Brexit Impact Tracker - 26 February 2022 – The War on Ukraine and the Autophagy of the Brexit Movement

This has been a very dark week for Europe and the world, with Russian president Putin launching a full-on military invasion of a sovereign country that few – according to experts even the Russian public – had expected him to be capable of. 24 February 2022 will go down in the history books as a turning point in the history of the post-Soviet world. If we needed even further proof that history had not ended with the collapse of the Soviet Union in 1991 and the liberal-democratic model had not achieved its ultimate triumphed, this was it.

This historic event puts into question most of what many thought to be true just a week ago. From a British perspective this was strikingly illustrated by resurfaced footage of Johnson being grilled about defence spending only a few months ago and – in a sign of his great ignorance – confidently declaring that “the old concepts of fighting big tank battles on European land mass are over."  

After 2/24, no one can have any illusions anymore about Putin and his intentions. Right-wing as well as left-wing Putin apologists – from the UK, to France, to Germany, and Hungary – some of them facing imminent re-election battles – find themselves in a difficult position explaining to voters their previous pro-Russian positions. Russia’s invasion of Ukraine is a truly momentous event that will reshape British and global politics.

The war on Ukraine and Brexit

It would certainly be exaggerated to see Putin’s war on Ukraine as a direct result of Brexit – but only just. The two events are intrinsically related. For one, both are cases of an autocrat sacrificing the future of his people in an attempt to recreate a glorified imperial past when everything was better. For the other, one could argue that both Brexit and the Invasion of Ukraine were strategic goals of Putin’s foreign policy. Indeed, for years Putin has wanted ‘a weak, divided and fragmented EU.’ Brexit was arguably the single most important event on the path to achieving this and may have made Putin more confident about his imperialist West-ward expansion.

Yet, even for those who are sceptical of such a direct link between Putin’s strategic goals and Brexit, there is no denying that Brexit, Brexiters, and the Tory party are inextricably entangled with Putin’s regime. Therefore, beyond the horrific consequences of the invasion for Ukrainian and Russian people, the war on Ukraine will potentially have far-reaching implications for UK domestic politics too. It could further accelerate a phenomenon that I call ‘the autophagy of the Brexit movement,’ which we have seen emerge in the past months. To understand how, it is useful to go back to the fundamental nature of the Brexit project.

Brexit: The elite revolting against itself

In true populist fashion, Brexiters like to think of Brexit as a revolt of the people against the elites and any opposition to it as a betrayal of democracy. No doubt, Brexit was a constitutional- and as such a revolutionary moment in British history as pro-Brexit academic Vernon Bogdanor puts it. Yet, it increasingly turns out it was a revolution of the British kind. Just like the ‘Glorious Revolution’ of 1688 can be considered a revolution only by stretching the concept beyond the bounds of its meaning, so Brexit can be seen as a revolt by the people only by stretching both “revolt” and “people” beyond any meaningful definition. Indeed, just like 1688, 2016 was mainly an elite revolting against itself – with some effort to create a semblance of popular support for purposes of political mobilisation and legitimacy. Indeed, only in the ‘closed system’ of British upper-classism can Farage, Johnson and other leaders of the Brexit movement be seen as part of some sort of counter-elite. They certainly have nothing in common with the ‘ordinary people’ whose preferences they claim to represent. As such, the revolt they led is one of the elite against itself and therefore ultimately an inherently self-devouring movement.

Put crudely, there are two reasons why people do not like the EU: Firstly, many people believe it is firmly ingrained in the 1980s type market-fundamentalist paradigm and therefore a dogmatic ‘liberalisation machine’ that sees market-based competition as the only valid organisational principle for societies. As such, it aims to destroy any institutions that traditionally protected people from the raw forces of markets, such as trade unions, the welfare state, public ownership of utilities etc. That view is not entirely wrong of course, as the EU has arguably been a leading actor in liberalising economies and has undoubtedly had negative effects on workers and trade unions for instance. But of course, depending on where a member state starts from, EU membership may also be a ‘civilising force,’ compelling countries to increase rather than reduce its standards (worker or environmental protections in the UK being a case in point). Secondly, people who may not dislike the EU’s effect on liberalisation and market competition, still may dislike it for a second – related – effect, namely breaking up traditional relationship-based ways of doing business and politics. Up until the 1970s, the UK – like other European countries – was dominated by ‘club government’ where people who went to school together and played golf on the same golf courses managed the affairs of their country and their economy based on personal acquaintance, shared norms, and ‘gentlemen’s agreements.’

Since the 1970s, European countries moved towards a more formal rules- and regulations-based system, which opened up the ‘old-boys’ networks to outsiders and increased transparency and accountability in political and economic affairs. Indeed, the rise of a so-called market-supporting ‘regulatory state’ and the decline of informal ‘club government’ had two effects: Firstly, it created enormous opportunities for market participants to make money in newly liberalised and privatised formerly protected areas of the economy. Secondly, for new markets to be able to emerge in this fashion, it was necessary that anonymous market participants played by a set of formal rules, which guarantee levels of transparency and accountability that personal relationships do not.

The trend towards formal, rules-based interactions sometimes comes at a cost, as local knowledge and informal – and moral – ways of organising an economy are replaced with anonymous, market-based “arm’s-length” interactions following fixed, formal regulatory rules. Sometimes, the traditional informal ways are worthy of protection, because they are well-adapted to the local conditions and are more socially and environmentally sustainable than the large-scale, anonymous, market-based alternatives.

 Yet, optimists see the trend away from relationships toward formal rules and regulations as a process of “democratisation” in the sense that what was previously done based on privilege is now subject to meritocracy and fair competition. Rather than having to be a member of an exclusive club, knowing the right people, and being from the right background, in the rules-based system access is based on transparent public standards and merit. I think that is an overly optimistic interpretation, because the actors who filled the gaps torn into the fabric of what Michael Moran calls Victorina-age ‘club government’ are not just ‘ordinary people,’ but to a large extent members of the same privileged elite. Still, it is precisely for this second reason that the Brexiters among the British elite disliked the EU. Indeed, Brexiters love the first bit of the new system (making money due to new opportunities), but they hate the second (complying to rules that guarantee transparency and accountability).

This ambiguous effect of the move towards the ‘regulatory state’ – creating opportunities to amass private riches, but making these activities more transparent and rule-governed in theory – explains the rise since the 1970s of a massive industry for offshoring private fortunes of the wealthy and powerful as revealed for instance by data leaks like the Pandora-, Paradise-, Panama Papers, and the very recent Suisse Secrets. Liberalisation, privatisation and the increasing reliance on transparent formal rules on the one hand, and the emergence of the murky universe of tax avoidance and offshore money centres on the other, are hence two sides of the same coin.

While the EU was not the cause of the move away from ‘club government’ towards the ‘regulatory state,’ the EU played a role in advancing this trend.  In this context, some have seen the increasing eagerness of rich and powerful Brits to leave the EU as a direct result of EU’s anti-tax avoidance directive (atad). Such a direct link may be exaggerated when explaining specific steps in the Brexit process, but the basic point that the rich and powerful dislike anything that constrains or sheds light on their unsatiable drive to accumulate wealth holds and is crucial in understanding why the Tory party became the party taking the UK out of the EU.

In short, the Brexit project is based on the fundamental contradictory goal of seeking to further liberalise markets and public goods for private benefits, while rejecting the necessary corollary of liberal markets, i.e. a rules-based regulatory system. Now that their revolution has succeeded – or, as Chris Grey puts it – now that the dogs have caught the car, this inherent unsolvable contradictions in the Brexit project has become unmanageable. It necessarily leads to the movement’s self-consumption or autophagy.

The Autophagy of the Brexit Movement

There were at least three examples this past week that illustrate how the self-contradictory nature of the Brexit project is leading to its autophagy.

First, there was the widely commented case of Rees-Mogg – newly appointed Brexit Opportunities and Government Efficiency Minister (BOGEMin) – who – as I noted last week – initially seemed to announce a paradigm shift away from post-Brexit Britain’s refusal to consider any regulatory alignment with the EU for fear of not making most of its regained ‘sovereignty.’ Yet, the BOGEMin was quickly shot down by Downing Street, exposing not only his incompetence, but also the fact that his ‘naïve radicalism’ is at “odds with the broader Brexit ‘coalition’ that supports but also constrains his government.”

It may very well be that Rees-Mogg simply does not care whether his policy programme makes sense, since he has still ample opportunity besides his role in government to enrich himself (e.g. by offloading his investment companies’ Russian assets just before sanctions hit). Or perhaps he thinks it does not matter what deregulatory strategy he adopts, because in his mind realising Brexit opportunities only requires a wrecking ball and no positive policy programme. Indeed, his ‘naïve radicalism’ is based on market fundamentalist thinking that sees markets as spontaneous, natural orders, that flourish when the state is removed/destroyed/starved of funding rather than as being state-made constructs. Regardless, the BOGEMin’s split personality over regulatory alignment and sovereignty nicely illustrates the impossibility of squaring the circle of Brexit promises and explains why ultimately the Brexit movement must consume itself.

The second striking example of autophagy was Ian Duncan Smith’s letter in the Daily Mail ranting against the Northern Ireland Protocol (NIP). Chris Grey has written a superb line-by-line takedown of all the falsehoods and inconsistencies contained in that piece. So, no need to repeat any of that here. What is interesting is that fundamentally the piece constitutes a frontal attack of 2022 Ian Duncan Smith on 2019 Ian Duncan Smith who loudly and proudly supported the NIP as part of Johnson’s ‘oven ready deal’ to get Brexit done. It may be that he simply did not understand what he was voting for back in 2019. Yet, more likely, 2019 IDS was so obsessed with ridding the UK of rules and regulations that constrain the ruling elite’s ability to enrich itself that he readily accepted a flagrant breach of the Brexiters’ promise to ‘take back control’ by leaving part of the country in the EU’s single market and erecting a barrier inside the UK. Three years later, 2022 IDS is struggling to accept the dissonant situation he contributed to creating and has no other option than reneging what he stood for in 2019 (incidentally – in further signs of Brexit autophagy – 2022 IDS is also mad at Johnson, as is Nigel Farage).

The third example of Brexiter autophagy is Johnson’s reaction to Russia’s invasion of Ukraine. Johnson’s response was feeble and confused. The government’s initial reaction was to impose sanctions on five banks – four of which were already under US sanctions – and on three Russian oligarchs. While Johnson himself called his sanction plan ‘draconian,’ commentators and experts like Dr. Elisabeth Schimpfössl considered it ‘a joke’ (in German here, substantively same argument in English here) and equated it with ‘turning up to a gun fight with a peashooter.’ Later in the week, Johnson showed a bit more spine by early on supporting removing Russian banks from SWIFT international payment system. Yet, this more courageous stance was cancelled out by Home Secretary Priti Patel’s and others’ shameful hesitance to unconditionally accept Ukrainian refugees.

The confused, contradictory, and weak stance of the Johnson government in the Ukraine crisis is – once again – not coincidental but inherently linked to the Brexit project. The connections between the Conservative party and influential rich Russians are many and well documented. They reach from donations to business ties (e.g. Tory MP Greg Barker at one stage serving as executive chairman of Russia’s En+ group). While Johnson refused to let Parliament investigate if Russia interfered with the Brexit referendum directly, the Intelligence and Security Committee of Parliament’s (heavily redacted) ‘Russia report’ clearly shows that – contrary to the US government after the 2016 election – the UK government did not take the threat of Russian interference seriously and did not even try and establish whether interference had taken place during the EU referendum. The report also suggest that MI5 basically accepts the findings of academic studies that interference has taken place.

In this context, in another sign of autophagy, Tory MPs and other prominent Brexiters now have to perform contortions to distance themselves from Russian money – shouting down opposition MPs in Parliament and going as far as threatening Twitter users with lawsuits for pointing out connections they themselves previously bragged about. Again, this is not a random result of a random event, but a logical consequence of the inherent contradictions of the Brexit project. Brexit was orchestrated and bankrolled by an international of right-wing plutocrats – reaching from Rupert Murdoch, to Steve Bannon, and various Russian Oligarchs –, but was sold to the people by supposedly anti-elite members of the elite as a patriotic project of national rejuvenation. Sooner or later, this contradiction had to come to the surface and force Brexiters to engage in denial and autophagy.

Back in 2018 I attended a conference at the Moscow State Institute for International Relations (MGIMO)  – an elite university close to the Russian Ministry for Foreign Affairs – where one speaker – a Russian Orthodox bishop – indignantly commented on the UK’s reaction to the Skripal poising in Saulsbury. He angrily blustered that if you hit the Russian bear it will bite you, but if you hit the English lion it will whimper and stay down. While the metaphor of ‘poking the Russian bear’ as explanation – or even justification – of the Russian invasion of Ukraine is greatly misleading, given how easy it is to turn - with a sufficient amount of money - the three English lions into lapdogs, one cannot blame the bishop for considering the UK a weak country.

What needs to happen now are two things: firstly, the UK government needs to get serious about its sanctions not just on Russian banks, but also the individuals closest to Putin. Indeed, as I argued four years ago, ineffectual condemnation is fuel to the warmongers in Putin’s circle and plays into his strategy of creating foreign enemies to garner domestic support, without reducing Putin’s capacity to divide and rule the West. Therefore, sanctions need to be decisive and genuinely hurt Putin and his inner circle to be successful.

Secondly, the opposition parties in the UK need to continue exposing the links the governing party has with Russian oligarchs and other foreign funders and use the current tragedy as an opportunity to clean up the corrupt British political system. Opposition parties need to make people understand that it is the kleptocratic, parasitic elite at the top – and not refugees crossing the Channel in dinghies – that is responsible for their economic hardship and constitutes a threat to our country’s security.

Brexit Impact Tracker – 20 February 2022 – The crumbling of castles in the air and pies in the skies: Time to get ready for post-populism

This week brought more evidence of a trend I and many other Brexit commentators have commented on in recent weeks, i.e. that Brexiters seem increasingly out of touch with and in denial of Brexit reality (see here and here). The starkest example illustrating this assessment this week came from the newly appointed Brexit Opportunities and Government Efficiency Minister (BOGoEMin for short?) Jacob Rees-Mogg who flat out denied that Brexit was having an impact on trade. In an interview with the BBC he stated "I think Brexit has been extremely beneficial for the country. I think the evidence that Brexit has caused trade drops is few and far between."

 That statement stands in stark contradiction with literally any anecdotal account from businesses up and down the country (e.g. event hauliers) and a recent survey by the British Chamber of Commerce, which found that 71% of exporters say the Trade and Cooperation Agreement (TCA) with the EU “is not enabling them to grow or increase sales” and a “[m]ajority think it has pushed up costs, increased paperwork and delays, and put the UK at a competitive disadvantage.” Our BOGoMin’s statement also contradicts the House of Commons Public Accounts Committee’s report and official statistical data on trade figures that I reported on last week and is belied by the government itself who has set up a scheme to help SME with the Brexit impact on trade.

Just to briefly summarise reality, the official statistics on UK trade show increased costs due to additional red tape and a 12% decline of exports to the EU and a 20% decline of imports for 2021 compared to pre-pandemic levels. This compares with an export boom between Northern Ireland – which is still part of the EU Single Market – and the Republic of Ireland, with exports from NI to the RoI up 65% and imports up 54% on 2020. (The Irish figures are not directly comparable to the ONS ones for the UK, which are comparing 2021 to 2018 not 2020, but the direction of changes are telling and the point that Brexit is an opportunity for trade between RoI and NI trade holds more broadly).  

Jacob Rees-Mogg living in a different reality is of course nothing new. What is new, however, is the effect that his denial of reality is having on me. While a few months ago his dishonest and blatantly false statements would have outraged me, I am now almost pleased to see him deny reality in this way. The reason for that is that – like I argued last week – Brexit lies before Brexit and Brexit lies now have very different effects on British politics and our lives.

Before the referendum and during the withdrawal and trade deal negotiations, the lies and denial of reality were a powerful weapon to garner popular support for a greatly damaging project. The lies also led to one of the worst possible outcomes in terms of the post-Brexit arrangements, namely a hard Brexit (only ‘no deal’ would have been worse). Each lie was therefore dangerous and leading the country down a blind alley.

Now, however, the situation is different. Increasingly, Brexiter lies are not judged against what more honest actors predict to be the risks and opportunities associated with exiting the EU, but rather they can be judged against reality. The confrontation of the lies with reality can only have one outcome, i.e. show an increasing discrepancy between what was promised and what is happening in reality – and that constitutes a chance to drag the UK out of the populist swamp in which it has become engulfed.

To be sure, there will still be a sizable number of people who are willing to believe the lies about how ‘taking back control’ was worth every bit of economic damage we’ve done to the country. But that number is bound to shrink as people are waiting for the country to be levelled up and power given back to the people and while doing so are struggling to pay their energy bills.

Brexiters’ know that. There is increasing evidence that they are now trying to play for time by increasingly promising Brexit benefits that take time to materialise. In Rees-Mogg’s first interview as BOGoEMin, he promised that “big wins” were “coming shortly” and suggested it would take a full decade until people will recognise that Brexit is preferable to re-joining. Indeed, in a chilling quote in the Express Rees-Mogg warns that within a decade “[i]t will be impossible to go back because our economy will be so transformed that firstly nobody would want to and secondly the EU would look at us in horror because we would not be following all their petty rules.” This reads like a threat to make the Singapore-on-Thames menace of deregulating environmental, public health, safety and other standards a reality.

The quote also directly contradicts other statements the BOGoEMin has made this week when voicing his support for an Institute for Economic Affairs (IEA) report, which advocates the exact opposite. Namely, that the UK should adopt a ‘unilateral openness’ approach, recognising EU regulation even if the EU refused reciprocity. Reciprocity is of course a key demand for Brexiters like David Frost and indeed a matter of national pride (because in the Brexiter mindset it would signal that the UK is worth 27 other European countries). Therefore, the government following IEA’s – questionable (see below), but realistic – stance on unilateral trade liberalisation would genuinely constitute a paradigm shift in post-Brexit UK-EU relationships. The shift would mean a triumph of the libertarian, free-trade wing of Brexit over the parochial, autarkic nationalist wing, as Chris Grey suggested this week.

Yet, even within the libertarian wing it would imply a fundamental transformation away from the illusionary ‘bonfire of regulation’ approach, towards one that accepts that free trade requires common rules and standards and that freer markets necessarily mean more rules (because large scale markets are not spontaneous, natural orders, but sophisticated, state-made institutional systems). So, instead of seeking to diverge from EU regulations for the sake of it, the strategy would shift to aligning unilaterally where it is required to guarantee market access. Such a strategy of unilateral trade liberalisation is not without risk, as I argued a few weeks ago. Still, it would imply that the dangerously naïve view on deregulation that dominates large parts of the Brexit movement is off the table and a much closer relationship with the EU may become possible. This might pave the way to a softer Brexit, which – as I argued elsewhere – is currently the best option to take the UK out of the cul-de-sac in which it finds itself.

Our BOGoEMin’s contradictory statements about transforming the UK’s regulatory environment to the extent that the EU will be horrified and his support for the IEA’s suggestion the UK should continue to unilaterally align its regulations hints at a contradiction that splits not only Rees-Mogg’s personality, but increasingly the entire Brexit movement.

Brexiters divided

As reality kicks in, the fault lines in the heterogenous Brexit movement start to become ever wider. I have blogged before about the ‘revolt of the deregulators’ who are increasingly unhappy with the absence or lack of radicalism of Johnson’s regulatory reforms. This faction of the Brexiter camp advocates for a radical divergence from EU rules either for the sake of it (i.e. to show that we have indeed ‘taken back control’ even if that control is pretty useless in practical terms), or based on a simplistic, libertarian understanding of markets that consists in believing that fewer rules mean more economic freedoms. Either way, their preference for a Singapore-on-Thames type Brexit is based on lofty ideas of sovereignty and ill-conceived liberty. Their unhappiness with actually existing Brexit increases by the day. Indeed, even the incoherent childish tantrums of die-hard ‘team Boris’ Telegraph columnists now end with the conclusion that “No10 simply hasn't got Brexit done well enough.”

This group of Brexiters’ preferences are in line with the kleptocrats and aristocrats in the Tory party who simply seek to weaken state capacity and oversight over the economy to be better able to enrich themselves – as they did during the pandemic. This faction dreams of going back to a pre-1970s situation dominated by what the late Michael Moran called Victorian-age ‘club government’ where few rules existed for those in power and things were done based on informal gentlemen’s agreements within a closed ‘old boys club.’ Rees-Mogg’s recent suggestion to cut 65,000 posts in the civil service is in line with that faction’s – of which he is the chief exponent – preferences. Such a situation would mean less accountability to the general public and hence much freedom for the rich and powerful, very little for everyone else.

The “lofties,” kleptocrats, and aristocrats’ preferences are increasingly opposed by the more state interventionist, populist, and nationalist Brexiter faction that attacks the government for its aristocratic shenanigans – such as party-gate. Among this faction are the 2019 cohort of conservative PMs from the Red Wall constituencies, with Christian Wakeford arguably the most extreme example. Their preferences for Brexit are the opposite of what the lofties want, namely to show people in the Red Wall seats – who according to some accounts are losing faith in Johnson due mainly to the Partygate scandal – that the Conservative party is serious about levelling up and has really become the party of the ‘ordinary man.’

