmer says he wants to "reduce" trade barriers.  It is an explicit admission by both major parties that the non-tariff barriers between the EU and the UK are impacting trade. The problem now is trying to follow through on it and trying to get the EU to agree.

This will not come cheap in political terms for the Tory party although a bit less costly for Labour who aren't committed ideologically to the whole idea of Brexit in the way the Tories are. Sunak's problem is that the ERG are implacable in their opposition to even a hint of slightly closer EU ties.

Lord Barwell tweeted:

The FT carries a nice summary of the problems that the UK government faces in trying to reduce these non-tariff barriers. 

The only way to reduce trade barriers is to align regulations, something that Sunak went out of his way to reject last week at the CBI conference.  So, what to make of that?

Who can tell? Brexit has created a unique atmosphere in Britain where there is a lot of gaslighting going on most of the time but it’s never easy to tell who is being gaslighted. I suspect it’s the ERG in this case. The pressure to reduce barriers is coming from business and I don't expect it to reduce any time soon. It's more likely to rise as the coming recession bites.

Although all the talk of a Swiss-style deal in The Times was flatly denied by Sunak and No 10, Caroline Wheeler who helped write the story, tweeted: “The Sunday Times does not publish important stories like this unless they are impeccably sourced. As you know, the government response is often influenced by a need to manage the warring tribes of the Conservative Party.”   

You can bet somebody is working on this as we speak, regardless of what the PM said on Monday at the CBI.

The FT article is very informative, it asks: What can the UK do to lessen Brexit’s negative impact?

The answer is:

"Any moves to mitigate the negative effects of the TCA would involve blurring the current government’s red lines, particularly on accepting European Court of Justice oversight over key areas — say, regulations governing autos, chemicals or food standards — that the UK refused in the 2020 trade talks.

"The British Chambers of Commerce has identified five key areas it would like to see improved. They include a veterinary agreement to reduce the cost of paperwork to export animal and plant products; an overarching deal to simplify VAT arrangements so they do not differ from EU country to country; a deal to recognise the EU’s CE mark on industrial and electrical goods; and bilateral agreements with individual EU member states to allow better access for UK professional services.

The challenge, according to Anton Spisak, trade and EU specialist at the Tony Blair Institute for Global Change, is that to deliver meaningful benefits in these areas would require much higher levels of regulatory alignment than the current government can accept.

Such a move would run directly contrary to the government’s stated desire to seek 'benefits of Brexit' by actively diverging from EU regulation via the retained EU law bill, which is currently in parliament.

"'Ministers could make unilateral decisions to align to EU rules where consistency of rules evidently benefits business. This would alleviate some business costs, but it wouldn’t mean frictionless trade unless the UK can formalise this in a bilateral agreement with the EU — and for this, agreeing to the ECJ jurisdiction would be unavoidable,' said Spisak."

Another dilemma for any Tory leader.

Starmer has ruled out relaxing immigration and talked yesterday about training more UK workers. This is all well and good but it isn’t the problem. It’s attitude. British workers all too often don't have the right 'attitude' to work in general, at least not compared to Europeans.

And Labour says the new immigration process will have to allow in more workers anyway for the short term. Employers under Labour's idea will have to prove they have a plan to upskill British workers or invest in automation in the future. These are just more bureaucratic hurdles adding time and cost. 

It’s just skirting around the real problem and delaying a solution 

Finally, William Hague has an article in The Times that is fascinating. He says Brexiteers have until the election after next - 2028-29 - to show some benefits of Brexit. If not, all the murmurings about a Swiss-style deal will grow much louder and become unarguable.

I think he's being pessimistic. Crunch time will come much earlier than that. He writes:

"Voters felt strongly, on both sides, about how they voted then and have been reluctant to change their opinion. Recent surveys, however, are pointing to more regrets: YouGov recently reported that 56 percent of voters thought it was a bad idea to leave the EU and only 32 percent still thought it was a good one.

"This does not mean there is a public appetite to stir this divisive issue again. Most people want to see what has been decided finished off and made to work. But if, over the next few years, that 56 percent rises and the evidence of time suggests that Britain is doing badly, the electoral landscape at a future election, in 2028 or 2029, will be very different. 

"That would be a long enough period for the electorate to come to a judgment and, if that judgment were to be that Brexit had been a serious mistake, for materially closer links with the EU to become a very popular cause. The bad news for hardline Brexiteers is not that they are about to be betrayed. It is that there are about six or seven years left in which to show that the “clean” Brexit on which they insisted can be made to work in the interests of British people. They have used up half their time."

Hague says the government needs to speed up its efforts to show that Britain can use its freedom to make its own regulations in key parts of the economy. 

"The aim of abolishing all EU rules by the end of next year is really an act of frustration and threatens to throw the good out with the bad. A surgical approach to better rules for business and innovation has been slow to develop.

"Progress is now speeding up — the reform of financial services rules known as Solvency II was finally unveiled last week, and the gene-editing bill is before parliament. But changes to EU agricultural policies by introducing an environmental land management scheme need pushing forward decisively. Reform of rules on clinical trials, on which the UK could be a world leader with a better framework than EU directives, is dragging on without decisions from ministers. There are other opportunities, across many sectors, that need to be seized quickly.

"For the moment, there is no plot to be like Switzerland that the Conservative or Labour leaderships would entertain. Guardians of Brexit should calm themselves about that. What they should worry about is that the time available to show the Brexit project can work as it stands is not infinite. By the late 2020s, ministerial musings about Switzerland could be much more serious."

If William Hague (who I've always respected BTW) thinks the majority of voters are worried about Solvency II or gene editing and voted for Brexit to get those two things, I must say I think he's seriously deluding himself. 


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