The fourth – least vocal – faction are the ‘realists’ who are serious about Brexit and therefore point towards the details that matter to make Brexit a success. Their voice is currently still drowned out by three-word-slogan shouting members of the first three factions, but as reality starts to bit, their voice is bound to gain more weight.

This week, Telegraph columnist Ben Wright – who come close to that category of reasonable Brexiters (although I do not know which way he voted) – wrote a mock letter to our BOGEM warning about mindless attempts to deregulate financial services in search of Brexit opportunities. The gist of the article is this: 1. Even during EU membership the UK financial regulators could and did deviate from other EU countries. 2. Often times the UK raced other EU member states to the top rather than to the bottom, i.e. UK financial regulators interpreted generic EU rules more strictly than other EU countries’ financial regulators. The reason for this prudential ‘gold-plating’ approach was simply that the UK’s financial sector is much larger than other countries, posing thus greater systemic risks. 3. Financial regulations are “drawn up at a global level these days,” which means the UK will most likely be better off following them than creating its own ideosyncratic ones. Wright’s more general point though is that any Brexit dividends expected from deregulation will require careful analysis of the regulatory details of each industry.

(Also important to note, while Rees-Mogg is searching for things to deregulate, the EU pursues its drive towards ‘strategic autonomy’ of its capital markets. Last week, the EU announced that UK clearing houses’ permission to serving customers in the bloc would be extended one last time until June 2025. After that date, the recognition of equivalence accorded to the UK in this area will lapse. The UK are not the only ones who are taking back control.)

The increasing divergence of the preferences of ‘lofties,’ populists, and ‘realos’ is a result of the increasing gulf between Brexit promises and reality. Reality makes it increasingly difficult for Brexiters to provide any convincing justification for the project. A good example comes from the largely fact-free, poorly informed, falsehoods-based, and cliché-strewn rambling on GB News, which does not get more convincing by the mounting evidence on Brexit reality. You know desperation is in the air when Mark Dolan is forced to admit that “[s]ome of the detail in relation to Brexit doesn't make for great reading.”  In this context, the case that it is the EU rather than Brexiters who are “unapologetically detached from the hopes, dreams and aspirations of the people [they] lead” is becoming increasingly hard to make in face of reality. For instance fearing the Schengen agreement because of the alleged “unlimited flow of citizens back and forth, with its potential stresses on infrastructure and society” sounds like a bad joke not only because it confuses Schengen with Free Movement of People (which we had without being member of Schengen area) and given the stress the new border regime the UK government has put in place is causing lorry drivers and travellers.

Starmer’s two-pronged strategy

This week also saw another backlash against labour leader Kier Starmer who very boldly stated that there was no case for re-joining the EU. Following that statement, the Labour leader had to take a lot of flak on social media for his statement. Many Remainers seem to see it as a betrayal and making comments to the effect that Starmer has made his biggest mistake yet.

I think the anger at Starmer is misguided for at least two reasons: Firstly, even if the Labour leader wanted to re-join the EU, doing so during his Premiership is unrealistic for many reasons, not least because it is unclear if the EU would want to engage in a membership negotiation process at the current stage. Secondly, Labour campaigning on a strict ‘no case for re-joining’ position puts the conservatives in a very difficult position. Indeed, Labour ruling out re-joining has the great advantage of taking the toxic “in/out” debate out of the next GE campaign. The Conservatives will not be able to brand Labour as the ‘Breamoner’ party, but instead will have to defend what they have actually achieved. Rather than campaigning on keeping “those obsessed with reversing Brexit” out of government, they will have to justify their own record and explain their plan. Convincing the voters that all the lovely sovereignty we got back was worth the economic pain, or that the best of Brexit is still to come – in 10 to 50 years – may be a promising strategy if the opposition promises instead to undo what Brexit may still deliver in the future. But when the opposition is promising to make Brexit better more quickly rather than reversing it, the party in government will be in the defensive; having to defend its plan against an alternative plan. Labour, on the other hand will be able to unpick everything that has gone wrong with Brexit since January 2021 – and there is a lot to get one’s teeth in in that respect. The conservatives will certainly not hesitate the build more castles in the sky, but Labour will simply be able to ask why the existing ones are crumbling.

No doubt, Starmer’s clear stance will put off some labour voting Remainers, but realistically who will they vote for given that the two major parties are now ‘pro-Brexit’ as some put it (I personally disagree that saying ‘re-joining is not an option’ means being pro-Brexit) and given Remainers strong aversion against Johnson? Labour may lose some staunch remain voters who may defect to the Lib Dems or perhaps the Green Party, but they will certainly not turn to Conservatives who not only are equally ‘pro-Brexit,’ but are pro a much worse type of Brexit from a progressive viewpoint.

More importantly, with Labour still obsessed with winning back the Red Wall seats from the Conservatives, being clear on Brexit is much more important than promising a politically and practically unrealistic re-join policy at this stage. I am personally sceptical of the obsession with rewinning the Red Wall seats at any cost, while neglecting the 48% of voters who voted to remain. However, given that Johnson’s popularity has plummeted in the Red Wall seats following Partygate these areas may become more realistic targets for Labour again. Moreover, the strategy of trying to regain votes in these leave voting areas by simply not promising to re-join and holding the conservatives to account for their predictable failure to take levelling up seriously makes that strategy much more promising than Labour’s illusionary initial strategy of trying to outcompete Johnson on nationalism, immigration, and ‘war on woke.’

Another significant development this week was that it emerged that Starmer seems to combine his ‘no case for rejoining’ strategy with an informal ‘non-aggression pact’ with the Liberal Democrats. If Labour and Lib Dems concentrate their resources in constituencies where they each are most likely to displace a sitting Tory MP, Labour taking the ‘in/out’ question out of the equation makes even more sense. If Labour manage to regain some seats in the Red Wall – for which not being stamped as the ‘Bremoaner’ party is key –, while the Liberal Democrats campaign on a softer Brexit – leaving the possibility of re-joining the EU in the future open – while benefitting from conservative ‘Blue Wall’ voters’ discontent with Johnson’s Brexit, Partygate, and focus on Red Wall voters, the Tories will come under pressure on two fronts. With a re-run of the ‘get Brexit done’ election of 2019 out of the question thanks to Starmer’s strategy, it seems very difficult to imagine a policy programme or narrative that will allow the Tories to hold together the heterogenous coalition that handed them the 2019 landslide victory. The combination of losses to labour in the Red Wall and losses to Lib Dems in the Blue Wall seems the only way to overturn the massive Conservative majority from the last election.

Time – or rather the next GE – will tell whether being clear on Brexit was Starmer’s smartest move or his biggest mistake. What is clear, however, is that removing the Conservatives from government is a much more realistic step towards setting the process in motion that sees the UK slowly gravitating closer to the massive economic bloc on its doorstep, than campaigning on ‘re-join the EU.’

Labour supporters may not like either Starmer dropping re-joining or an informal non-aggression pact with the Lib Dems. Yet, with the benefits of hindsight, Gordon Brown’s refusal to consider a coalition or a “confidence and supply” deal with the Lib Dems after the 2010 GE, is what brought us nearly a decade and a half of conservative government – including a decade of austerity, disastrous NHS and University reforms, and of course Brexit. For Starmer’s strategy to be a bigger mistake than that, it would have to be a mistake of epic proportions.

Getting ready for post-Populism

To some extent Johnson’s recent troubles and Brexiters’ increasing difficultly to face reality illustrates a more general phenomenon common among populists: They are generally not very good at delivering what they promise during elections…and eventually people will realise. That goes not just for Johnson and other fake populists in UK politics, but for populists around the world.

Media attention is firmly on anti-lockdown and anti-vaccine protesters (e.g. in Ottawa), which may give the impression that populist Covid strategies (anti-lockdown, anti-mask, and in many cases – although not Johnson’s – anti-vaccine) are popular. Yet, the silent majority of people start to realise that populists do not deliver in terms of public health. There is indeed evidence that the Covid19 pandemic may undermine support for populists. The Centre for the Future of Democracy at Cambridge University’s ‘The Great Reset’ report on the impact of the pandemic on support for populist governments around the world shows that popular support for populists is declining due to their handling of the pandemic. Another study confirms this, finding that in 2020 countries under populist leadership had double the excess death rates than non-populist countries. Viruses, it would seem, are not fooled by three-word slogans.

There is also mounting evidence that populists do not deliver in terms of economic policies either. One long-term study finds that 15 years of populist leadership leads to a 10% lower GDP compared to a realistic non-populist alternative scenario. The reason for the poor economic performance being “economic nationalism and protectionism, unsustainable macroeconomic policies, and institutional decay.”

As a result of these trends, Victor Orbán – arguably one of Europe’s most successful populists – is facing his thoughts re-election yet. Of course, with the Media largely under his control and the electoral laws strongly tilted in favour of his ruling party, there is still a good chance of him winning another mandate. But popular support is crumbling.

It seems increasingly likely that Johnson will face a similar challenge in the next GE. Despite the success of the vaccine roll out, the fact is that the UK has the world’s seventh highest death toll and the highest in Europe (by 19 February 2022 160,379 people have died of the virus in the UK) – and regular readers of this blog will know all about the impact of Johnson’s populism on the British economy. Yet, just like Orbán in Hungary, Johnson and his populists have a firm grip on much of the domestic media and an electoral system that favours them (making it possible to win an incontestable majority in Parliament while representing only 40% of voters). Still, populists in power are always like a straw fire, which can burn for a long time, but eventually will consume itself due to the lies and contradictions on which it is based. As the castles in the air and the pies in the skies are crumbling, it is time to start preparing for the UK’s post-populist future.

Brexit Impact Tracker – 13 February 2022 – Brexit still does not mean Brexit to Brexiters

Theresa May’s ‘Brexit means Brexit’ slogan was meant to make it clear to Remainers that there was no going back on the Referendum result and the UK would indeed leave the European Union. Yet, like others have observed before (e.g. here and here), it becomes increasingly clear that the ones who are struggling to accept that Brexit does indeed mean Brexit are the Brexiters themselves. Recent developments show that they simply do not take Brexit seriously, with increasingly devastating consequences for the country.

A lot has happened since my last regular BIT, much of it supports this thesis. Thus, the Stormont Executive is on the verge of collapsing after DUP’s Paul Givan quit as First Minster in protest over the Northern Ireland Protocol (NIP), the head of the Metropolitan Police has resigned, the PM has reshuffled his cabinet in an attempt to convince the public that he is ‘cleaning up’ his operations in the wake of ‘Partygate’ – a reshuffle that led to the appointment of Jaco Rees-Mogg as minister for Brexit opportunities –,the government has published two reports about Britain’s post-Brexit strategy, one on levelling up and one on ‘The Benefits of Brexit’ (on which there are several excellent commentaries available, e.g. here and here), and the parliamentary cross-party Public Accounts Committee (PAC) has published a report that contains a strong warning that in trade terms Brexit is not going well. The direction of travel seems clear: we are headed towards rock bottom. And that is largely the result of Brexiters denying Brexit reality whose bite is increasingly strong.

 Trade reality and the dream of exporting power

 Unsurprisingly, the area where Brexit reality bites hardest is probably trade. New data released by the Office for National Statistics (ONS) for the whole year of 2021 unsurprisingly confirms that – net of the pandemic and world-wide supply chain issues – Brexit has very considerably affected the patterns of UK’s imports and exports. The headline figures are that compared to 2018 – the last stable year before Brexit and the pandemic – UK imports have declined by 4.8%, while its exports dropped by 10.5%, meaning the UK’s trade deficit has increased. Moreover, there seems to be a shift in trade away from the EU: 2021 exports to the EU have fallen by 12% on 2018 figures, compared to a fall of 6% in exports to the rest of the world. Moreover, for the first time since data is available imports from non-EU countries surpassed imports from the EU.

 These figures may provide some motivation for the UK government to act on the Public Accounts Committees insistence that something needs to be done about the trade frictions. Yet, the committee’s report does not provide much cause for optimism. Thus, commenting on the government’s stated ambition to create the most efficient border in the world by 2025 the PAC simply notes that “we are not convinced that it is underpinned by a detailed plan to deliver it.” This may suggest that the only answer the government may have in the short run is to further delay the introduction of full border checks on imports from the EU so as to at least not make things worse. The PAC report mentions that government sources do not completely exclude that possibility. Yet, for UK exports such a move may “feel like a very inequitable settlement,” because they will face the full EU border checks, while EU businesses will continue being subject to a light-touch border.

 Yet, despite the reality of post-Brexit trade patterns and although the PAC boldly concludes that “the only detectable impact [of Brexit] so far is increased costs, paperwork and border delays,” Brexiters continue to dream of turning the UK into an export economy.

Indeed, according to reports in several outlets, the Global Britain Commission – set up by Liam Fox in October of last year – is about to publish its first report setting out a plan for the UK to rival Germany’s export prowess. Contrary to the announcement, the report does not seem to be available online yet. So, it is impossible to know the details of the plan. The sound bites quoted in various pro-Brexit outlets do not allow it to get any sense of how exactly the lofty goal of becoming an export economy will be achieved in practice. But whatever the plan is, one fundamental inconsistency with the idea is that – as Chris Grey points out – Germany became an export power while being an EU member state. Indeed, Germany became an export power not despite EU membership, but very much because of EU membership. Thus the single market provided the country with access to cheap but well-trained labour on its doorstep (in Hungary, Poland, Slovakia notably) and the introduction of the Euro gave the country’s export sector an enormous competitive advantage by constituting a de facto devaluation of its currency compared to its European competitors. Therefore, if the goal is to imitate the German model, the most promising plan would be to re-join the EU and then adopt the Euro. More fundamentally, you cannot simply decide that you want to become an export power, but you need an industrial strategy that builds up the capabilities of the exporting sectors. Nothing indicates that either Global Britain Committee or the government are close to having such a strategy beyond the blind belief in free trade. (Another question is whether focusing as much on exports as Germany does is desirable, as it comes at considerable costs for non-exporting industries and creates dependencies, as German political economists like Andreas Nölke argue).

 De-Regulating what?

Another sign of Brexiter desperation and continuing denial of reality concerns the government’s deregulatory agenda. Since the Covid excuse and the ‘teething problems explanation’ of negative Brexit  impact have started to lose their clout sometime in the autumn of last year, calls for radical liberalisation and deregulation of the UK economy have grown louder in pro-Brexit news outlets. The past two weeks show that the government – in its desperation – starts giving in to those pressures.

The PM announced the so-called “Brexit Freedoms Bill” on January 31st, 2022. It promises to “make it easier for the Executive to alter or repeal retained EU law without having to pass primary legislation,” which means there will be virtually no parliamentary scrutiny of such decisions by the government. The reason for this short circuiting of Parliament is – according to the government – that this way “the UK can capitalise on Brexit freedoms more quickly”. Various commentators – such as Chris Grey and Hannah White – have pointed out the irony of Brexiters promising to re-establish full parliamentary sovereignty and the tendency by the Johnson government to increasingly by-pass Parliament. Indeed, the Johnson government is in the process of realising one of Friedrich A. Hayek’s nightmares. While he was a bit fan of the Anglo-Saxon Common law system and one of the fiercest critiques of anything continental European in terms of legislation, in The Constitution of Liberty he noted that ‘[I]t is a question whether the much praised flexibility of the common law which has been favourable to the evolution of the rule of law so long as that was the accepted political ideal, may not also mean less resistance to the tendencies undermining it, once that vigilance which is needed to keep liberty alive disappears” (Hayek 2011[1961]: p.298). Clearly, as the governing elite has lost any moral restraint – as Byline Times’s Hardeep Matharu convincingly argued a while ago – the absence of any formal constitutional constraints on the government has been one of the key factor letting the UK edge closer to a ‘flawed democracy’ in global rankings since 2019.

The tragic irony with the government’s power grab is the fact that the government seems to have absolutely no idea how exactly to use these powers to bring about those Brexit benefits. Rees-Mogg’s appointment as minister for Brexit opportunities illustrates this perfectly. Pro-Brexit outlets have told us for years that UK businesses were strangled by EU regulation and that we desperately need to cut ourselves free. Six years after the Referendum, the government has to turn to Sun readers to tell them which regulations exactly were so oppressive. We have gotten so used to Brexiter ideology and spin that some may interpret this move as a genuine attempt to let the people have a say. Yet, Rees-Mogg’s move is destined to fail for reasons Polly Mackenzie summed up perfectly on twitter. But more importantly what it really exposes is the reality that Brexiters still do not know what to do with the newfound Brexit freedoms and sovereignty. This is further illustrated by the fact that Ian Duncan Smith, Theresa Villiers, and George Freeman already provided a report on the opportunities of post-Brexit regulatory reforms back in May 2021 and yet we still do not know what/how to deregulate.

Levelling up

An interesting new dynamic in how Brexiters seek to bat away reality has emerged around the publication of Michael Gove’s ‘Levelling up white paper.’ Given the absence of any real Brexit benefits, Brexiters now push the realisation of these benefits into the future (2030 in the case of levelling up), while withdrawing further back into history to look for inspiration (into the 1500s in this case). Indeed, permanent secretary to the Cabinet Office Andy Haldane - one of the authors of the levelling-up report -, jettisoned the Singapore-on-Thames idea and turned instead to 16th century Florence for a model to follow. The suggestion was quickly mocked by twitter users pointing toward the realities of 16th century Florence.

To be fair, though, the basic point that looking at historical examples for the ‘raw ingredients’ of economic success is not absurd per se. Indeed many comparative economists and economic historians like Douglas North and Geoff Hodgson have done just that. The problem is, however, that Halden’s approach to identifying these ingredients in the ‘secrete sauce of success’ – (they cannot resist the temptation of a three word slogan, can they?) – is so unsystematic and general that it is ludicrous to believe it can replace a serious economic strategy. The ‘raw ingredients’ are so general that they leave open a million possible policies and strategies to try and achieve them in practice. Therefore, the ‘ingredients’ of economic success can only be the starting point for drafting a successful industrial policy, not its end point. Getting from the broad goal to the actual, practical policy is the difficult bit. There is no indication that the government has any intention of (or the capability to) addressing that. In fact the levelling up white paper defines twelve broad “missions” – eight of which were already present in Theresa May’s industrial strategy but then ditched by Business Secretary Kwasi Kwarteng –, which are high-level and aspirational but lack in policy detail about how they will be achieved.

Regardless, whatever one thinks of the twelve missions, the most fundamental flaw is that the levelling up agenda is rooted in a core assumption of Tory economic policy, namely that the state is already spending too much and government is inefficient. Therefore, no new money is needed to achieve these targets, but simply ‘ensuring [public money] is spent effectively on local priorities’  is sufficient. The way in which the government seeks to achieve this is by creating a new law that forces government departments to work towards the twelve missions. Most experts seem to agree that without extra resources and appropriate funding, there is very little chance levelling up will become a reality.

Therefore, the ‘Florence on Thames’ idea will remain just another half-baked, aspirational slogan without any policy substance. That impression is reinforced by the lack of seriousness of the levelling up white paper itself, most importantly the fact that it contains passages that were simply copy-pasted from Wikipedia. This illustrates once again that the Brexit government is simply not taking Brexit seriously.

Northern Ireland Protocol

A great deal has happened in Northern Ireland as well over the past fortnight. Agriculture Minister for NI Edward Poots ordered NI officials to unilaterally suspend boarder checks for goods coming into NI from GB. These directions were temporarily suspended by a High Court ruling two days later, but with First Minister Paul Givan also stepping down in protest over the NIP, the situation remains extremely delicate. In an attempt to provide some stability, the UK Parliament this week passed legislation to guarantee that the NI Assembly could continue work until the elections in May rather than being dissolved early.

Yet, despite the political upheaval in NI, the FT reported some progress in the talks between Liz Truss and Maroš Šefčovič over the NIP. Reportedly, the UK government has made a verbal offer to the EU to accept checks on GB exports that are destined to remain within NI. This constitutes the first concession made by the UK since the talks began and a rare signal of the government seeking a genuine solution to the NIP issues. The offer raises hopes that an agreement might be reached at the Joint Committee meeting on February 21.

With Johnson fighting for his political survival and therefore wary of a trade war with the EU and the EU side reportedly having suspicions that the UK government may have something to do with Poots’ decision to order a halt to border checks, Truss’s offer may be a strategy to avoid escalation right now. The UK’s concession may also have to do with the content of an audit of NI border procedure by EU officials which was completed in October last year, but has not been published while awaiting the response of the UK authorities. RTE’s Tony Connelly reports that the content of the audit will make the UK government’s claims that a bespoke model can be found whereby goods destined to stay in NI should not be checked, while goods going to the Republic of Ireland should be. The audit shows that the lack of preparedness and flaws in the border checks introduced by the UK are such that clearly such a bespoke model cannot work. This would imply that the NIP is the one Brexit-related issue where the government may start to partly accept reality. However, there are also reports that the Cabinet Office has ramped up preparations for a possible trade war with the EU in case the UK government does trigger article 16. Regardless, Friday’s third in-person meeting between Truss and Šefčovič ended with both sides reiterating the need to continue and intensifying talks over the coming days.

Reality bites against sound bites

Overall, then, Brexit related news were grim pretty much in all respects in the past two weeks. Yet, as with every crisis, there is some strange comfort in things going badly for a long time, because there is hope that eventually they cannot get any worse but will have to start looking up again. To me, the past two weeks had some of that hopeful flavour. Not so much because there is still a chance that Johnson’s premiership may soon be over. The PM has now received a formal legal questionnaire from the Met Police asking for “an account and explanation of the recipient’s participation” in events held at Downing Street during lockdown. If he is fined for breaking lockdown rules, some senior Tories say it will be difficult for him to continue. Yet, in the decency-free space that the Conservative party and Downing Street have become, it is equally possible that the PM will cling on to power despite losing any credibility, undermining the public’s trust in the Rule of Law and in the importance of pandemic legislation – and several Tory MPs clearly are still happy to support him in that endeavour. But with the Tory party firmly in the hand of the ERG and the pro-Brexit faction, Johnson’s departure would probably change the UK’s direction of travel less dramatically than some may expect.

What does give me some hope is something else, namely the fact that the government’s hyper-activism around Brexit opportunities, levelling up, and deregulation strategies increasingly reek of utter despair. After two years outside the block, Brexiters simply have nothing to show for their supposedly ‘no-downsides’ revolution. All they can do is try and sell damage limitation as success and blame on EU ‘punishment’ anything that cannot be spun in a positive way. Chris Grey has shown this week how that strategy leads Brexiters to spinning an ever more intricated web of lies. I feel there are signs that soon enough Brexiters will get caught up in that web of lies themselves.

Lying about Brexit was a cunning strategy to win the Referendum, and the 2019 GE, but it will soon reach the limits of its political potential. Even for people who are very conscious of the lies that are repeated ad nauseam, it is not always easy to resist engaging with them on their own terms, which means we spend time arguing about things that we should not be arguing about. Yet reality does not work like that. Reality is immune to Brexit lies and will not bend to them. You can lie all you want, the lorry queues at Dover will not get any shorter. You can lie all you want, the living standards of people in Coventry or Preston will not increase. Of course you can keep people voting for you and your ideas by selling hope, but the longer the queues get in Dover and at local foodbanks, the more convincing your explanation why Brexit hasn’t solved these issues will have to be. Brexiters are certainly masters of trying, but anyone who is not completely sold to their ideology will realise that the explanations become increasingly ludicrous in face of a stubborn reality. The best illustration of this phenomenon this week was provided by Natalie Elphicke – MP for Dover – who in all seriousness suggested in Parliament that the border issues at Dover were not a problem created by Brexit, but were Brussels’ fault. This denial of reality may provide political benefits in the short and medium-term, in the long run, however, the persistent discrepancy between promise and reality will have a political cost. That will be the point at which even Brexiters need to start taking Brexit seriously and to develop serious policy proposals that can help the UK move towards a more sustainable post-Brexit arrangement. While we wait for this to happen, Brexit reality keeps biting.

Brexit Impact Tracker - 5 February 2022 - Should/can we make Brexit work?

My BIT time this week went towards writing another piece for the EncompassEU web page, the ‘regular’ BIT will be back next weekend.

Monday 31 January 2022 marked the 2nd anniversary of the UK’s official exit from the European Union. At this symbolically important moment, the Johnson government and other Brexiters are keen to convince the British public that Brexit is working. Thus, to mark the occasion the government published a report on ‘The Benefits of Brexit.’ The 102-page long document lists everything from rolled-over trade deals, over the new trade and cooperation agreement (TCA) with the EU itself, to the famous crown stamp mark on pint glasses as undisputable benefits of Brexit. However, despite its impressive volume, according to Chris Grey, the report simply lists “a mish-mash of things that are untrue, or true but misleading or of trivial or questionable value.” Most fundamentally, the report is deeply flawed because it does not provide a cost-benefit analysis of the impact of Brexit to date, but simply ignores any costs, focussing thus on gross benefits. Read the full article here.

Brexit Impact Tracker – 30 January 2022 – Brexit Anniversary: Two years of reality checks, still no real realism

Monday will mark the second anniversary of the UK officially leaving the EU (although really existing Brexit only started after the end of the transition period on 1.1.2021). Brexiters still seem to be holding their breath in expectation of a sudden ‘Brexit Bonanza.’ But their celebratory tone contrasts with the absence of anything concrete to show for after two years outside the block. It is not for lack of trying, mind. The Spectator’s Steerpike laments: “With Boris ruling out a VAT cut on energy bills and Rishi's taxes killing off 'Singapore-on-Thames,' let's hope mandarins find some examples of the UK exploiting its post-Brexit opportunities.” The Express on the other hand did find something positive to report on, announcing that “UK drivers rejoice as hated EU law set to be axed under radical new plan in Brexit coup.” The paper was referring to a Bill voted on in the commons – and celebrated by Grant Shapps on Twitter as Brexit dividend – that repeals a ‘controversial EU law,’ which would potentially have increased insurance premia on vehicles not primarily designed for use on the road (such as lawnmowers, mobility scooters, and golf buggies). Of course, the lawnmower, mobility scooter and golf buggy drivers’ joy about this yearly Brexit dividend of an estimated £50 may be short-lived, given that in April the government will increase National Insurance contributions by around £180 a year for taxpayers on the basic rate.

Beyond Brexit dividends, Brexiters also continue to make every effort to deny the actual and most obvious impacts of Brexit so that we have to rely on investigative journalist and whistle-blowers to establish the otherwise obvious fact that increasing paper work and border checks necessarily creates frictions and makes trade less smooth.

Brexiters’ desperation to stave off reality encroaching on their Brexit fantasy, may also explain why they are desperately the trying to construct a link between Brexit and the UK’s role in the Ukraine crisis. As Chris Grey adroitly explains in this week’s Brexit & Beyond blog, all the contortions necessary to make that link plausible, fail at the first, very basic hurdle, namely the fact that even as EU member ‘the UK operated an entirely independent foreign and defence policy.’ Rather than reflecting a new-found ‘global leadership’ role, the UK’s foreign policy currently seems to be hostage to Brexiters’ desperate compulsion to see Britain reclaim its rightful place on top of the world geopolitical system and to a Prime Minister fighting for his political survival and keen on some positive (or indeed even just different) headlines.

As such, the past week was another one following the now familiar pattern of the Tory party’s home-made problems – most notably the shocking handling of the investigation into ‘Partygate’ – paralysing progress on any of the real issues facing the country.

Northern Ireland Protocol: Deal, no deal, same deal?

Most importantly, the continuing political and public focus on Johnson’s personality and possibly unlawful actions start impacting on the most delicate unsolved Brexit issue: The situation in Northern Ireland.

Some sources reported that the UK-EU talks about the Northern Ireland Protocol (NIP), after some optimism earlier this year when Liz Truss replaced Lord Frost, seem to have stalled due to uncertainty about Johnson’s future. Other news this week contradict this pessimistic interpretation to some extent. Irish foreign minister Simon Coveney and Liz Truss had a phone call on Friday following which Coveney tweeted that “Progress on key issues in February is possible” and Liz Truss stated earlier in the week that she wanted “to make significant progress by February.” These optimistic statements are of course politically motivated, and there still is no movement on the sticking points.

Meanwhile, on the ground the situation risks escalating. Democratic Unionist Party (DUP) NI Agriculture Minister Edwin Poots argued that recent court rulings required him to seek retrospective approval from the wider Stormont executive to carry out the checks on goods arriving from GB required by the NIP. While Sinn Fein prevented the issue from being put on the agenda, the DUP First Minister Paul Givan confirmed on Thursday that Poots would order for the checks to be stopped regardless. This would mean the UK would be in breach of the NIP once again.

Neither Truss nor Johnson seem particularly worried about the impact the DUP’s move might have on the UK’s relationship with the EU. Indeed, Johnson outburst during PMQ (accusing the ‘insane EU’ of ‘pettifogging’ over the implementation of the NIP) and Truss’s statement that the UK government would not prevent the DUP from suspending the controls, as well as the Foreign and Commonwealth and Development Office (FCDO) itself taking to Twitter to attack the protocol seem to blatantly contradict the otherwise more reconciliatory tone and Truss’s insistence on progress.

Whatever the reasons for these contradictory statements and actions coming out of Westminster, the discrepancy between discourse and reality increasingly seems like the one constant in the government’s approach to Brexit.

Agility and restlessness in financial regulation

Equally ambiguous and contradictory news also reached us regarding financial regulation and services.

The good news story this week was that demand for UK consulting firms have recorded their sharpest ever increases in overseas income last year, – according to the FT – thus “belying concerns about the impact of working restrictions imposed by post-Brexit trading relationships.” The big problem with that claim is, of course, that the increase is almost entirely due to Covid-related working from home rules in many countries, which has meant business travel has become a non-issue for the delivery of such services. So, the right way to look at this is not that demand for consultancy services has increase thanks to Brexit, but rather Covid-induced increased demand for remotely delivered services has been possible in spite of Brexit.

In less good news, the FT also reported on the EU’s decision to delaying the implementation of capital requirement rules enshrined in the Basel III accord until 2025. Concretely, this means that EU banks will require less capital coverage for loans made to companies that do not have a credit rating (most European companies). They can therefore lend to such companies at lower costs than banks in countries that fully implement the Basel III accord. It is not yet known – and won’t be for another few months – whether the UK will follow the EU or instead fully implement Basel III thus potentially creating a competitive disadvantage for UK lenders.

Beyond this new example of potentially harmful regulatory competition (in terms of financial stability), the episode provides interesting insights into what the opportunities and dangers of regulatory divergence look like in practice. There is the well-known fundamental problem that diverging from EU rules will mean for most companies not being subject to one – potentially lighter touch – regulatory regime, but rather having to comply with two rather than just one such regimes. Yet, there are more subtle issues with predictability and certainty of regulations too.

In this instance, it is the EU who decided to use a light-touch approach to regulation, thus putting pressure on the UK regulator to follow suit. One can see how this can lead to a race to the bottom, even though experts do not think the UK regulator will follow the EU’s lead in this instance.

The more fundamental issue though is the uncertainty Brexit creates: The view, popular amongst Brexiters that the way of handling regulatory divergence after Brexit is simply creating a bonfire of regulation is of course an illusion. One lawyer quoted in the FT put it this way: “Divergence is not going to happen through a roll back of historic rules, it’s going to come from the different approach to rulemaking.” In other words, it takes more than a wrecking ball to create a competitive regulatory system. In this process, another Brexiter trope – that of ‘regulatory agility’ after Brexit – may come back to bite the UK. While companies in general may like more ‘agile’ regulators produces more flexible and lighter touch regulations, too much ‘agility’ in the form of uncertain and potentially constantly changing rules is not in firms’ interests either. Here, the often-decried slowness of EU law-making and regulation can actually be an advantage for firms, because it creates planning certainty by providing a relatively stable regulatory environment. That is often worth more for firms than the elusive struggle to get the ‘optimal rules’ for their business. Here, the UK’s planless approach to Brexit risks creating an actionism, driven by political needs rather than technical expertise that will lead to a ‘restless regulator’ that is unable to provide a stable environment for businesses.

Again, the argument is not that regulatory divergence cannot generate any ‘dividends’ for the UK economy. The argument is that none of the Brexiters – driven as they are by a blind and mindless libertarian ideology – seem to understand the realities of economic regulation in the modern world economy. Identifying and then pursuing the potential for a competitive – but still prudential – regulatory regimes would require detailed analysis of opportunities. Such analysis require a deep understanding and consideration of the technical details, like the ones carried out by the regulatory divergence tracker or perhaps the reasonable statements made by the UK’s new Information Commissioner on the potential for the UK to lead on privacy regulations.

Two years of reality checks – still no realism

The ERG and Brexit ultras like Frost push the government for a supposedly ‘common sense’ approach to economic regulation, foreign policy, trade policy etc., which are however based on a complete denial of the realities of 21st century modern states and economies. The views of the Brexit ultras are not only denying technical realities, but also political ones. As Tom Peck wrote in the Independent this week, the commonsensical anti-regulatory, anti-state reflexes of the Brexit ultras are not very popular amongst the British public either. Ultras like Frost urge the government not to go down the route of a “high tax, high regulation, high control” society. What they do not understand is that most people are aware that they depend on public services to live a decent life and turning Brexiters’ libertarian fantasies into policy would create a reality that benefits the rich and powerful only.

If we were to sum up the first two years of post-Brexit Britain, a sentence written by Hanna Arendt in 1948 about another set of fanatics may sum it up best. She noted a ‘curious contradiction’ between an ‘avowed cynical “realism” and their conspicuous disdain of the whole texture of reality.’ The same contradiction still characterises the Brexit movement. As a result, even after two years of reality checks, the British public is condemned to wait for Brexiters cynical realism to give way to real realism.

Brexit Impact Tracker – 23 January 2022 – The UK’s Escape from Freedom

“Freedom” is high up on Brexiters’ priorities list – at least in terms of discourse. “Unshackling” the UK, liberating it from the European yoke was, after all, the whole point of the exercise. ‘Taking back control’ and using the new-found freedom to make ‘our own laws’ have become part of the Brexiter narrative about getting ‘our country back.’ The central position of ‘freedom’ in Brexiter discourse comes as no surprise, of course, now that we know that the entire Brexit project is driven by pseudo-libertarian ‘Think Tanks’ and groupuscules including the Cato Institute and the Atlas Network. Johnson himself regularly jumps on the freedom bandwagon, e.g. when declaring Freedom Day after abolishing Covid restrictions back in July 2021.

Yet, this week has exposed with brutal clarity that the idea of ‘freedom’ in the pseudo-libertarian playbook has one purpose and one purpose only: Giving those in power absolute and unrestrained freedom, while denying the rest of us even the most basic, hard-fought political liberties of a democracy.

The reading of the Policing Bill in the House of Lords on Monday and early Tuesday quickly got drowned out by the renewed uproar around ‘Partygate’ and the very vocal challenge that some Tory MPs directed at the PM (most conspicuously perhaps David Davis with his indirect Cromwell reference). Yet, Monday’s debate in the House of Lords of Priti Patel’s Police, Crime, Sentencing and Courts Bill was arguably a key moment in the Johnson government’s increasingly egregious attacks on key pillars of British democracy. Debating and voting well into the early hours of Tuesday, the Lords defeated the government 14 times, thus reversing some – but not all – of the most anti-democratic elements of the bill (such as police power to impose noise-based restrictions on protests). Whatever happens next to the bill when it is debated in the Commons in February, the debate in the Lords has thrown into sharp relief the fact that behind the libertarian façade, Brexit is an assault on our freedoms and rights at an unprecedented scale in recent times. The direct attacks on the British democratic institutions and judicial system are the most egregious illustration of that fact; but this week’s Brexit-related news provided several other, less conspicuous ways in which Brexit has restrained our freedoms.

The end of freedom: Queues and music tours

The build-up of long queues of lorries on the approach roads to the port of Dover – and at Calais – has made headlines in quite  a few news outlets. The way in which different outlets report on the issues and the question of what factors are to blame are revealing in the sense that they illustrate that when it comes to Brexit, even the most basic facts become subject to politically tainted struggles over interpretation and causality. Thus, LBC reported that the queues can be seen from space, while they cannot be seen on Highways England’s traffic cameras on the A20. Highway England denies accusations that it deliberately switched off the traffic cameras on that stretch of motorway, but does not deny that they are not currently working. The CEO of Dover Port Doug Bannister, on the other hand, was eager to blame unusual hikes in freight traffic rather than Brexit for the delays. A statement that was contradicted by drivers and a European haulier who squarely blame the queues on Brexit red tape, which reportedly takes 10-20min to clear for each vehicle, while ferries leave the port reportedly half empty. The BBC reported on the queues matter-of-factly without mentioning Brexit. While LBC turned to eye witnesses’ social media posts and the Express focussed on social media users’ reactions to Guy Verhofstadt’s tweet about the British’s penchant for queuing.  GB News, in turn, blamed - in an at first glance perhaps surprising way - ‘terrible Brexit red tape’ for the queues. At second glance, however, this may very well be a further sign that the government is increasingly facing a two-front war on Brexit:  On the one hand it faces increasing pressures from businesses to move towards a softer version of Brexit and towards less fraught relationships with the EU, on the other hand radical Brexiters are increasingly unhappy with the too moderate version of hard Brexit that the government is implementing. This was clearly illustrated by Lord Frost’s departure and subsequent commentary from Brexit ultras. GBNews reporting on the lorry queues seems to further illustrate this.

Yet, reality did rear its ugly head when Doug Bannister urged the government to negotiated with the EU the streamlining of customs procedures to avoid further chaos when the EU introduces new biometric checks in September 2022. These checks may mean that lorry drivers must leave their vehicles to go through face scanning and similar checks, adding to processing times and possibly generating massive queues and delays. Overall, it seems hard to deny that the removal of the freedom to move goods across borders starts having a considerable impact on businesses.

Another freedom we have lost with Brexit is our right to freely travel and work in 28 different European countries. This lost freedom starts hitting artists and musicians increasingly hard as countries are preparing for the end of the pandemic. Elton John has been campaigning for the reestablishment of touring musicians’ rights for some time. He has been quoted again this week as criticising the government’s misleading claims that 21 EU countries offer visa and work permit-free access to UK musicians. A House of Lords inquiry has confirmed Elton John’s view. Lord Kinnoull summarised the inquiry, which found that government websites are not accurate and that much of the information about the processes that artists need to comply with before a tour is misleading.

Overall, pressure on the government seems to be building from various quarters to sort out the additional red tape Brexit has created for businesses. The British Chamber of Commerce (BCC) published a new report that documents the negative impact of Brexit on businesses ability to secure worker visas and the continuing disruption and higher costs due to customs procedures. The BCC urges the government to solve these issues. The issues seem all the more urgent as CityAM reported results from a new survey that draws a very bleak picture of business sentiment after Brexit. According to the paper, one in three businesses fear they may not survive beyond 2022 due to Brexit-related impediments on business and trade.

Fisheries and Finance: More dark clouds

This week also brought us some news from industries whose fortunes after Brexit remain strongly disputed…and they suggest that those disputes will not be settled any time soon.

I blogged about a ‘silver lining story’ in the Daily Mail related to Brixham fish market a couple of weeks ago. This week, Devon Live ran a story that painted a very different picture of how the fish industry in Brixham is faring after Brexit and what people working in the industry think of Johnson’s promises to the fishing industry. Contrary to the Mail’s upbeat story, Devon Live interviewed members of the fishing community who talk about their sense of betrayal and resentment against Johnson and Brexit.

The impact of Brexit on financial services too continues to be a controversially discussed topic. By now, it is well-known that the impact of Brexit on jobs in the City of London has not been as catastrophic as some pre-Referendum worst-case scenarios predicted. A piece in the FT this week confirmed that once again. The job market in the City of London is buoyant and salaries and bonuses are increasing. However, we are only just at the beginning of Brexit’s impact on UK financial services, and the FT notes that much now depends on the EU’s own policy in this respect. This week, the EU announced the extension of the permission for EU banks to continue using clearing houses in London for a further three years to June 2025. The extension may provide some further hope that the impact of Brexit on the UK financial service industry will be more limited than feared. However, the announcement also made it clear that the EU’s long-term goal remains to build up capacity inside the block to reduce its dependence on the City of London. What we are seeing may hence simply be an indication that the impact of Brexit will take longer to materialise than what many thought. As Chris Grey put it at one stage: Brexit is a slow puncture, rather than a dramatic tyre blow-out. A new report by the Federation of International Banks in Ireland (FIBI) shows that there is no reason for complacency. The report found a €200bn increase in financial assets in the Irish banking sector since the UK voted to leave the EU six years ago. While the Irish banking sector was expanding even before Brexit and presumably would have continued to expand without it, there can be no doubt that with the UK’s departure from the single market, Ireland has become an even more attractive location for foreign banks to service EU clients. So, part of this increase certainly is due to companies moving assets from the UK to the Republic of Ireland or deciding not to place them in London in the first place. This sort of evolution will not mean the end of London as an important financial centre. There are ways in which London can remain internationally competitive – e.g. by establishing an attractive regulatory regime for Green Finance and Fintech as Joël Reland argued this week.

What these news items from key industries illustrate once again is the subtlety of the impact of Brexit on the UK economy. While polls show a clear trend towards waning support for Brexit (a recent Statista poll for instance shows 49% of people surveyed consider it was ‘wrong to leave’ with only 38% considering it was ‘right to leave’). Yet, the impact of Brexit will always have to be measure against the counterfactual of the UK not having voted for it in June 2016 and not having actually exited the EU in January 2021. That counterfactual is hard to establish empirically and even harder to present to the general public – especially in a public discourse that is dominated by deliberate obscurantism, anti-expertism, and nationalist delusion. It seems therefore unlikely that we will be moving beyond the politically-tainted interpretations of the figures any time soon.

FTAs and the NIP

The week also brought some good news for the government, most importantly that the US government has finally agreed to start negotiating a deal on steel and aluminium tariffs imposed on UK exports to the US. Sorting out this issue is of outmost urgency for the UK, with some UK steel producers already working on plans to move production from the UK to the EU to avoid these tariffs (see my previous post).

Whether or not these negotiations will be successful will most likely depend on the outcome of the ongoing discussions between the UK and the EU about the Northern Ireland Protocol (NIP). There have been various reports that the US has refused to remove the tariffs on UK steel and aluminium imports in order to use them as a means of pressuring the UK to refrain from triggering Art. 16 of the NIP, suspending parts of it unilaterally. The chances of the UK government making that dramatic move seem more remote now that Lord Frost has removed himself from the equation and Liz Truss is in charge. Moreover, as long as Boris Johnson remains embattled about ‘Partygate’ his appetite for a trade war with the EU is considered more limited. The chances of Truss finding an agreement with the EU are deemed to be intact even thought that may affect her chances of succeeding Johnson as next PM. The crisis in Ukraine over the risk of a Russian invasion may further increase the chances of a deal being reached, because the issue of gas supplies and a common stance against Russia is becoming more pressing, possibly allowing the UK and EU to overcome their differences over Brexit.

The UK Australia Free Trade Agreement (FTA) also got some news coverage this week. What was sold to the country as a ‘world-class deal’ and a great victory for Brexit Britain and Liz Truss personally, starts to be subject to some scrutiny and it turns out that not everything that glitters is gold. Referring to the potential impact of the agreement on UK farmers, one Tory MP is on record for saying that the deal was as one-sided as the recent Ashes cricket series. The Independent, in turn, reported the Australian wine producers’ discontent over UK government plans for an alcohol tax reform, which would increase tax on highly alcoholic (above 11.5%) wines and thus more than wipe out the expected reduction in tariffs on Australian wine exports to the UK. This episode illustrates another now well-known fact related to Brexit, i.e. that the government has no coherent strategy in delivering its much lauded ‘Brexit dividends.’ Without any coherent plan or strategy, what one minister does one day, another one may undo the next. Yet, this way of approaching policy-making relates to a more fundamental element of Brexiter ideology, namely its view of freedom as something that liberates us not just from rules and laws, but from reason itself. Brexiters seem to genuinely believe that it is possible to defy reason, which is what makes them so dangerous.

Absolute freedom: Freedom from rules, freedom from reason

Chris Grey’s Beyond Brexit blog this week contains a fascinating discussion Johnson’s personal disregard for rules and the Brexit project’s ‘anti-ruelism’ – a term coined to capture the fact that Brexiter’s approach to freedom ‘ isn’t some coherent or principled anarchism, but a rag-bag of inchoate impulses’. This week exposed the incoherence of the Brexit project’s approach to freedom better than any other one so far. The blatant contrast between the government’s disregard for any rules restraining its own actions and its willingness to impose draconian restrictions on anyone else’s basic civil liberties reveals the fundamental dishonesty of the Brexit project. Just like the pseudo-philosophical ramblings of an Ayan Rand, or Cumming’s ‘pseudo-intellectual disruptor philosophy,’ Brexiters’ approach to freedom is incoherent, contradictory, and ultimately dangerous. Indeed, one is reminded of the historical example of the Jacobines during the French Revolution.

 G. W. F. Hegel famously criticised the Jacobins for seeking to rebuild society entirely according to the prescription of human will – rather than reason – and thus to realise an unrestricted, unconditioned kind of freedom. According to Hegel, such a project of ‘absolute freedom’ is bound to lead to disastrous and destructive results – such as the Terror during the reign of Robespierre -, because its hubris puts the ‘will of the people’ not just above any existing laws and rules, but above reason itself. It is a claim to freedom not just from rules, but freedom from reason. In this respect, likening Brexiters to the Jacobins of the French Revolution seems indeed appropriate and captures a fundamental truth about Brexit. Like the Jacobins, Brexiters promise freedom. But their freedom is fundamentally an impossible claim to unrestrained, unconditioned, and unlimited power. Hegel warned us against politicians who – in pursuit of an unachievable purist ideal – defy not just the established rules of society, but reason itself. They promise that it is possible to escape from reason, but they orchestrate an escape from freedom instead, dragging society into the abyss as a result. It is to be hoped that history will not repeat itself in this respect.

Brexit Impact Tracker – 16 January 2022 – Silver Linings and Dark Clouds

This week’s Brexit-related news seemed a bit different from previous weeks. Various stories from various outlets suggest that things are not all bad in Brexitland. Perhaps people are so fed up with bad news, that they start clinging on to whatever possible good news there could be? Or perhaps, as it becomes increasingly clear that Brexit most likely will not be the success we were promised, the quintessential British reflex of keeping a stiff upper lip in face of adversity is kicking in? Regardless, there are reasons to doubt that too much optimism about the UK’s post-Brexit situation is warranted at this stage.

Silver linings?

It is of course not surprising that the usual suspects among the pro-Brexit press continue to claim ‘Brexit victories’ at every turn to convince themselves and their readers that Brexit was the right thing to do. (Conversely, they also continue to blame the EU for absolutely everything Brexit has caused. This week’s announcement by O2 and Virgin that they will not reintroduce EU roaming charges led Nadine Dorries to – falsely – blame the EU for a failure to include roaming charges in the Brexit negotiations). However, this week, even serious journalists and experts, like the FT’s Peter Foster, seem to have started to try and look for the silver lining of the Brexit cloud. Foster rightly points out that feeding pro-Brexit newspapers with stories about frankly ludicrous Brexit dividends – like the pint-size champagne bottles or the crown stamp on pint glasses – will not keep people who voted to leave happy for much longer. Instead, the government will need to get serious about the actual opportunities that regulatory divergence from the EU can offer. Here, Foster mentions the new National Artificial Intelligence strategy as an area that may actually provide the UK with a competitive advantage over the EU whose emerging regulatory framework in the area may very well turn out to be more restrictive than the UK’s.

Similarly, a strangely up-beat sounding article on the BBC web page noted that firms were ‘still exporting into EU despite new costs.’ The article quotes various UK exporting companies, one as saying that they ‘coped well with the new rules’ and that Brexit was nothing to fear, but something to prepare for. On its Radio 4 Today programme (@ 25:00) the BBC also reported on a new survey by Make UK, which suggests that nearly three quarters of British manufacturing businesses were optimistic that conditions would improve in 2022. Dharshini David did acknowledge that border delays and additional costs are continuing issues caused by Brexit rather than ‘teething problems.’ However, the report on the survey mainly focusses on the positives, namely the fact that the UK still is considered a highly competitive place to do business from and the expected 10% increase in business investment in plant and machinery in 2022. The latter is good news indeed. Lack of business investment in the UK is at least partially responsible for low productivity, which is one of the key issues the UK needs to address to support living standards. However, the reason for the uptick in investment is mainly a very generous government tax incentive for such investments, which will expire in 2023. It is likely that what we are seeing here is spending being brought forward to benefit from this ‘super-deduction’ tax break, rather than a permanent uplift in much needed business investment.

Regarding financial services, a ‘Big-Read’ piece in the FT entitled ‘The EU vs the City of London’ provides a nuanced assessment of the impact of Brexit on the City of London and EU financial centres. The article notes that no ‘wide-ranging regulatory bonfire’ has taken place in the UK that would attract large amounts of financial activity to London. However, it also underscores the limited success of the EU to ‘a financial sector commensurate with its economy.’ Overall, like other pieces this week, the picture is one of limited damage and possibly some hope for the UK, although the long-term effects of Brexit on the city of London are still to come.

There is nothing wrong with reporting positive news about Brexit, of course.  However, there is a risk that such stories – however nuanced they are – lead us to draw the wrong conclusions about Brexit and what is needed to get the UK economy back on track post-Brexit and post-pandemic. Therefore, it is important to note that the vast majority of good news are describing situations where the Brexit damage is more limited than expected, not about any actual positive effects. As such, these news items are part of a tendency that I have written about since April at least, whereby Brexiters have managed to reverse the onus when assessing the impact of Brexit: Increasingly, those who opposed Brexit have to justify why the self-inflicted wound is not as bad as expected, rather than Brexiters having to explain why there are no benefits. The above reports all show that journalists seem to have bought into that reversal of onus and are now – at least implicitly – reporting cases of damage limitation as successes.

This is not only politically important, but also economically. Misunderstanding possible ‘silver linings’ of Brexit is problematic because it leads us to underestimate the economic dangers associated with Brexit. For instance, even where good news stories point to genuine Brexit opportunities, such as (possibly) divergence on AI regulation, such dividends – as Peter Foster puts it ‘will have to be netted off against the costs of leaving the EU single market, estimated as a 4 per cent long-run hit to UK gross domestic product.’ In other words, any gains Brexit generates have to be seen in relation to the losses it has also caused. We should not confuse being less worse off with being better off.

A second issue is the one of the ‘shifting baseline.’ Brexit and Covid have hit the UK particularly hard in terms of basic macroeconomic measures. Any bounce back that the media are reporting on needs to be seen in this context. Percentage increases in GDP, investments, etc. will always look greater when starting from a smaller base. The example of business investments is a case in point: The FT remarks that “the rebound [in business capital expenditure] comes from historically low levels and some economists said it would still leave the UK lagging behind other advanced economies.’

This is not Remainer pedantry or me not being willing to concede that Brexit may have some positive effects. Rather, it is a plea for honesty in the analysis of the UK’s economic situation, so that the right diagnosis is made, and the right remedies are chosen. Brexit is to an important extend the result of people worrying about a continuous worsening of their perspectives and a fall living standards and things will get worse post pandemic. Being satisfied by the fact that things could have been worse than they currently are will do nothing to start addressing these long-lasting and socially corrosive problems.

Northern Ireland Protocol (NIP)

This week also brought us news of a potential silver lining to the dark cloud over Northern Ireland. A rather encouraging statement was released after Foreign Secretary Liz Truss’s first meeting with EU Commission vice-president Maroš Šefčovič about the Northern Ireland Protocol (NIP). Truss sounded fairly optimistic, stating that "[t]here is a deal to be done that protects peace in Northern Ireland, defends our Union, and maintains the integrity of the United Kingdom and EU.“ The two sides have agreed to intensify talks over the next weeks. Irish Foreign Minister Simon Coveney saw the meeting between Šefčovič and Truss as the reset some were hoping for and urged the two sides to try and reach a deal by the end of February.  

Whether Coveney’s statement is political strategy or wishful thinking rather than a realistic assessment of the situation remains to be seen. While the atmosphere between the negotiation teams may have improved after Frost’s departure, substantively the key divergences remain. Liz Truss has not taken the triggering of Article 16 off the table and continues to insist that it is the EU side needed to show more pragmatism. On the other side of the Irish Sea, Democratic Unionist Party leader Donaldson reiterated the unionists’ opposition to any Irish Sea border stating that “whilst the Irish Sea border exists, Brexit has not been delivered.”  These statements suggest that there remains plenty of potential for further conflict and disagreement which may make a solution impossible. And of course, there is Truss’s domestic political strategy to contend with.

Deal or no deal for Truss’s leadership bid?

For Truss to realise her apparent political ambition to succeed Johnson as party leader and PM, she has a balancing act to perform. Truss’s steep political rise is in large part explained by the perception that she gets deals done. That myth has been pushed by the pro-Brexit press when she was Trade Secretary in charge of rolling over a large number of Free Trade Agreements (FTAs) the UK had with countries around the world as an EU member. Getting a deal done on the NIP would strengthen that image of a ‘deal maker’ and presumably earn her a lot of respect in the general public.  

However, there is simply no solution to the NIP issues that could possibly satisfy either the hard-line European Research Group (ERG) or the DUP. Any deal she could reasonably reach with the EU will necessarily make her a traitor to the hard Brexit cause, seriously limiting her chances of succeeding Johnson as party leader. From that perspective continuing Frost’s hard-line approach and possibly triggering Article 16 would be a better strategy for her career progression. This path, of course, would most likely lead to a major fallout (and a trade war) with the EU, which some observers think may not be what Johnson currently wants given his weakened position. But it would also make Truss’s life more difficult. An escalation of the conflict may be the only thing that will satisfy the Brexit ultras – and even that probably only for a short while, since the Brexit ultras can never be satisfied. However, contrary to Frost, as Foreign Secretary Truss has to take a broad view on how the NIP impacts not only our relationship with the EU, but also the UK’s other foreign and security interests. So, Truss finds herself faced with a dilemma: If she gets a deal, she will most likely be branded a traitor by the Brexit ultras and her leadership bid may be compromised. If she does not get one or even triggers article 16, the relationship with the EU and the situation in NI will degrade further possibly to the point of a trade war or, worse still, a flaring up of sectarian violence in NI. That would in turn lead to a reaction not just from the EU, but the US, and mean Truss would not be able to deliver on the Global Britain strategy, which relies on a strong partnership with the US.

Between a ‘reset’ leading to a genuine solution and a fully-fledged ‘fall out,’ various commentators believe that a third option may be a sort of ‘muddling through.’ This third scenario, which Chris Grey considers the most likely and worst of the three, would consist of ‘a partial climbdown’ by the British government that would make a deal possible, but not solve anything or satisfy the Brexit ultras; leading to a continuation of the situation in 2021 characterised by a state of permanent low-level conflict with occasional flare ups and new negotiations. Given that no solution seems to be politically viable at the moment, commentators like RTE’s Tom Connelly see a potential for paralysis resulting from the talks. For Brexiters, of course, that muddling through strategy may be the whole point. Many of them have made their career based on stirring up anger against the EU. In this context, the NIP may seem like a perpetuum mobile – a perpetual motion machine – that will keep the wheels on the machine that brought them to power spinning forever. Yet, just like the perpetuum mobile, that belief makes sense only as long as one ignores fundamental laws of (human) nature.

Symbols and Reality

Tellingly, the prominence of the NIP on the political agenda in the UK and the EU contrasts somewhat with the economic reality on the ground. Indeed, another ‘damage limitation’ story this week comes from a new survey by Manufacturing NI, which found that “less than 25 per cent of 163 manufacturers surveyed were still struggling with border controls between Britain and Northern Ireland, down from 40 per cent six months earlier.” The same caveat applies to this story as to the ones above: That’s only relatively good news compared to a worse situation a few months ago, not compared to a much better one when the whole of the UK was in the single market. Still, the contrast between the actual economic effect of the NIP on businesses and the politicians’ rhetoric about its alleged devastating impact reminds us of what is becoming another permanent feature of Brexit rhetoric, namely the constant disconnect between symbolism and reality. Nothing illustrates this disconnect better than Article 16. Few Brexiters probably know – or care – what triggering Art. 16 would really do. But that does not matter, as Art. 16 has simply become the latest symbol of our regained sovereignty on which Brexiters pin their hopes while denying reality. Art. 16 is being treated like the legal incorporation of the mystical Excalibur that can be swung at the EU if we do not get what we want. Funnily enough, the same Brexiters (Truss in particular) who adhere to such magical thinking, continue to accuse the EU of lacking common sense, pragmatism, and realism when it comes to the NIP negotiations. Until Brexiters themselves start to show the common sense, realism, and pragmatism that they want from the EU, we are condemned to relive the same pattern of reaching and then reneging our agreements with the EU, which will lead the country absolutely nowhere. It is not easy to see a way out of the current cul-de-sac. Contrary to what some observers seem to believe, replacing Johnson as the PM will not solve anything, as the Tory party will most likely remain in the hands of extremists after he is gone. On the NIP as on other issues, that means that the current thaw period due to Truss’s different personality and political style to Frost’s is most likely only a temporary reprieve. The British people are condemned to watch the dark clouds gathering and to anxiously wait for either real domestic political change or for external pressures (from the US or the EU) to mount to the point where someone will step up and cut the Gordian knot of the NIP.

Brexit Impact Tracker – 9 January 2022 – Trade Fantasies and the (not so) Special Relationship

There have been various types of Brexit-related news this week; some good, some bad, some ugly. Which is which is not always easy to tell at first glance. In fact, Brexiters are still very much on a mission to claim victories and ‘Brexit dividends’ where there aren’t any. It seems that after one year of actually existing Brexit, all Brexiters can point towards are things that demonstrably have nothing to do with Brexit, could have happened without it, or do not matter much. Chief among which is the ‘vaccine roll-out,’ which Vote Leave boss Matthew Elliott had to resort to in order to come up with anything positive after one year of Brexit. Still, let us start with some (fake and genuine) good news for a change.

Fake good news, (possibly) good news, not so good news

The fake good Brexit news comes from Devon. The Daily Mail’s Robert Hardman penned a piece with the headline “Brexit success story to make Remoaners choke on their sea bass.” The Brexit success story he is referring to is the record value of fish sold at England’s most valuable fish market in Brixham. Barry Young - Managing Director of Brixham Trawler Agents – is quoted in one outlet as saying “[d]espite the doom-mongering about life outside of the European Union, we have a clear example that shows the opportunities and the benefits that can be found through the UK as an independent trading nation.” What does not become clear from any of the articles covering the story, is how exactly Brexit has helped fishers in Brixham to achieve this new record. Digging a bit deeper, it becomes clear that this may simply be a continuation of a trend that has very little to do with Brexit. Thus, an article from 2017 explains the local fishing community’s success as being the result of  ‘many years of stock conservation and gear development, which we are now starting to see the benefits of.’ So, what we see in Brixham may simply be the continuation of a trend that started long before Brexit and was hence possible as an EU member. It is also not clear how Brixham’s good fortunes compare to the industry as a whole, with other recent media reports drawing a much less positive picture. So, it would seem that this alleged ‘Brexit success story’ is at best a story about Brexit not having reversed the upwards trend in fish sales at Brixham rather than one about Brexit in anyway causing or helping that trend.

In the category of genuinely good news: This week the government has presented its plans for the post-Brexit agricultural policy which will replace the EU’s Common Agricultural Policy (CAP). Replacing the CAP – one of the EU’s worst policies in particular regarding biodiversity  – with a system that incentivises farmers to move towards more environmentally friendly production methods is definitely good news. Although, environmentalists and farmers have reacted by warning that nearly six years after the Brexit vote, the policy still lacks detail and was mainly based on the government’s usual ‘blind optimism’ rather than a clear plan.

More – moderately – good news came from the talks about the Norther Ireland Protocol (NIP). Liz Truss and Ireland’s foreign minister Simon Coveney had their first meeting, which was qualified as ‘good.’ While on the substance the two positions seem to remain incompatible, as the UK government has not changed its demands after the departure of Lord Frost. It continues to demand the removal of the European Court of Justice (ECJ) as instance overseeing the NIP. Yet, the good news is that the triggering of art. 16 seems less likely now than a few weeks ago and there now seems to be a pathway to a solution emerging. This pathway consists of finding an agreement on the issues of paperwork and physical border checks for goods crossing the Irish Sea by February and leaving the trickier governance and state-aid questions for after the Stormont elections in May and after the French EU presidency ends in mid-2022.

Another piece of superficially good news has to do with the introduction of the new border controls on EU imports to the UK. The new border checks led to some disruption and lorries queuing at the border due to issues with the new Goods Vehicle Movement Service (GVMS). Overall, however, the government managed to avoid disruption at a scale that would have made it onto the front pages of the national papers. Brexiters will decry ‘project fear’ of course and –  like Shanker Singham – claim that all is well in terms of post-Brexit trade. The reality, however, is that British and EU companies have just been administered ‘another dose of pain’ in the form of increased costs and red tape. The reason why there is no visible problem at the border are simple: For one, the checks came into force during a ‘seasonal lull in trading’ so that the real test for the new system will come in the coming weeks when trade picks up. More importantly, as trade expert Sam Lowe pointed out this week, the UK government has been very successful in keeping visible disruption away from the borders. In fact, goods simply do not leave the factories and warehouses in the first place due to increased costs and paperwork. So, if there is no visible problem at the borders, it is to a considerable extent because Brexit had led to a decrease in trade, contrary to what we were promised.

Trading in fantasies

Chris Grey discussed this week the growing acknowledgement in Brexit quarters that something is not going quite to plan. However, in terms of trade Brexiters largely persist in claiming that everything is well – despite the reality of an estimated 15% decline in trade with the EU last year.

Brexiters use several strategies to prop up their trade fantasies in face of a stubborn reality. The reification of FTAs is one of them. Thus, Singham maintains that Brexit has gone well in trade terms by measuring Brexit success simply by the number of new trade deals concluded, rather than their content and likely impact on the UK’s economic performance or people’s (including farmers’) livelihoods. But even on his own terms, Singham’s positive assessment seems like another case of ‘blind optimism.’ The Australia deal is literally the only new FTA concluded with the New Zealand deal having been agreed. All others are roll-over deals of EU FTAs. Some have been slightly amended compared to the EU predecessor deal (the one with Japan), but others have already fallen behind what the EU has, because the EU has since concluded a more comprehensive new deal than the one the UK rolled over (the one with Mexico). Most importantly, all new trade deals are more than offset by the end of free trade with the EU. Indeed, the new trading arrangements under the Trade and Cooperation Agreement (TCA), due to new non-tariff trade barriers, make trade less free. So, even on this superficial criterion of number of deals, Brexit has not delivered more free trade.

Another defender of the myth that Brexit is good for free trade is the ‘hight priest of Brexiter economists’ Patrick Minford who insists that that ‘civil servants’ are overly pessimistic about the huge benefits from falling consumer prices due to increased free trade post-Brexit. Minford’s outdated theoretical assumptions and methodological choices have been debunked years ago. His flawed economic modelling predicted that Brexit would lead to a 4% increase in GDP due to the impact of free trade on consumer prices and competition, which is in stark contrasts with the OBR’s forecast of a 4% decline.

Minford’s belief in free trade is based on a century-old libertarian trope, namely that free trade will benefit people through falling consumer prices. Based on that belief, the FTAs with Australia and NZ are great ‘because those are very big agricultural producers, which could have a big effect on food prices.’ He thinks the OBR’s prediction of a 0.02 % impact of the Australia deal on GDP is ‘the most stupid underestimate, because it's completely leaving out the enormous impact it should have on our consumer prices.’ The neglect of the impact of the Australia FTA on prices in the OBR assessment is demonstrably wrong. Yet, the more fundamental problem with Minford’s argument is that any benefit to consumers may be more than offset by the costs that import-competing producers and localities will bear. Concretely, there is the risk that British beef and sheep farmers are wiped out or forced to engage in a race to the bottom in terms of environmental impact, food standards, and animal welfare.  Minford is indifferent to such effects. His enthusiasm for free trade goes as far as rejecting FTAs and instead advocating a complete, unilateral abolition of import tariffs even when it means – as he admits – that it would ‘cause the ‘elimination’ of UK manufacturing and a large increase in wage inequality.’ 

But the impact of import competition matters. Recent scholarship has provided evidence that trade liberalisation has had devastating effects on certain regions in the US and the UK, leading to deindustrialisation and long-term declining living standards. It made people so miserable that they were willing to vote for Trump or support Brexit. That is not to say that free trade is necessarily all bad, but ‘when and where trade is costly, and how and why it may be beneficial’ are still open questions for policy-makers and researchers that require careful consideration. Simply opening up one’s domestic market – without compensation or support for those who may lose out – clearly is not the sort of policies that will make trade liberalisation a success.

What explains such fanatic belief in the benefits of unconditional free trade as Singham and Minford demonstrate?

Partly, it’s economic and historical illiteracy. Minford maintains that “Before the First World War, we traded all around the world, basically with free trade and [it was] tremendously beneficial. We were very much a powerhouse.” The reality of course is that what we had before WW1 was not free trade among equals, but mercantilist and selectively protectionist trade policies within the British Empire backed up by gunboats and colonial armies. It was not free trade that made Britain great. It was colonisation and looting at immense human cost to the peoples forcibly subject to the British Crown that did. Free trade only started to be seriously considered as a policy once Britannia completely ruled the waves.

Brexiters’ use of the myth of free trade has of course a long history. Ever since the repeal of the Corn Laws in 1846 the belief that free trade benefits consumers by reducing prices has become a common place. Yet, as historical research shows, the free trade ideology was in reality aggressively pushed by producers – such as Richard Cobden and the Anti-Corn Law League – pursuing their own interests. Evidence that other trade arrangements (e.g. import substitution) may provide similar or even better economic and societal outcomes were simply ignored.

Yet, the myth of the social benefits of unconditional free trade is deeply rooted in this country. Brexiters’ staunch defense of free trade against any economic realities exposes another reason for that state of affairs. Namely, the belief in the inherent superiority of the ‘Anglo-Saxons,’ which logically means they will come out on top in a perfectly free and competitive marketplace. Indeed, Brexiters’ free trade fantasies illustrate the mishmash of ethno-nationalistic myths and alleged economic common sense and pragmatism on which the Brexit ideology is based.

Anglo-Saxon superiority and English internationalism

There are many reasons why people voted for leaving the EU in 2016. Frustration with actual and feared declines in living standards, the decline of local infrastructures and public services, worries about immigration, and frustration with too many rules and regulations. The architects of Brexit had managed to convince many voters that all these things were to be blamed on the EU and that exiting would solve them. Over the past year, however, it has become increasingly clear that the suspicion many of us had was right: The architects of Brexit never intended to solve any of these problems facing ‘ordinary people.’ Rather, the project was about something else entirely: Re-establishing Britain’s rightful place in the world – namely at the very top.

Partly that project is rooted in English nationalism. But it is not an isolationist project as the Global Britain slogan illustrates. Rather, it is a project of English – or ‘Anglo-Saxon’ – internationalism where the Anglosphere is supposed to form an alliance to reassert its world dominance.

The idea that Anglo-Saxon culture and civilisation is superior to continental European and other cultures has of course a long history. It may indeed be a reaction to the fact that for most of its existence England was a country ruled by others. In his lectures entitled ‘Society Must be Defended,’ Michel Foucault provides an interesting discussion of how the Norman invasion in 1066 gave rise to considerable intellectual effort to try and demonstrate the superiority of the ‘indigenous’ English common law over the continental roman-law inspired civil law of the invaders. These efforts have not only survived into the 20th and 21st centuries, but have actually become increasingly influential in the 1990s and 2000s when serious legal and economic scholars in prestigious universities developed a whole legal reform programme based on the idea that common law leads to better economic outcomes than civil law. This so-called Law & Finance School has influenced policies promoted by the World Bank, IMF, OECD and other international organisations who pushed countries towards ‘best practice’ in company law based on the allegedly superior Anglo-Saxon common law system (see here for a review and critique).

A very different type of literature, but making a fundamentally similar point, are popular books by arch-Brexiters like Jacob Rees-Mogg and Daniel Hannan who attempt to demonstrate the exceptionalism and superiority of English-speaking peoples. With Brexit and Johnson’s GE victory of 2019 these ideas seem to have gained more influence over politics and the society than they have had in a very long time, as Peter Jukes’ piece on Englishness suggests.

It is of course somewhat funny that, of all people, Boris Johnson – the person other world leaders call a clown – has come to incorporate Britain’s claim to superiority. Clearly, other ‘Anglo-Saxon’ are not convinced, as the post-Brexit evolution of our relationship with the US illustrates.

The not so special relationship

Just before Christmas Trade Minister Penny Mordaunt toured the US in order to reaffirm the special relationship between the two countries – a key pillar of the Brexiters plan for the UK to reclaim its place in the world.  Concretely, Mordaunt sought to make progress with discussions about a UK-US FTA and it was hoped her trip would lead to an agreement on the removal of Trump-era tariffs on British steel exports to the US.

Mordaunt’s speech in Atlanta during her tour is extraordinary in many respects. It contains passages that read like Mordaunt lecturing the US about what sound policies should look like and it even contains language that almost sound like a threat (“For the US to wait to seize this opportunity [of teaming up with post-Breixt Global Britain] would be to all our detriment, but also to its own. It is in its own interest to step up its trade policy and negotiations [with the UK]“). It also included a cringeworthy plea to be taken seriously: “[T]he US needs to understand and recognise the UKs new position. This is far more significant than just the size of its market – when America set itself free, it was a small economy.” Most of the speech, however, seeks to demonstrate the profound cultural bond and similarities between the US and the UK – including the shared ‘common law tradition’ – that sets them apart from the rest of the world.

Despite all these efforts (or maybe because of them?) – and despite praise from the pro-Brexit press – no tangible progress was made on either the FTA or the steel tariffs. While Brexiters may forgive the UK government for not having pulled off an FTA with the US yet – that is a hugely ambitious goal after all – it may be more difficult to stomach the fact that the EU has managed to agree a deal on removing US import tariffs on EU steel, but the UK has not. That seems to contradict the idea of the special relationship within the Anglosphere.

A direct reason for the Biden administration to hold off with an agreement on steel tariffs is that they may be used to pressure the UK government to agree to a deal on Northern Ireland. More fundamentally, however, while the famed British pragmatism increasingly looks like a ‘big myth’ as Christian Lequesne puts it, the US still is pragmatic – even opportunistic – when pursuing its foreign policy interests. Much was made of the shock AUKUS agreement that seemed to provide some support for the idea of a special bond among Anglo-Saxon countries. However, other events last year show that this agreement – like most things in US foreign policy – was driven by the US’s cool calculation and strategic pursuit of its interests rather than some sense of Anglo-Saxon solidarity. Thus, the US withdrawal from Afghanistan last summer is largely seen as a case of US unilateralism and indeed a humiliation for the UK.

 The UK’s failure to find an agreement on steel tariffs seems like the starkest reality check Global Britain and the idea of an Anglosphere have faced since Brexit. Of course, an agreement on steel could still be reached, but the fact that the EU has done so more quickly is crucial and is indeed already damaging the UK economy. BBC4’s Today (4 Jan 2022 @ 6:20am) spoke to United Cast Bar (UCB) Ltd in Chesterfield who are preparing to move part of their production to Spain to avoid the 25% tariffs on steel exports to the US. In the interview, UCB made it clear that if an agreement with the US is not reached quickly, that move will be permanent.
Also interesting was what the Economist’s Soumaya Keynes had to say about the reasons why the EU successfully negotiated a removal of the tariffs while the UK has failed to do so. As a far bigger market than the UK, the EU’s threat retaliatory tariffs on US products would hurt the US much more than the UK’s equivalent retaliatory measures. For the same reason, US importers are more concerned about tariffs on imports from the EU than from the UK. But another interesting factor Keynes mentioned was that the EU was more explicit about the retaliatory measures, while the UK was ‘friendlier, chummier.’ This perfectly illustrates Brexiters’ complete lack of realism and delusional ideas about special bonds among Anglo-Saxon peoples.

 Grandeur, pride, and destruction

 As Prof. Anna Deighnton put it “Global Britain” is a policy of grandeur. Ultimately, grandeur and British – or Anglo-Saxon – supremacism is the UK’s own worst enemy. It leads to the essentialist belief that Britain is by its very nature superior to other countries and Anglo-Saxon culture is the pinnacle of human civilisation. That’s where the Brexiters’ ‘bellicose victimhood’ comes from. If you firmly believe that you are the best in the world, then the fact that you objectively are ‘only’ a middle power must be somebody else’s fault.

It is British ‘supremacism’ that explains why the country has gone down a cul-de-sac, because it makes believers in that ideology – who now sadly control the Tory party and government – blind to the possibility that the failure of the country to provide decent living standards, jobs, and perspectives to all its citizens may actually be home made. This leads to a flawed analysis of what is going wrong and to providing all the wrong answers to the right questions. It suggests that re-establishing Britain’s rightful place on top of the world requires a purely negative political agenda, namely ‘unchaining’ or ‘unleashing’ it by removing the obstacles that its enemies – from outside and within – have put in place and that prevent it from reclaiming its place at the top. Once these obstacles are removed, everything else will follow naturally. There is no need for a positive policy programme to change the country’s fortunes. Simply break the chains and the rest will happen naturally. In other words, you do not need a plan, you just need a wrecking ball – the Brexit Referendum itself is the perfect illustration of this destructive approach.

The big problem with that ideology is that Britain’s problem is not, and never was, that it was ‘chained’ and held back by its European partners. Britain’s problem is that it has chosen economic and social policies that have left a large part of its population struggling to maintain the living standards and perspectives that people have come to expect after WW2. ‘Unchaining’ Britain – even if that were actually possible in our interdependent world – would not solve any of these issues, but make them a lot worst. Rich people – those who sponsored Brexit – do not need the NHS or the welfare state. They do not even need Britain as they are mobile and can buy a house wherever they please, as Farage made clear a while ago. They can afford to believe in their natural superiority. For everyone else, however, the reality is that they will have to rely on the state and public services at one stage in their lives. For them, the belief that superior Brits do best when unhampered by any constraints will soon turn into the nightmare of seeing their livings standards erode even further.

Ironically, then, it is those who are trying to convince Brits of their supremacy who are making sure that the country’s fortunes and position in the world are not what they could be with an honest assessment of who we are and what needs to be done. Pride goes before destruction and a haughty spirit before a fall.

Brexit Impact Tracker – 3 January 2022 – The Battle over Britain’s Economic Strategy

The past week’s Brexit news was dominated by the anticipation of additional barriers to UK-EU trade following the entry in force of delayed checks on EU imports to Great Britain on January 1, 2022. In parallel, an increasing number of politicians and commentators have started weighing in on the debate about the broader economic strategy the UK should or should not adopt to address the pressing economic issues and making Brexit a success or limiting the damage it is causing.

Trading in indifference

The grace period for full customs declarations on goods imported into Great Britain from the EU expired on 31.12.2021 (imports from the EU to Northern Ireland are exempt thanks to the Northern Ireland Protocol (NIP) and the UK government has decided to extend the grace period for goods imported into GB from the Republic of Ireland). From 1.1.2022 UK importers (and in some cases their EU suppliers) will have to provide a full import declaration. A key issue with the new rules is that EU exporters to the UK will have to register for an Eori number (economic operators registration and identification number).

So, the year started with another blow to the Brexiter promise of ‘frictionless trade’ as the media are full of articles on the now familiar effect of Brexit on UK-EU trade, namely a combination of more red tape, higher costs for businesses and slower trade. Unsurprisingly, this is expected to hit smaller businesses most as the Cold Chain Federation and the Federation of Small Businesses both warned this week.

The Guardian cites Paul Hargreaves, founder of Cotswolds Fayre, as saying that the government does not understand the impact of Brexit on British businesses and that “[Ministers] are not in the real world. They think things are a lot easier than they actually are.” That is not surprising of course. We have known at least since Johnson’s famous ‘F**k business’ comment that Brexit was always going to be about nationalist ideology not economic rationality. However, while it was possible to argue (and lie) about the impact of Brexit on businesses before Brexit happened, it becomes increasingly difficult to deny the fact that the vast majority of UK businesses do not seem happy with the way things are going.

Brexiters, of course, have not changed their tune and continue to do just that, i.e. deny that Brexit is a problem for businesses. This was illustrated to perfection by Arch-Brexiter Shanker Singham’s intervention on a panel on BBC Radio 4’s Farming Today programme on 1.1.2022. On the programme Singham was asked to comment on various food producers’ complaints about the ‘completely untenable customs bureaucracy’ that meant for several interviewees that exporting to the EU was simply not viable anymore. His answer to these complaints from people who actually have first-hand experience with the new customs regime remains stubborn denial and a rehash of the teething problems argument: Yes, there were issues with new non-tariff trade barriers in early 2021, but these are the EU’s fault because the EU decided to apply full customs and regulatory checks from day one rather than applying an ‘implementation period.’ Regardless, Singham maintains that ‘challenge for customs processes going into the EU are much, much reduced now’ and the temporary difficulties have been overcome because companies have learned how to live with the new barriers. Astonishingly, according to Singham this also applies to the impediments on trade between Great Britain and Northern Ireland.

Singham’s intervention summarises nicely the Brexit ideologues approach to economic reality: a mixture of bad faith and denial that leads him to deny that there is a problem and blaming whatever problem cannot be denied on someone else, here the EU.

It is important to remember, of course, that it is the UK who did not want to extend the transition period and that the continues delays on introducing full checks on imports into the UK is mostly due to the government’s unpreparedness and not something that was part of the plan.

Regarding the Northern Ireland Protocol (NIP) it is important to remember that the very same customs processes Singham considers having been resolved are the very same that lead Brexiters to declare the NIP unacceptable and highly damaging for Northern Ireland.

Singham’s statements were in obvious contradiction with what interviewees and other panellists, including Minette Batters the president of the National Farmers' Union (NFU), had to say about the impact of Brexit and of Free Trade Agreements (FTA), like the one with Australia, are having on their lives. But Brexiters have become masters of distorting the reality in front of them and to always blame someone else for the failure of Brexit to deliver on its promises; and like Hargraves told the Guardian they genuinely seem indifferent to the negative impact their Brexit is having on businesses and their fellow citizens.

The promises and threats of deregulation

Another set of news items this week relate to the ‘détente v. deregulation’ choice I referred to last week and more specifically to the future direction of the UK’s economic strategy and macroeconomic policies.

The Tory right seems to continue cranking up the pressure on the party and the government to move Britain down the deregulation path. Several pieces including some by high-profile figures illustrate this trend. Thus, the Telegraph ran a piece scolding ‘risk-averse Tories’ for squandering Brexit opportunities and deploring that the UK is staying too close to the European model rather than going full on Thatcherite. The Telegraph also gave Nigel Farage a platform to voice his disappointment with the direction post-Brexit Britain has started to take. His analysis of the economic opportunities that Brexit presents remains at the usual level of evidence-free claims and empty platitudes including ‘energising the role of our financial services industry’ ‘new health and safety provisions in the workplace’ and unspecified ‘supply-side reform [that] could add 2 per cent to our GDP;’ which taken together ‘means that our economic prospects are better than those of our European neighbours.’ Besides these well-known 1980s-sounding economic recipes for success, there are some interesting bits in Farage’s piece though; Namely a pretty open call to Tory backbenchers to topple Johnson. According to Farage, for the next stage of ‘Britain's journey as an independent nation […] a character of Thatcher-style determination must be at the helm.’ He calls for the ‘Oxbridge chumocracy’ to ‘be consigned to the dustbin’ and asks if the ‘many MPs on the Tory backbenches [who] are beginning to realise this’ will ‘have the courage to act in 2022?’

Farage’s piece is another sign that Johnson has lost the support of the UK’s hard right and that 2022 will see the Tory party face a fundamental battle over its post-Brexit economic strategy direction.

Meanwhile, at the other end of the political spectrum, trade unions start getting nervous. The Trade Union Congress (TUC) reportedly wrote to Foreign Secretary Liz Truss and Business Secretary Kwasi Kwarteng to caution against moves to undermine workers rights. Kwarteng had proposed an employment rights review, but then scrapped it in early 2021 when the extent of public opposition became clear. However, with the Tories under increasing pressure to finally show the country some Brexit dividends and with the hard right pushing for ‘regulatory reform’ – which in their mind can only mean deregulation not better regulation –  there is renewed concern that workers’ rights may come under pressure again. In particular, a review of retained EU Law (REUL) carried out by Lord Frost before he stepped down may put workers rights back on the reform agenda.

It should also be noted that even without an active push for deregulation, the UK may soon lag behind the EU in terms of labour rights, as Brussels is planning several pieces of legislation that will protect workers better in terms of platform worker status, minimum wages, and collective wage bargaining. The TUC has consistently warned against what might happen to workers right were the UK to leave the EU, but the ambiguous effect of the EU on workers’ rights increasingly shows that the left-wing case for Brexit (or Lexiter) case for leaving the EU was as much an illusion as the right-wing ‘taking back control’ case. Indeed, while I would agree that the EU does not leave countries enough choice in terms of their preferred institutional economic arrangements and while the European Court of Justice has undoubtedly played a role in driving what left-wing critics (wrongly) call a neo-liberal regulatory agenda, the positive effects of the EU on some aspects of workers’ rights become increasingly clear. Thus, the TUC now lauds the EU’s efforts in the area of labour rights, e.g. its ‘game-changing new rights for platform workers.’

As with anything Brexit related, the Tory right’s frustrations and the trade unions’ concerns show that the country is deeply divided and confronted with two very different visions of what is best for the country. Although it should be noted that the libertarian anti-State, anti-regulation approach is actually not popular – which may explain the flurry of pro-deregulation newspaper articles – but driven by a small group of extremely well-funded and well-organised extremists and therefore likely to have disproportionate influence on government policy. 

Wages, prices, and inflation– squaring the circle

One of the most extraordinary moments in the Brexit saga in 2021 was when in reaction to increasing nominal wages – due to labour shortages – the government briefly tried to convince us that this was part of a plan of moving the UK economic model towards a high wage, high skill, high productivity economy. This incredible case of post fact rationalisation has already lost any real world relevance since price increases now outpaces increases in nominal wages, as Jonathan Portes pointed out on Twitter this week. Yet, a further element of proof – if we needed any – that the there was no coherent economic strategy regarding wages, skills, and productivity came from Tory MP Peter Bottomley. Bottomley – the person who finds it ‘grim’ to live on £82k a year –  penned a piece in the Telegraph asking for workers to be ‘given limited pay rises this year in order to protect pensioners from inflation.’ Comparing the current situation to the 1970s and 1980s and suggests that there is a risk of wage-push inflation.

That, of course, is a questionable assumption given that other factors, increasing fuel prices in particular but also supply chain issues and the excess demand as the pandemic is easing, are certainly more important contributor to price increases. In that situation, Bottomley’s economic strategy would be counterproductive. Instead, the government will be keen to avert the threat of a cost of living squeeze, which means nominal wages need to increase more than prices, which in turn means either letting wages increase or getting prices under control.

On that front – price controls – another feisty debate took place on twitter this week. Political economist Isabella Weber suggested in a Guardian piece that price controls would be a potent tool to address the current inflationary pressures. The piece led Nobel prize winning economist Paul Krugman to post a – now deleted Twitter thread – that called Weber’s arguments ‘truly stupid.’ This in turn led to a backlash including a thread posted in James K. Galbraith name defending Weber’s expertise as well as the idea of price controls.

The debate of price controls is a difficult one on which even the brightest minds do not agree. Most people do seem to agree that they should be an exceptional and short-term instrument reserved for times of real crises. The heated debate seems to be mostly about whether or not the current situation is actually such a crisis and whether there are better ways of dealing with the current bottle necks and shortages. Weber (and Galbraith) argue that price controls may be a better means to keep inflation under control than resorting to interest rate increases and fiscal restraint that might lead to a recession.

Regardless of where one stands on price controls, one important point that Weber makes in her piece concerns the ‘critical factor that is driving up prices [and] remains largely overlooked: an explosion in profits.’ Indeed, government policies of state support for business, loose monetary and fiscal policies mean that companies’ earnings have skyrocket; And while companies have faced supply chain issues and labour shortages, they were largely able to pass on a sharp rise in prices to consumers. So, increasing producer prices have led to increasing consumer prices and declining real wages.

At the same time, we have witnessed a stock market boom and record levels of merger and acquisition (M&As) around the world. These phenomena – not usually discussed in relation to the issues of wages, inflation and productivity – hint at an actual fundamental flaw in the UK’s current economic system, namely its financialisation and excessive focus on shareholders.

There is a heated debate about the impact of shareholder primacy – the theory that companies belong to shareholders and should be run in their interests only – on firm-level and economy-level outcomes (I wrote a short note on the debates about the EU’s sustainable corporate governance plans). Yet, there is increasing evidence that shareholder primacy has negative impacts on things like investment in long-term projects and innovation, which in turn would be important for productivity increases as well as creating good jobs. Instead, companies still are pushed to focus on generating short-term returns for shareholders.

Despite increasing evidence that shareholder primacy may be ‘the world’s dumbest idea,’ it remains deeply engrained in Britain. An interview on BBC Radio 4’s Today programme on 31 December 2021 with former Unilever CEO Paul Polman was telling in that respect. Polman – well known for his progressive views – had to remind the journalist interviewing him that it was a false idea that managers were legally obliged to maximise profits and generate dividends. Indeed, the UK Companies Act 2006 obliges management to run the company in the interest of all its members, balancing the interest of different stakeholders – including employees and shareholders.

Therefore, an economic strategy for post-Brexit Britain that seeks to successfully square the circle of wages, prices, inflation, and productivity would also need to address the underlying institutional flaws such as excessive shareholder power. But of course, the sort of regulatory reform the Tory right is pushing for would – as so often – would most likely make this problem worse rather than solving it.

‘Levelling up’ putting pressure on the pro-Brexit coalition

Levelling up – the government’s plan to address the regional inequalities – may be the only area where the government does seem to be serious about coming up with some sort of plan. Indeed, we are shortly awaiting a report by levelling up minister Michael Gove setting out that plan. So far, levelling up has mainly made negative headlines, including this week complaints about the continuing delays to the Shared Prosperity Fund and uncertainties about the amount of money available (reportedly only £2.5bn over three years compared to the £4.5bn available through EU funding had Brexit not happened) and reports that money is being spent on filling potholes on streets leading to Tory donors’ luxury mansions.

Yet, increasingly, levelling up is also coming under pressure from the Tory right though. The Telegraph’s Jeremy Warner for instance, criticises the policy for pushing the government away from the deregulation agenda due to its heavy focus ‘on Brexit-supporting red wall constituencies.’ That comment is interesting in itself as it constitutes an implicit acknowledgement that there is a trade-off between deregulation and ‘levelling up.’ In my view, the assessment that deregulation will not make things better in the deindustrialised areas of Middle and Northern England is accurate.

It also shows that the realities of Brexit and the economic choices the government is facing are starting to put serious strain on the pro-Brexit coalition. As Warner puts it “[r]econciling what was always a very broad and often contradictory coalition of the Leave-voting public is proving extraordinarily difficult.” Remainers may feel some satisfaction – or perhaps just more frustration – about this development, as it shows that even Brexiters cannot deny any longer that Brexit was achieved by promising incompatible things to different groups of the British public. Yet, unfortunately, this development will not do anything to help us tackle the serious economic challenges that lie ahead. The increasing tension inside the Tory party will not make formulating a coherent economic strategy any easier. It is to be feared that as Chris Grey put it we are now all hostage to quarrels between the extremist libertarians and more moderate forces in the Tory party. As a result, any economic strategy the government will be coming up with will most likely be the result “of factional infighting in the Tory Party rather than” a policy that is the result of “any strategic intent, still less of any sense of what might serve the national interest.”

Needless to say that it is hard to see how that will lead to economic policies fit to address the serious challenges we are facing. It also means that things will most certainly get worse before they get better; sadly it increasingly seems that they will have to for the country to realise that it has been heading down the wrong path.

Brexit Impact Tracker - 26 December 2021 – Year II of Actually Existing Brexit: Détente or Deregulation?

 As the first actual post-Brexit year draws to a close various news outlets have provided useful roundups of how Brexit is going. While many things remain uncertain and the coinciding of Brexit with the Covid pandemic continues to make any clear assessment of Brexit itself more difficult, some things seem to make little doubt.

Firstly, the vast majority of economists and think tanks seem to agree that, even net of the pandemic, the impact of Brexit on UK’s GDP growth will be significant and negative. Estimates vary from 4% (Office for Budget Responsibility) to 6% (UK in a Changing Europe think tank), but are not fundamentally contested even by pro-Brexit economists close to the Institute for Economic Affairs (IEA).

Secondly, while estimating GDP is notoriously difficult given the myriad of confounding factors intervening, the negative impact of Brexit on the British economy becomes even clearer when focussing on factors that show more concretely how businesses are fearing now the UK has left the bloc. Here the decline in private-sector investment (down 11.7% compared to the fourth quarter of 2019 according to ONS figures) and trade (down 15.7% by October 2021 compared to a scenario where the UK had remained a member of the EU) speak a clear language.

Thirdly, whatever the macro-economic figures and trends and however much economists caution against drawing premature conclusions on the impact of Brexit, the mood on the ground does not seem good. There is a lot of – admittedly anecdotal – evidence that for small UK businesses (e.g. here and here) Brexit is at best a problem that businesses can adapt to and learn to live with and at worst an existential threat that makes UK companies uncompetitive in the EU market. Some sectors – notably the fishing industry and farmers – have become particularly vocal about the contrast between what they were promised and what actually existing Brexit looks like. Thus, the National Federation of Fishermen’s Organisations estimates the industry to be £300m worse off by 2026 than without Brexit.

Fourthly, whether or not what we observe is permanent, structural damage done by Brexit or just ‘teething problems’ that may still be overcome in the long run, it would seem that the British people start having doubts about Brexit. Recent polling suggests a change of mind in terms of EU membership with a ‘poll of polls’ suggesting that the country remains split down the middle about EU membership, but the trend is towards a majority now supporting EU membership (51% against 49%). Again, there is much uncertainty about such polls and clearly the two camps remain of roughly equal size, but what is equally clear is that Brexit is not the resounding success that people and businesses were promised.

Overall, the impact of Brexit on the UK economy and society is variegated, complex, and often subtle. For instance, as I wrote a few weeks ago, the prospect of Brexit may have hit trade well before Brexit actually took place, which means the effect has been spread out and therefore is being underestimated. Similarly, Brexiters decry ‘project fear’ pointing to the fact that the exodus of financial sector workers from the City of London has not happened to the extent predicted. Yet, that is forgetting that Brexit is not over and never will be and jobs may continue to move away from the City faster once the pandemic is over (see here ‘the party of finance?’ section). More generally, there are the largely neglected ‘unseen opportunity cost of new jobs being created in the EU that, but for Brexit, might have been created in the U.K.’ The fact that the impact of Brexit is often unseen, hard to quantify, and subtle constitutes a political problem, namely, that it will always remain subject to opinion, ideology, and manipulation.

That said, given this uncertainty and subtlety, it is even more remarkable that in December 2021 there are few Brexiters who claim that Brexit has been an unmitigated economic success. Even pro-Brexit economists, such as Julian Jessop, now admit that “[t]here’s not a lot of doubt that the things you can measure have been negative.”

So, year I of actually existing Brexit has not been a great economic success. Is there hope that year II will see things improve?

Post-Brexit UK at a crossroads

The answer to that question will crucially depend on the UK government’s political choices. There seem to be two ways forward: The first one is the ‘deregulation path’ which would essentially consist of a continuation of the confrontational approach towards the EU based on the belief that the more the UK moves away from the EU the better. Supporters of that path will argue that Brexit may not have been an immediate resounding economic success, but it could become one if the government finally made most of its new-found freedom to diverge from EU regulation. This path would lead the UK down a deregulation path towards a low tax, low regulation haven following the Singapore model. Interestingly, that theme was more prominent in Lord Frost’s resignation letter last week than Johnson’s softening on the NIP issues. This may presage the fact that, after one year with literally no Brexit dividends, the far-right of the Tory party that dreams of turning Britain into ‘Singapore on Sea’ is growing impatient. This was also demonstrated by the ‘Covid Rebellion’ in parliament last week, which may mean that pressure on the government to advance down the deregulation path will grow in year II of really existing Brexit.

The second path forward is the ‘détente path’ supported by those who believe that – at least in its hard form – Brexit was a mistake and the best the UK can hope for is to limit the damage it causes. On this account, the only way to mitigate its negative impact on the UK economy is by finding a more comprehensive arrangement for UK-EU relationships than what the barebone Withdrawal Agreement and the Trade and Cooperation Agreement (TCA) provide for. A more comprehensive arrangement would require for UK-EU relationships to become less acrimonious, more pragmatic, and more cooperative. It would require for Brexiters to finally show more realism when it comes to the very real trade-offs between ‘sovereignty’ and the economic impact of Brexit, which can only happen – as Chris Grey puts it – when Brexiters become more truthful about it. This would then allow it to move towards a closer arrangement that would include an agreement on services, but would almost certainly require some level of regulatory alignment of the UK on EU standards.

For PM Johnson this creates a difficult situation to navigate. He will have to choose between catering towards the radical and vocal libertarian far-right of the party and his more populist and state-interventionist inclinations that would help him keep the ‘Red Wall’ Tory voters and their MPs on board.

However, given his recent struggles, what the Johnson decides may be less important than what another leading Tory does in the New Year, namely Liz Truss. Indeed, the political fortunes of the Foreign Secretary – who the pro-Tory press already considers as a PM in waiting – may prove decisive for post-Brexit Britain’s direction in 2022 whether she replaces Johnson as PM or not.

In Liz we Truss?

Year I of Brexit ended with a bang. Namely, the departure of Lord Frost as Brexit Minister in charge of the renegotiation of the Northern Ireland Protocol (NIP). The PM’s decision to put Foreign Secretary Liz Truss in charge of the NIP dossier instead has led to a lot of comment and some hope that relationships with the EU will improve as a result.

There are two narratives around Frost’s departure an optimistic one and a pessimistic one.

The optimists see Frost’s departure as an opportunity to reset relationships with the EU at a time where a weakened PM seems to have lost his taste for direct confrontation with the bloc. The optimists consider that Frost was the main cause of the UK’s intransigent – some would say unreasonable and dishonest – stance over the Irish sea border and his removal will provide space for a solution.

The pessimists – the majority it would seem –, on the other hand, point towards to factors that make it unlikely that Truss will be able to put UK-EU relationships on a better footing. The first one has to do with the internal politics of the conservative party and her ambition to become the next PM. Some observers consider it unlikely that Truss stands any chance to succeed Johnson as PM unless she panders to the ‘Europhobic sentiment among Tory grassroots and backbench MPs, at the expense of sound diplomacy.’ Solving the NIP issues – which will be her first priority – would allow her to show that she can ‘get things done’ and possibly further increase her popularity. However, as I – alongside many others – noted last week, it simply seems impossible to envisage any solution to the NIP issues that would satisfy the Brexit ultras inside the Tory party. Indeed, pessimists point to the fact that there simply is no solution to the so-called ‘Irish trilemma,’ and therefore no solution acceptable to all sides can be found if the UK sticks to its preferred hard Brexit. If Brexit excludes UK membership in the customs union, single market, or even extensive regulatory alignment in key areas such as sanitary and phytosanitary (SPS) standards, then Truss’s leeway will be too narrow to find a solution and there will simply have to be a border of some sort in the Irish Sea. On this account, Johnson putting her in charge has been interpreted as a cunning way of setting her up for failure and thus get rid of one of the frontrunners in replacing him as Conservative leader and next PM.

In addition, BBC’s Katja Adler points out that any positive impact of Truss on UK-EU relationships will also be hampered by the simple fact that Lord Frost was not the only problem, but that worsening relationships between the EU and successive governments going all the way back to Cameron means that ‘[m]istrust in the UK government will likely remain, long after Lord Frost leaves.’ This may not be helped by the fact that the EU presidency for the first six months of 2022 will be held by France, with whom British bilateral relationship has taken a particularly strong hit since the Brexit referendum, as a new paper by my colleague Prof. Helen Drake shows.

Despite these constraints, some observers still think there is cause for optimism; pointing to the fact that Truss’s reliance on the Tory hard-right in any leadership contest may be exaggerated. Thus, Politico’s Mujtaba Rahman, points out that Brexit ultras actually may not have any more right-wing and Eurosceptic candidate to choose from than Truss. She therefore may be able to pursue a more conciliatory approach towards the EU than many expect without damaging her chances of becoming the next PM. This is even more likely now that the Brexit dossier is reunited with other international relation briefs in the Foreign Commonwealth and Development Office, because a less fraught relationship with the EU would help her realise her foreign policy priorities – such as taking a tougher stance towards China and Russia.

Career & Country: The Australia deal and trade capitulations

Given her popularity with conservative voters and her chances to succeed Johnson as PM, it is worth taking a closer look at what she has achieved as Cabinet minister to date. Truss’s rise from a relatively junior member of the cabinet to the likely frontrunner in the next Tory leadership election is symptomatic of politics in the era of Brexit. Like few other politicians does she represent the vacuity and unsubstantial symbolism that Brexit has introduced into British politics.

Her rise is almost entirely due to positive reporting in the far-right press on her work as Trade Secretary when she was touring the world rolling over trade deals the UK already had as an EU member and claiming credit for this alleged Brexit dividend. This has propelled her career, but will do very little to deliver any concrete improvement in British people’s living standards. Her biggest achievement to date – the new Free Trade Agreement (FTA) with Australia that was signed a couple of weeks ago – illustrate her priorities very well: her career over the country’s interests.

In the midst of all the scandals and problems facing the conservative party in the run up to Christmas, the government announced – how could it be otherwise? – a ‘world-class trade deal’ with Australia.

On the other side of the globe, trade experts clearly could not believe what they were seeing. Australian trade expert Dmitry Grozoubinski considered that “[t]ariff elimination on this scale through a free trade agreement is almost unprecedented” especially because it was “[…] not clear what UK negotiators managed to extract in reciprocal concessions.” Indeed, after a transition period, the deal essentially guarantees Australian farmers tariff free and unlimited access to the UK market.

Given the extent of UK concessions to the Australian side, the FT’s Alan Beattie reported on the Australia deal (and the New Zealand one concluded in October) under the heading ‘trade capitulation news.’ According to Beattie, the post-referendum story of British trade policy has been marked by an annual capitulation on important red-line issues (such as the Irish Sea border in 2019) – the supposedly world-class trade deal with Australia falls into the same category.

Unsurprisingly UK’s National Farmer’s Union as well as other actors in the agricultural sector were appalled by the one-sided deal in particular because any safeguarding measures regarding import quotas are time limited. The Soil Association’s Rob Percival described the government’s approach as “free trade at all costs, served with a side of hormone-treated cattle.” Indeed, the government’s own impact assessment shows that the deal will actually do damage to UK farming and the food industry.

However, the FT’s Beattie does commend Liz Truss for her ‘pretty bold move’ for a Tory secretary of state, especially one representing a heavily rural constituency, to eliminate farm tariffs for two of the world’s most efficient agricultural exporters. Yet, this boldness illustrates another deeper truth about Truss and the Tory party in its current state: Sometimes, when you really do not care about the country you are governing but only about your own career, you are able to do things no other politician would think possible. Concluding a far-reaching trade deal with Australia in the agricultural sector without any protection for UK farmers is one of them.

There is another interesting aspect of the Australia FTA that illustrates Truss’s thought- and recklessness: The deal includes a clause that states that Northern Irish Whiskey should be treated like British Whiskey regardless of input from the Republic of Ireland. According to RTE’s Tony Connelly this constitutes an important precedent for ‘rules of origin’ in other trade deals in the sense that ‘inputs from either side of the [Irish] border get recognised under rules of origin.’ This could indeed become an important issue in particular for dairy products and will privilege all irish production. That is not a bad thing of course and may mean that both the Republic and Northern Ireland will benefit more from Brexit than they already have. From the UK government’s perspective, however, this seems like another case where the UK government seemingly oblivious of (or indifferent towards) any long-term effects of its actions has created a precedent that may considerably restrain its leeway going forward. The principle that products resulting from Irish North-South collaboration can be considered as having a single origin surely is not just economically, but also politically very important. The UK government does not seem aware of the implications of this concession.

Liz Truss, the architect of the Australia FTA, seems to have one thing in common with Johnson at least: Namely that superficial symbolic politics is more important to her than the dull specificities of policy briefs. That does not bode well for the NIP negotiations now that Truss is in charge of that dossier. But her success also seems to have inspired a new culture in the Department of Trade with Trade Minister Penny Mordaunt’s US tour clearly motivated by a similar type of mediatic diplomacy that is heavy on empty rhetoric but devoid of almost any substance.

The Road ahead

On the eve of year II of real existing Brexit, the UK is at a cross-roads. 2022 will show which path the UK government chooses to go down: The path of moving away from the EU in search of elusive Brexit dividends, or the path of more conciliatory and closer relationship with the EU. Deregulation or Détente.

Regulatory divergence and especially deregulation was of course one of the main arguments for Brexit. Yet, the UK in a Changing Europe’s recent ‘UK-EU Regulatory Divergence Tracker’ shows that to date very limited divergence from EU regulation has taken place even in areas where such divergence is actively pursued. However, the report does identify two areas in which divergence from EU regulation could actually provide ‘Brexit dividends.’ Namely, in the area of the Common Agricultural Policy – where Defra has drafted a new payment scheme that could lead to considerable environmental benefits – and green finance, where few regulations exist and the UK could pull ahead of the EU. So, the regulatory divergence path is not in all cases fantasy. But the problem is, understanding when divergence creates opportunities and does not simply duplicate EU regulations would require level-headed and competent policy making driven by realism not fantasy. Yet, the UK’s governing party is dominated by what Peter Foster calls its ‘fantasy wing’ whose economic policy preferences draw on libertarian extremists like Shanker Singham – whose views are in turn a rehash of evidence-free libertarian common places rather than on a realistic understanding of how regulation shapes economic activity. Continuing down the road of confrontation and deregulation would be disastrous for the UK. Indeed, the economic policies of deregulation the Tory right is advocating are precisely the sort of policies that caused Brexit in the first place. Rather than providing any solutions for the problems Brexit was meant to address, it may very well make all these problems worse.

Truss has a mixed record in terms of extremism. While she once was a Remainer, which may suggest less hostility towards the EU than most of her fellow Cabinet members, she also is a co-author of that infamous libertarian manifesto ‘Britannia Unchained,’ which casts serious doubt on her economic literacy (one does wonder sometimes what they teach on that Oxford PPE!).

Here, Truss’s opportunism may be a greater source of hope than her economic and political competence. It becomes increasingly clear that many conservative voters and even party members do not share conservative politicians and MPs extremist views on Europe and other things. In the general public, the extremist views of the Tory far-right seem even less popular. Only 15% of the UK population, for instance are in favour of far-reaching deregulation. Here, Truss’s instinct to focus on symbolic politics for the sake of her popularity may create some space for her to escape the grip of the Brexit ultras. Managing to solve the NIP issues with the EU will most certainly mean she will come under fire from the Tory hard right, but – depending on how the pro-Brexit press reports on such a solution – the conservative grassroots may actually give her credit for yet another ‘masterstroke.’

From that perspective, it is to be hoped that Liz Truss’s personal ambitions mean she will swing-back onto the path of moderation. A real détente between the UK and the EU would allow us to solve many of the issues that unnecessarily leave UK citizens worse off than before Brexit – from the big ones like the NIP, the UK universities’ participation in the EU’s Horizon programme, to the tiny ones like British citizens having to pay for visa wavers when entering the EU. Equally important, however, if Truss were to succeed in the NIP negotiations while disregarding the Brexit ultras’ demands for conflict and intransigence, this may be the beginning of the Tory party wriggling out of the iron grip of its far-right wing. If that is the result of Truss’s opportunism and personal ambition rather than her pursuing the country’s best interest is secondary; for British citizens it would provide a glimmer of hope after another very dark year.

Brexit Impact Tracker – 19 December 2021 – The End of the (Tory) Party?

It has been another eventful and potentially decisive week in post-Brexit Britain. Other than Lord Frost’s shock resignation on Saturday night, once again important unresolved Brexit-related issues – most importantly perhaps the Northern Ireland Protocol (NIP), new Free Trade Agreements (FTAs), but also the appalling saga of EU citizens’ rights in the UK – were pushed into the background by tumultuous domestic politics resulting from Johnson inept leadership. Yet, since the transformation of the Tory party since 2010 is inherently intertwined with Brexit, it does seem appropriate to reflect on these events in a Brexit-related blog.

A dismal week for Boris Johnson

“The party is over,” declared Liberal Democrat Helen Morgan after her shock victory over the conservative candidate in the North Shropshire by-election. Indeed, Boris Johnson is probably not in party mood after this week. That was not just down to the loss of a genuinely ‘true blue’ seat that the party had held for nearly two centuries years and – remarkably – where 59.85% had voted ‘Leave’; but also because over 100 of his own MPs ‘rebelled’ against his new Covid measures. As if that were not enough, the week ended with the shock resignation of Brexit Minister David Frost.

Several people close to the Conservatives – such as Will Tanner of the centre-right Onward think tank – have attempted to portray the North Shropshire by-election as just one of those isolated freak by-election results that can be explained away by the specific circumstances. In this case, it came towards the middle of Johnson’s premiership – when governing parties tend to do badly – and the seat in question was Own Patterson’s old seat which was of course at the very heart of the ‘sleaze scandal.’

However, the extent of the vote swing from the Conservatives to the Lib Dems between December 2019 and December 2021 (namely 34%) is remarkable and indeed has few historical precedents. Also important is the fact that after the Chesham & Amersham victory, this is the second hole the Lib Dems have put into the ‘blue wall.’

There is also evidence that this was not all about sleaze alone. The reasons that voters in North Shropshire give for switch to the Lib Dems were mainly local issues such as “farming, the NHS and improving public transport and connectivity.” This list is remarkably similar to what UK in a Changing Europe and academic studies have identified as key reasons for people – both wealthy and not so wealthy – to support the Leave camp in the EU referendum: underinvestment in public services, local infrastructure, and lack of economic opportunities due to deindustrialisation. Clearly, for the people of North Shropshire none of these issues have been solved with Brexit. Brexit, therefore, has stopped to be a reason for people to vote conservative.

After weeks of scandalous headlines that now have started translating not only into poor polling, but actual electoral losses, Johnson’s premiership is on the edge. For a few weeks observers have predicted his demise; although there remains considerable disagreement about the ‘when.’ Predictions range from a demise before Christmas, after the May local elections, to a year from now. But most observers seem to consider that he is "finished” and that the “only question is when” as one Tory MP reportedly put it. Actually, that is not the only or most important question. Rather it is: What will happen to the conservatives once Johnson is gone?

The rot will not go away: The conservatives in the grip of klepto- and aristocrats

One thing that seems certain is that removing Johnson will not solve the malaise that has befallen our country. As Anette Dittert chilling comparison of the Tories’ attacks on British democracy and Poland under the Law and Justice party shows: “Britain’s real problem isn’t Boris Johnson, but rather the Conservatives themselves.” Johnson is not the architect of the type of conservatism he has come to incorporate and that he managed to turn into electorally successful political mainstream. Rather, he is himself the emanation of a long-term trend in Anglo-Saxon conservatism that also brought us Donald Trump and Tony Abbott. Indeed, in an important investigation, Byline Times’ Nafeez Ahmed and Peter Jukes show the influence of US far-right political donors and ideologues like the Mercers and Steve Bannon on British conservatism. The investigation shows that the Tory party is increasingly in the grip of a right-wing libertarian international that has transformed the party in profound ways.

The ‘Covid rebellion’ in the UK parliament this week illustrates this in horrific fashion. What was genuinely shocking about the ‘rebellion’ was not so much that people disagree about how to tackle the pandemic. It was the quality – or rather lack thereof – of the arguments advanced by Covid rebels. They ranged from the ludicrous comparison of Covid deaths to deaths from car crashes to absurd comparisons of Covid passports to the policies of Nazi Germany. The Nazi comparison does not only seem absurd in its own right, but appears particularly appalling when we consider that the Johnson government will introduce voter IDs that are expected to exclude a significant part of the population from political participation.

Such gut-wrenching hypocrisy permeated the whole debate about the measures and made any reasonable debate about the public health situation impossible. Conservatives get all red-faced about wearing a mask in a shop or having to show a vaccine passport when entering a large event, because they consider measures an insufferable attack on our liberties. At the same time, they have no problem whatsoever to support the government’s assault on our basic democratic liberties of protesting and questioning most basic human rights in the form of the Police, Crime, Sentencing, and Courts Bill, the Nationality & Borders Bills, and the reform of the Human Rights Act.

This paradoxical stance of the Tory right on liberties demonstrates that Steve Baker’s “free-market conservatism” is about a very incoherent and selective interpretation of liberalism and freedom. What libertarian Tories mean when they say ‘freedom’ is their own, personal claim to be freed of any obligation towards our society’s moral norms and of any duty towards the common good. They mean the freedom to use their riches in whatever way they see fit without being subject to public scrutiny or accountability. They mean freedom from taxes on their wealth and income; and they mean freedom to use their political power to enrich themselves further. This has become clear over and over again in recent weeks - with the ‘second jobs scandal,’  but also with former PM Cameron’s interference in politics for person gain, as well as unlawful PPE contracts and government Covid loans being given to Tory donors and party members (what the Good Law project call the “VIP lane”).

This may also explain Tory’s stance towards the Covid restrictions and their hatred of ‘experts.’ Someone whose only goal in life is power and money will have a hard time conceiving that some people actually do things with a view to genuinely help other people. People who read Ayn Rand and, until recently, did not believe that there was such a thing as society, the very notion of ‘public service’ and ‘public good’ do not make a whole lot of sense. By definition, the only thing that drives scientists and experts is their own narrow self-interest not the public good. Therefore, of course, any measure to contain the virus has got to be a cunning plan to grab power and control other people. This type of thinking was illustrated by a (now deleted) despicable tweet by Tory MP Joy Morrisey that suggested that – in the name of democracy – scientific knowledge (about the virus in this case) should be subject to public opinion and to that of elected politicians. What the tweet revealed is the fundamental belief that scientific knowledge is not something that is deployed to help people protect themselves from harm, but simply an instrument to control them. That is a common belief amongst adherents to pseudoscientific theories. As Peter Krekó wrote in an excellent piece on pseudoscience in the pandemic: “All these suspicions point to Big Pharma and an imaginary cabal of doctors, virologists and scientists, who supposedly want to impose their will on the people for greed or to gain political control.” This sort of thinking does nothing to help us design public health strategies to deal with the pandemic, but it tells us a lot about the people who hold such beliefs. While this sort of thinking is worrying in citizens, it is even more worrying when around 100 members of the UK’s governing party adhere to it.

The libertarian Tory kleptocrats who instigated the Covid rebellion are supported by a second group of Tories that seem a bit more aloof from the pursuit of direct material gains. They are perhaps too well-off to care too much about the pecuniary benefits of being a Tory politician. Rather, they seem to be emanations of the aristocratic side of Toryism and seem mainly motivated by the thrill (or just habit) of exercising power for the sake of it and the ambition of restoring Britain’s world power status and 19th century greatness. Commons leader Jacob Rees-Mogg is the most publicly visible incorporation of this type. He probably genuinely believes in the possibility of taking the UK back to Victorian times. He probably thinks he is speaking the truth when he says loud and proud that Brexit was a ‘triumph for this nation in reasserting its freedom.’ Although, of course, the seriousness of anything that Rees-Mogg’s says always has to be measured against another statement he made in the Commons, namely that infamous argument about British fish being happier outside the EU. There’s nothing wrong with humour in politics per se (although that may be debatable). But in Rees-Mogg’s case it seems to be an expression of the fact that to him politics is just a game he is playing for his amusement, knowing full well that whatever decision he makes for the country does not really affect his privileged lifestyle.

The PM clearly embraces the aristo- and kleptocrat conception of politics where those in power should be given the freedom to use it however they see fit without any accountability to the public. His annoyed reaction when asked about the reasons for the North Shropshire by-election results illustrates this. In his view, the problem is not his and other senior Tories’ behaviour regarding lockdown rules and parliamentary standards, but the fact that the media and public focusing too much on them.

All this illustrates once again what the Tory party really is about: Not about the public good, not about solving any of the issues the UK and the World are facing, and – despite lip service to patriotism – not even about the national interest, but simply about the narrow private interests of Tory politicians themselves. The conservatives have become a party drunk on rich donors that is working on its own account. The original meaning of the term Tory – from the Irish word for ‘robbers noted for outrages and savage cruelty’ – seems perfectly appropriate to describe this coalition of kleptocrats and aristocrats. As a result, the only thing the Tory party has to offer is – as Ahmed and Jukes aptly put it – an ‘Ostrich-like ideological ‘laissez faire’ fanaticism that is doomed to endlessly repeat the ignorant mistakes of an arrogant past.’

This may read like a very long rant. But it is an important one to understand post-Brexit Britain. Once we accept that the Cabinet is replete with people whose only goal is to be in power and to use that power in their own private interest, policies that look absurd to most observers such as the Australia trade deal that was signed this week (about which I will write next week so as not to make this blog any longer) and the deliberate bad faith approach to the NIP (see below) start to make more sense.

Yet, may there be a glimmer of hope coming from an unexpected direction?

2019 Red-wall Tories to the rescue?

Many progressives and left-leaning observers were understandably dismayed at the success of Johnson’s Tories in the formerly firmly Labour-voting constituencies in the North and Midlands of England. However, there are some signs that this success may become a problem for the klepto- and aristocrats in the Tory party. Tory MPs of the 2019 intake seem less easily sold to the purely self-seeking logic of the far-right of the Tory party.

This first became clear during the sleaze and second jobs scandal, which went down particularly badly in Red Wall constituencies. The breaches of lock down rules and news about parties in government buildings clearly do not help either. This has led to considerable anxiety amongst members of the 2019 intake of Red Wall Tory MP who are said to be “fed up with having to deal with complaints from constituents relating to things the PM is apparently culpable for.”

They reacted particularly virulently to the recent string of scandals and Thursday’s by-election defeat. One of them being quoted as describing the situation in no uncertain terms as a “clusterfuck of shithousery.”

With Brexit losing its power as a uniting cause that brings together atypical Tory-voters from poorer, working-class constituencies with libertarian kleptocrats and aristocrats, the new cleavages within the Tory party that have resulted from its populist right shift could potentially threaten, if not its survival, at least its ability to win elections. As Will Tanner put it “you can enjoy an 80-seat majority, including the red wall or you can pursue Singapore-on-Thames. You can’t do both for long.”

The intolerance of the right-wing fanatics inside the Tory Party – including Johnson himself – has already led to the exclusion from the party of very senior centrists and the formation of the short-lived centrist party Change UK. Their intolerance has been illustrated again this week by an anecdote about the removal of culture secretary Nadine Dorries – hardly a centrist – from a WhatsApp group of around 100 far-right Tories manged by Steve Baker. If the divide between the factions inside the party continue to grow, the centripetal forces may become too strong to resist.

A more optimistic interpretation may be that the Tory Red Wall rage may be what will halt the party’s further descent into a purely rent-seeking coalition of kleptocrats and aristocrats. Given the quite different policy preferences of Tory voters in the formerly industrial North and Midlands of England regarding welfare services, industrial policy, and jobs, they may share some values and policy preferences with more traditional centrist (former) Tories – who have often been vocal opponents of Johnson’s populist conservatism and have paid the price for it. This could form the basis of a collation that challenges the ‘Spartans’ on the Tory right-wing and shifts back the party to the centre.

Progressives may be tempted to disregard the changes within the Tory party and simply hope for a opposition victory at the next General Election.  Yet, banking just on that may be a very risky strategy. For one, Labour have a mountain to climb to win the GE outright – an estimated lead of 12% points.  The Shropshire by-election has shown the potential of an alliance that would put pressure on Tories both in ‘Blue Wall’ and ‘Red Wall’ constituencies. Yet, while there are signs that tactical voting to defeat conservative MPs is taking place, Labour still rejects the idea of a formal ‘progressive alliance’ and denies informal non-aggression arrangements. If Labour does not embrace the possibility of an electoral pact – formal or informal – the next election may very well return another Tory government.

This is even more likely because there are signs that the current government will do anything it can to retain power, including redrawing constituency boundaries (Gerrymandering). Therefore, seeing the conservative party move back from the right wing fringe  is equally – if not more – important than the opposition winning the next GE. As long as the Tory party is a force for evil and a danger to the country, every General Election will be a high stakes event that may quite literally decided over life and death – as not only Johnson’s largely incompetent handling of the pandemic and Britain’s death rate (7th highest in the world and highest in Europe in absolute terms) but also before him Osborne’s decade of austerity illustrate.

Be that as it may, those who are eager to see that back of Johnson, may have to wait some more. In particular, some observers believe that the Tories will try and avoid leadership contest in the middle of the Omicron upsurge and before key Brexit-related issues – NIP in particular – are resolved.

Northern Ireland Protocol

Recent weeks have seen considerable uncertainty over the UK government’s position on the NIP in the ongoing negotiations with the EU. On the one hand, the government seemed to downplay the possibility of triggering article 16, only for Lord frost to reassert yet again this week that the option remained very much on the table. Similarly, the UK side also started showing readiness to compromise by excluding the role of the European Court of Justice (ECJ) from the current negotiations. The question was largely whether this was a genuine attempt to solve the issues around the NIP, because the government had gotten cold feet, or simply a way for Johnson to temporarily postpone the clash with the EU to focus on his domestic political survival strategy.

On the face of it, Frost’s resignation could be taken as prove that Johnson genuinely wants to find a compromise solution with the EU, which Frost the hardliner could never agree to. Indeed, there are reports of considerable Eurosceptics’ fears that the PM may be ‘capitulating on post-Brexit trade arrangements in Northern Ireland.’ The Democratic Unionist Party gearing up its warnings and threats about the Irish Sea border – including a renewed threat to walk away from the Stormont assembly – may lend further credence to that interpretation.

However, the Financial Times quotes sources close to Frost stating that it was Frost – not Johnson – who was seeking a temporary agreement on the NIP and that the softening of the UK’s stance on the NIP was hence not the reason for his resignation. Instead, Frost blames his resignation on the fact that post-Brexit Britain is not moving fast enough into the direction of the libertarian wet-dream of a ‘supersize tax haven’ aka Singapore on Thames (note that politically Singapore is an autocracy – which clearly is also part of the Tory right’s plan for Britain).

Yet, this seems an implausible explanation as the timing of the resignation over such a fundamental long-term concern (in the middle of the ongoing negotiations with the EU) would seem odd to say the least.

What is more likely to have happened is this: It has started dawning on Frost that without a softer version of Brexit, the Irish Sea border is an inevitability. Realising that Brexit cannot be done in the way Brexiters promised especially not regarding Northern Ireland, he has prepared his exist strategy. This strategy consisted of taking the ECJ issue off the table in the NIP negotiations in order to reach an ‘interim agreement as a first step to deal with the most acute problems.’ Many Brexit pundits saw this move as a genuine sign of pragmatism and willingness to solve the issue once and for all. Others, however saw it as an attempt to keep the NIP in a limbo of semi-permanent negotiations in order to satisfy the Brexit ultras’ claim that the NIP is not be binding. Frost’s resignation suggests a third, more selfish motivation: Concluding such a provisional agreement early in 2022 will allow him to walk away from the mess, claiming he has achieved some sort of solution – albeit a temporary one – while leaving the unsolvable issues (the fact that there needs to be a border somewhere between the UK and the EU) to others. This constitutes the perfect basis for a well-known Brexiter defence strategy that Chris Gray has astutely called the ‘not-my-Brexit’ defence, which consists of blaming all the negative consequences of Brexit on the way it has been delivered by others.

It may also prefigure a new internal dynamic in the post-Brexit Tory party that we may have to get used to: The Brexit ultras push for control over the Brexit-process, but necessarily fail to deliver on their fantasist promises of full sovereignty at no economic cost. One by one the ultras – including Johnson – are then either removed from their position or step aside themselves. Brexit, as Chris Gray’s book shows, is a project that necessarily denies everyone what they want. The Brexit ultras will always only be able to stand on the side-lines and shout that they would have done Brexit differently, better; but every time they are given the chance to try, they will fail.

What is obvious is that Frost’s resignation constitutes another hammer blow to the PM at the end of an already dismal week. Yet, Frost’s resignation may be genuinely good news and a real opportunity to reset the fraught relationship with the EU. It is very likely, however, that cannot happen without deepening the divisions and tensions within the Tory party. It is anyone’s guess where that will lead the party.

Brexit Impact Tracker - 12 December 2021 - Christmas Parties & Turning Points

Another tumultuous week draws to a close in Westminster. After the scandals over MP’s second jobs and cases of outright corruption, the public eye has shifted its attention on a series of Christmas parties held at Downing Street and in other government buildings in December 2020 when the country was under strict lockdown restrictions including a ban on mixing of households. Almost daily reports of new parties and gatherings during lockdown restrictions continue emerging – now also extending to the Conservatives Party itself which is accused of having organised a party at London mayoral candidate Shaun Bailey’s campaign headquarters. Worse still, a video emerged in which government officials openly joked about the Christmas party in what seems like a rehearsal press conference for the case the news about a Downing Street Christmas party would break. The PM insists he did not take part in any of the Christmas parties now under investigation, but photographs have now emerged showing him taking part in a Christmas quiz at Downing Street, seated between two colleagues not wearing a mask.

 Despite almost daily revelations, the government continues its approach of acknowledging that a party may have taken place – or not – but insisting that if it had – which it may not have – it was in full compliance with the rules – probably.  

Senior cabinet members like Dominic Raab would simply state that they could not know if rules were broken, because they did not attend the party that may not have taken place. Police Minister Kit Malthouse, interviewed last Monday by Mishal Husain on BBC4’s Today programme (at 2:20:50) similarly stated he had been given the assurance that no rules had been broken at any time, but admitted that he had simply taken these reassurances at face value. So, even if there was a party it was within the rules, but he could not be sure because he was not there. Ms Husain pointed out that having had a party that complied with the rules seemed like a contradiction in terms given that any social gathering of two or more people was prohibited by law at the time. A further turn in the denial strategy came this week from Health Secretary Sajid Javid made a subtle, but interesting change in his defence of the PM, by stating this week that since he had received assurance that no rules were broken at Number 10, it logically followed that no party could have taken place.

 In actual fact, things are not as simple as that, as the Covid regulations did allow for gathering’s in non-private dwellings in some circumstances. Even though having drinks nibbles and dozens of people in a medium-size room clearly goes against the spirit of the regulations. But in any case, the government’s defence does not primarily focus on explaining how the rules had been followed, but rather seems to defend something it had done not after carefully considering the rules, but rather after following its usual strategy of considering that rules simply do not apply to those in power.

 Therefore, regardless of the lawfulness or unlawfulness of whatever party took place in government buildings last December, the political damage is immense. The continuing revelations about the government and PM’s behaviour during lock down restrictions and especially the leaked video of that mock press conference make it very hard to avoid Lord Ashworth’s conclusion following Javid’s rhetorical acrobatics that the government is simply “taking the p**s.”

 The feeling that there is one rule for them, one for the rest of us is particularly damaging for a government that has come to power on the back of a distinctly populist strategy and Johnson portraying himself as a man of the people. Everything he does belies this political image. And slowly, people and his party start noticing.

 The coming week may be a momentous one for the PM, as the continuing fallout from the Christmas party scandal, a possible extensive Tory backbench rebellion over new Covid restrictions, and the possibility of a byelection defeat could quite possibly damage his authority beyond repair.

A turning point: Johnson as a liability?

Recent polls suggest that the PM cannot get away with absolutely anything after all. In the past couple of weeks Labour have pulled ahead in terms of voting intension for essentially the first time this year, leading the conservatives by 8 points. That is not good news for Johnson who faces an important byelection next week Thursday in Shropshire North, the seat vacated by Owen Patterson in the sleaze scandal. The Liberal Democrats seem to stand a good chance of winning this seat from the Tories. There are voices suggesting that losing this formerly safe Tory seat might mean a non-confidence vote in Johnson could be staged soon after. Unsurprisingly, speculation and reporting on potential candidates for the PM’s succession have increased.

Further signs that Johnson has reached a turning point include the BBC’s more courageous reporting on the various scandals engulfing the government. Mishal Husain’s interview with Kit Malthouse was a refreshingly aggressive questioning of government behaviours that we haven’t seen in a while from journalists at the public broadcaster.

An equally, if not more, important sign that the Brexit process may have reached a turning point comes from the Express. An unusually critical article this week by Liam Doyle, starts with the following paragraph:

“Brexit, according to its backers, was meant to create endless opportunities. So far, however, the UK has failed to make the vote profitable, with the prospect of "global Britain" quickly fading according to recent data.”

These are unusually clear words from an unambiguously pro-Brexit paper. Moreover, one of the cheerleaders for Liz Truss, the paper now considers that the ‘[t]rade agreements negotiated by Ms Truss have done little to boost the UK's imports and exports[…].’ Of course, a swallow does not make a spring, but the change in tone in one of the staunchest pro-Brexit papers does seem remarkable. It may be another sign of the phenomenon described by Chris Grey this week of increasing numbers of actors disowning Brexit.

The limits of denial

It would seem that the negative effect of Brexit on the economy – in particular trade and investment – have become too obvious for even the most steadfast Brexiters to completely ignore or deny.

Indeed, the evidence of Brexit damage to the economy is piling up. This week the Independent reported a survey by the French Chamber of Great Britain that shows that an increasing number of member firms report problems with cross-Channel trade. The paper quotes Naomi Smith – CEO of Best for Britain – as saying ‘What the government once called teething problems have now become a chronic condition.’ These increasing delays at the borders are even more worrying when we consider border checks on imports from the EU will come into force in January and only 25% companies state that they are prepared for this further increase in trade obstacles.

UK in a Changing Europe, in its turn, published a new report on the impact of Brexit on trade in service, which outlines several ways in which Brexit has impacted the UK service industry and has led to increased trade barriers that affect service exports to the EU.

Similarly, the FT provides some rather shocking figures about business investment in the UK compared to other countries. The paper finds that ‘in the UK, business investment in the third quarter [of 2021] was still about 10 per cent below the level in the second quarter of 2016, when the country voted to leave the EU. Over the same period, it grew by 8 per cent in the eurozone and by nearly 20 per cent in the US.’ Of course, the steep drop in investment since 2016 means the government will seek to take credit for a comparatively stronger rebound in the UK than the EU in percentage terms when it comes, but this will be purely due to an extraordinary tax incentive for business investment and the lower baseline compared to other countries.

Brexit dividends: A smart border

Other trade-related Brexit news this week concerned the government’s announcement of trials next year of a so-called ‘smart customs border,’ which would allow it to reduce trade frictions by using technology to reduce border checks at the borders and have them take place in at warehouses and manufacturing sites instead.

Using technology to reduce trade frictions deriving from the new trade barriers created by Brexit has been a long-standing Brexiter counter-argument against suggestions that Brexit will inevitably cause trade frictions. As such, seeing some real developments in this respect is welcome news. Some trade experts predict that the UK will have one of the technologically most advanced borders in the world as a result. This can arguably be seen as a result of Brexit and therefore a rare ‘Brexit dividend.’ Although, it is of course not the case that the EU would have prevented the UK from adopting similar technology – indeed the EU too is moving into the direction of smart borders –, but because the situation created by hard Brexit does not leave the UK with any other option than trying and reduce trade barriers by investing in such technologies.

Yet, even if this is vaguely positive news, what is genuinely shocking is the timing for this reform: The ‘single trade window’ is expected to be in place by 2025 at the earliest. That is four years after Brexit took effect and another sign of a government utterly unprepared for Brexit reality.

 NIP & FTAs

 One effect of all the scandals involving the government is that the really important issues are being pushed into the background. Yet, important developments have taken place on various fronts.

 Most importantly, there seems to have been a very considerable shift in the Government’s approach to the Northern Ireland Protocol (NIP). This week the government briefed the press about its softening stance on the European Court of Justice (ECJ) issue. While it also insisted that the ECJ oversight of the NIP will need to be resolved eventually, it acknowledged that the issue goes beyond the negotiation mandate of the EU side in the NIP negotiations. This opens up an opportunity for compromise.

 It seems likely that the change of heart was driven by Johnson rather than Frost and motivated not only by the PM having enough on his plate as it were. However, the increasingly robust stance that the US government and Congress are taking on the need to solve the NI issue certainly played a role. In a sign that Brexit has wrecked not only our relationships with our European neighbours, but also the ‘special relationship’ with the US, Trade Secretary Trevelyan used her US trip to threaten the US with retaliatory tariffs if the Biden administration refused to remove tariffs on steel and aluminium imports from the UK. Put in context, this is a truly extraordinary statement given that leaving the EU was meant to open up new opportunities for Global Britain to strike trade deals with countries that are geographically further away, but allegedly culturally closer to Britain than continental Europe – in particular the US. Yet, one year on, it would seem that a trade deal with the US is all but impossible at this stage.

 That may not be a bad thing of course, given that it becomes increasingly clear that the government’s strategy of concluding free trade agreements (FTA) with the sole goal of showing the public that Brexit is working is not in the interest of the country and its economy. A new report by the National Audit Office (NAO) notes important risks resulting from the speed at which the government pursues new trade deals. Among those risks are a lack of proper implementation of FTAs once concluded, which may affect the extent to which companies can really benefit from them. Another risk comes from “developing new domestic policy in sensitive areas such as agriculture and the environment at the same time as negotiating with new partners” while “the time available for consultation with Parliament, stakeholders and the wider public” is “compressed.” In other words, the government is pursuing new trade deals at a speed that makes it difficult to protect domestic interests and properly supporting their implementation. This makes perfect sense from a government perspective, given that FTAs are purely a symbol that is expected to illustrate new-found Brexit freedoms, but none – not even the government – probably really believes that there is any chance that these deals can be better than the ones obtained by the EU. So, there content does not really matter. What matters is that deals are being concluded and can be announced in the pro-Brexit press, as happened again this week with the Digital Economy Agreement with Singapore.

 Long-term, of course, that strategy is going to backfire, as there are indications that in its pursuit of FTAs at any cost, the government weakens its own negotiating position by looking desperate and is willing to throw UK producers – such as sheep farmers – under the bus without hesitation.

 Which way are we turning?

 In the shadow of the scandals, Johnson continuous to push forward his agenda, most importantly and worryingly the reform of the legal system, which may see UK judges subject to increased political interference, a policing bill that would essentially criminalise protesters, and further privatisation of higher education this time by stripping the British Council of the contract to deliver the successor of the Erasmus student exchange programme and awarding it to the private outsourcing firm Capita, which has a track record of underdelivering on public contracts.

 Johnson’s policies will make many people hope that the sense of Johnson’s premiership having entered its final phase may be correct. However, from a progressive and liberal point of view, Johnson’s removal may be a mixed blessing. The impact he has had on the Tory party has been transformative at a deeper level and the ideological reorientation of the party towards some type of fake illiberal populist Toryism will most likely remain after he has gone. This is particularly true if – as seems likely at the moment – he will be replaced by someone from his cabinet. Johnson is well-known for his intolerance of any dissenting voices in his cabinet. It seems hence likely that the people closest to him in government share much of his ideological views. In a most interesting interview, former Tory Attorney General Dominic Grieve told Byline Times journalist Hardeep Matharu that ‘the attitude of the Government… is that parliamentary sovereignty means that a government with a majority can do absolutely whatever it likes.’ There is no indication that Liz Truss, Rishi Sunak, and others who are being mentioned as possible Johnson successors, feel any differently about such crucial questions of democracy and liberalism than the PM himself.

 Liz Truss seems particularly keen on putting herself in pole position for a possible leadership contest. However, a speech she delivered this week at Chatham House, has been dissected by Helene von Bismarck who demonstrates just how superficial, shallow, and vacuous the Foreign Secretary’s vision for ‘Global Britain’ is. Her hollow-sounding claims about Britain being at the forefront of forming a ‘network or liberty’ amongst countries of the ‘Free World’ are no different from Johnsonite slogans like ‘building back better’ or ‘levelling up.’ Indeed, as one of the co-authors of the book Britannia Unchained, Liz Truss has demonstrated that – just like Johnson – she seems to value rhetoric and ideology over substance.

 The difference would be that with Truss or Sunak, the Opposition would be facing a more serious and competent person in running the government’s business. Not because the likely candidates are particularly serious or competent, but because the bar is so shockingly low. Moreover, the damage done to the country by Brexit and the pandemic is so great, that it would not take that much to deliver some improvement on the current situation, which a more competent politician than Johnson may well be able to do. While such a person may have a harder time retaining voters in the red-wall seats in the North of England, they would almost certainly provide fewer opportunities for attack by the opposition resulting from major blunders and scandals. Therefore, while removing Johnson from power may seem like an important goal in the interest of the UK’s democracy and society, a more competent but equally illiberal populist Tory PM who has enough time to make their mark before the next General Election may mean we will be stuck with this toxic brand of Toryism for longer.

BIT 5 December 2021 – A Government and an Opposition in Denial

This week was the week where two of my usual BIT headings merged: Free trade agreements (FTAs) and the Northern Ireland Protocol (NIP). The FT reported that the US had put negotiations about removing Trump-era steel tariffs on UK steel on hold due to the UK government’s approach to the NIP. The paper quotes a ‘communication’ and several unnamed sources confirming that the US “talks were stuck after pressure from Congress over the UK’s threats to trigger” art. 16 of the protocol, which would unilaterally suspend parts of it. US pressure and public expressions of discontent over the UK’s handling of the Northern Ireland situation are not new of course. But this was one of the first times that a direct link to post-Brexit trade negotiations with the US were plausibly established.

False narratives, fake news: A government in denial

Equally interesting was the UK government’s reaction to the FT reporting on the issue, which – perhaps unsurprisingly – was one of denial. The BBC quoted Minister of State for Trade Policy Penny Mordaunt as saying that the FT's report "might be true in terms of how some people in the US feel, but it is a false narrative. These are two entirely separate issues." So, the minister did not deny the FT’s reporting directly, but nevertheless tried to disqualify it as false. What exactly is false about the narrative if the facts are right is not clear. We are reminded of the rhetorical acrobatics of public officials in the US government at the hight of the Trump administration where facts lost there value simply because they were not believed by those in power.

Regardless, the fact remains that the US has agreed with the EU to remove these Trump-era steel tariffs a month ago, but they remain in place for the UK. So, if the government is right that the reason for these tariffs remaining in place are not US worries about the NIP, then an equally awkward question for the government needs to be asked: Why is the UK government unable to deliver on this key Brexit promise to the British people that UK-US trade would receive a boost post-Brexit? The reality is, that at least regarding steel tariffs, the UK is now lagging behind that of the EU. It should be noted that this is not an academic issue but has considerable real-world implications. The tariffs are estimated to have led to a halving of UK steel exports to its second largest market.

The fact that the government is in denial was further compounded by Mordaunt’s insistence that “We have acted in good faith. We will do more to tell America we have acted in good faith and we are determined to be pragmatic.” How exactly the UK government will try to convince the US government of its ‘good faith,’ when there is ample evidence that the government never intended to respect the arrangements it signed up for, is unclear.

Meanwhile, pressure on the UK government to change tack when it comes to the NIP also arises from other quarters: In a remarkable move, the new Germany coalition government enshrined in its coalition agreement the need for "full compliance with the agreements adopted" by the UK and the EU and particularly the Northern Ireland Protocol.

Bleak outlook

It is clear that the government is under increasing pressure here. FTAs as a replacement for the lost access to the EU Single Market have been one of the most important promises of the Brexit campaign. Yet, even the most benign assessments of the deals currently in place make it very clear that they will never be sufficient to compensate for the increasingly obvious damage done by leaving the SM.

The outlook for trade is increasingly bleak. While our Trade Secretary is unable to answer basic – albeit not simple  – questions about the positive impact of FTAs on the UK economy, various authorities, including the Centre for European Reform and the Office for Budget Responsibility are increasingly able to assess the damage done by Brexit to UK trade. The latest figures show a decline of trade in goods with the rest of the world by 11.2% - and that is net of any impact of the pandemic. As a result, GDP could be reduced by between 4-5% in the long run.

As Chris Grey states in a brilliant post dissecting the Brexiters’ economic illiteracy, people in some parts of the country may be unconcerned about GDP, as they – rightly – consider that GDP growth has been largely concentrated in London and the South East for more than a decade. The problem, of course, is that the same inequalities that lead to London benefitting more from the economic upsides, also meant that the already underprivileged areas to lose more from any contraction. That may sound contradictory, but as with many social phenomena, the Matthew effect applies: Those who have will be given, those who do not have will lose even the little they do have. Sluggish growth is already leading to increased taxes and cuts in funding for local councils. Add to that the loss of EU structural funding, which is only to a very limited extent replace with UK government funding and the government’s declining tax revenues compared to what it could have been without Brexit, you can see that areas that rely more on government transfers will suffer more.                                                                                            

Nothing of this is new of course. Readers of this and other Brexit blogs will probably feel like ‘Groundhog Day.’ The same news of negative impact of Brexit on trade and economic growth, the same government denial, and the same vacuous promises of the benefits to come…Increasingly there is this sinking feeling that unless the government changes, nothing will change and we might be trapped in the hellfire of Brexit for eternity.

The Tories doing well

Sadly, political news only reinforce that sinking feeling this week: The Tories have held on to their seat in the Bexley by-election in South-East London. While Bexley certainly is a ‘true blue’ seat if there ever was one, the fact that 51.5% of the voters there chose to support the Conservative party who in recent weeks has made headlines mainly for corruption, incompetence, and a never ending stream of stories about ‘one rule for us, one rule for everyone else’ – most recently concerning Christmas parties at Number 10 during the December 2020 lock down – may seem astonishing to some.

Of course, Old Bexley & Sidcup is a heavily pro-Brexit constituency with over 62% voting “Leave” in the 2016 referendum. Brexit loyalties may still be strong enough to move a considerable part of the electorate to support the Conservatives. Still, the governing party achieving a clear majority half-way through a tumultuous parliament should encourage Johnson.

The opposition may draw some consolation from the fact that the conservative majority was slashed from more than 18,000 votes to under 4,500. But the fact that turnout was very low indeed should worry both the Conservatives and Labour.  

A next test facing Johnson’s Conservatives party comes in two weeks’ time with another by-election, this time in Shropshire North, another strongly leave-voting seat (60%).

Given current polling – with the Conservatives and Labour tied at 37% of voting intentions, a progressive alliance may be the only possibility to defeat Johnson in a future General Election.

Yet, Labour – as the country’s biggest opposition party – still lacks the sense of responsibility towards the population to make that crucial step to rid the country of more than a decade of Tory mismanagement and corruption.While Labour leader Kier Starmer has ruled out a ‘progressive alliance’ with the Liberal Democrats and the Greens, there are signs that the opposition parties do start to strategically hold back in seats where there is a realistic chance for another opposition party to defeat the Tories.

The only glimmer of hope from the Old Bexley by election comes from another corner, namely the good result that Reform UK achieved. Party leader Richard Tice himself garnered 6.6% of the vote share. While it will seem to many readers like madness to rejoice at a vile extreme right party’s electoral success, the fact remains that given the centre-left opposition parties’ lack of pragmatism, significant competition for the Tories on their right may be the only way to open up the electoral landscape enough for more centrist forces to emerge. But of course, last time a far-right party competed with the Tories on the right, the outcome was far from positive.

Mass masochism

It may be relatively easy to understand why wealthy areas of the country support Conservatives despite the shambles of the Johnson government. After all, the well-to-do do not have as much to fear from continuing economic decline and cuts to public services as poorer strata of society. It is harder to understand continuing support for Johnson amongst these poorer demographics who bear the brunt of Johnson’s ‘all wax, no wick’ populist policies that do not deliver on key electoral promises (40 new hospitals anyone?), but threaten hundreds of thousands of people with destitution.

While people were easily convinced that the EU is the root cause of all our worries and that simply cutting all ties with the evil union will solve our problems, it seems much harder to explain to voters that successive Tory governments that they keep voting for have a lot to respond for. While there is a “lack of belief and agreement among the electorate in the structural causes of inequality,” voters are much more willing to blame refugees for their falling living standards and even attack RNLI life boat staff for saving human lives.

While right wingers like Farage use vile stunts to fan the flames of racism and xenophobia, the centrist and left-wing opposition parties still have not found a recipe to explain to the British population how decades of Toryism – starting with Thatcher in the 1980s – have made the country vulnerable and unfit to compete in the global economy while providing decent living standards to its population. The Tories under Johnson may have started to focus more on some of the real issues to country is facing – most importantly regional inequalities – but stuck in an ideology from another era, they continue to misunderstand how the economy works and provide all the wrong answers.

The party of finance?

It is tempting to see the Conservative party mainly as a party of financiers and rentiers with close ties to the asset management, hedge fund and private equity industries on which it relies for personnel and donations. Indeed, the Byline Times found that 65% of donations for Johnson’s leadership bid “came from hedge funds, city traders and rich investors.”

Yet, even in this respect – as the party of finance – the Johnson government may be failing. The irresponsibly minimalist Trade and Corporate Agreement (TCA) with the EU does not contain any agreement on financial services, which means that the City of London risks losing much of its appeal. While the pandemic had slowed down any mass exodus of financial service providers, it is likely that the move of assets and personnel into the EU single market will pick up in the coming months due to increased EU pressures for banks to establish subsidiaries inside the SM in order to continue servicing EU clients despite the lapsing of passporting rights for UK banks. The government seeks to stem this tide for instance through a reform of the London Stock Exchange’s listing requirements, which are meant to make the LSE a more attractive place for tech company listings. But like in other areas, it is unlikely that such reforms will do enough to compensate for the massive hit the industry is taking due to being cut off the SM.

Despite the dependence on financiers, Johnson’s Conservative Party is too short sighted and ideologically blinded to feed the goose that lays the golden eggs.

Labour’s national responsibility: Refried socialism or hope for everyone?

Labour, on the other hand, is stuck in a perfect conundrum of its organisational logic – which pushes labour leaders to cater to the swelling ranks of far-left activists that have made it Europe’s largest party by membership – and the fact that catering to that audience means the party loses support in the population at large, having had the worst GE result since the 1930s.

Some observers see the solution to this conundrum in Starmer crafting “a new and exciting interpretation of socialism for the 2020s that unites Corbynites and Blairites alike.” I am not sure what such a ‘new and exciting’ socialism would look like and how far its appeal would really reach. Corbyn’s 2019 manifesto – which arguably attempted something like that – suggests that beyond nationalising all sorts of industries, there is not much new and exciting about 21st century socialism with a green tinge.

Worse still, while Jeremy Corbyn was generously supported by the trade unions, with UNITE donating £3m pounds to the 2019 GE campaign, Sharon Graham, the new general secretary of UNITE is threatening to defund the labour party, cutting funding to just £1m. Arguably, this is at least partly in reaction to the direction in which Starmer is taking the party, especially after the recent reshuffle of the shadow cabinet, which is interpreted by many as a right shift. The labour movement remains hence fragmented along factionalist lines and the Unite turning on the labour leadership – accusing it of elitism – will make sure to prevent an election winning strategy from emerging.

What labour needs is not refried socialism, but a new ‘grand narrative’ that provides a convincing analysis, a solution, and the promise of hope. This narrative should start with the fact that the root cause of current problems lies in the flawed response to the Fordist crisis of the 1970s. It also should include a narrative that the ‘market v. state dichotomy’ is a false one and that any large-scale modern economy necessarily needs both a well-funded, -functioning – but not necessarily huge and overwhelming – state, and regulated and controlled but vibrant markets. Convincing the public that it is time to move beyond the sterile state-market dichotomy would make labour less vulnerable to accusations of 1970s-style socialism and would open up opportunities for new, real solutions. Indeed, researchers in development and political economy suggest that successful economic development should rely on embracing “urgently and wholeheartedly the philosophy of state developmentalism as a new national project.”

Failing to do so may have dire consequences. A passage from the UN rapporteur on extreme poverty and human right’s report on his visit to Britain a few years ago makes for shocking reading and is worth citing at length: “The UK is the world’s fifth largest economy, it contains many areas of immense wealth, its capital is a leading centre of global finance, its entrepreneurs are innovative and agile, and despite the current political turmoil, it has a system of government that rightly remains the envy of much of the world. It thus seems patently unjust and contrary to British values that so many people are living in poverty. This is obvious to anyone who opens their eyes to see the immense growth in foodbanks and the queues waiting outside them, the people sleeping rough in the streets, the growth of homelessness, the sense of deep despair that leads even the Government to appoint a Minister for suicide prevention and civil society to report in depth on unheard of levels of loneliness and isolation. And local authorities, especially in England, which perform vital roles in providing a real social safety net have been gutted by a series of government policies. Libraries have closed in record numbers, community and youth centers have been shrunk and underfunded, public spaces and buildings including parks and recreation centers have been sold off.”

The UK public still have the choice to turn around the political tide, but with every day the Johnson government is allowed to stay in power, the chances of averting lasting damage diminish. It is hoped that the next electoral opportunity will be seized.

Brexit Impact Tracker – 28 November 2021 – From Post-Brexit Optimism to Post-optimism Brexit

The Prime Minister’s handling of several important issues this week could mean that we are approaching a tipping point in the Johnson Premiership. For many of us living in Johnson’s Brexit Britain has felt like being a passenger on a hijacked airplane. The reactions to this week’s events may indicate that the number of people feeling that way is increasing rapidly and includes influential Tories. With his sever shortcomings as a politician on public display and the negative impact of his government’s inaptitude increasingly difficult to deny, we see signs emerging that important pro-Tory institutions – including the Telegraph and Spectator – are losing faith if not in the idea of Brexit itself, at least in the actual existing Brexit that Johnson is delivering. This could be the most significant political development since the 2019 General Election.

Channel drownings

The first – and most horrific – salient issue on which Johnson has displayed a breath-taking level of recklessness and inaptitude is the issue of refugees crossing the English Channel from France into England. The tragedy of twenty-seven people drowning earlier in the week led the Home Secretary Priti Patel to defend her immigration system by reducing the problem to one of criminal gangs engaging in trafficking and by blaming the French and European side for not doing enough to crack down on crossings. The Home Secretary, of course, completely ignores the fact that the crossings are largely a result of legal ways to ask asylum in the UK having been cut off almost completely by successive Tory governments, as Lord Kerr of Kinlochard pointed out in the Lords this week.

The Home Secretary is said to be under great pressure from Number 10 to bring down immigration figures to cater to far-right Tory voters’ number one concern. Yet, the PM’s own attempts to contribute to the solution have gone horribly wrong this week. The PM himself made public his letter to French President Macron on twitter, which the French considered unserious and inappropriate leading them to disinvite Home Secretary Patel from a meeting on Sunday to discuss the issue. Whatever one thinks of the ‘five-point plan’ Johnson set out in the letter, the fact that he thought tweeting it would in any way help the UK and French governments to move towards an agreement and a solution speaks volumes of his inaptitude in handling the UK’s international relations. The disinvitation of the UK Home Secretary from a multi-lateral meeting that directly concerns the management of the UK’s border indicates that the UK is increasingly becoming a problem to deal with, rather than a reliable partner that contributes to solving the region’s common problems.

Fishing row

The channel crossings have shifted the media attention away from other unresolved problems that are simmering under the surface, but can easily erupt into full-blown crises. One of them is the row with France over fishing quotas. A reminder that despite several weeks of relative calm the issue is still not resolved came this week. On Friday French fishermen staged a warning blockade of the port of Calais and the Channel tunnel on Friday. Despite the reignition of the conflict there are no signs that the issue will be resolved any time soon. The new low UK-French relations have reached over the refugee issue makes it even more unlikely that this will change any time soon.

Northern Ireland Protocol

Yet another policy area in which Johnson’s government is unable to provide any solutions is the Northern Ireland Protocol. After Friday’s meeting between EU Commissioner Maroš Šefčovič and David Frost both sides confirmed that the difference between the two sides’ positions remained ‘significant.’ Talks will continue next week and may very well drag into the new year. So, no sight of any solutions to the problems caused by Brexit on that front either.

The PM’s Peppa Pig speech

These are all very significant and salient political issues resulting from Johnson’s Brexit, which would require a lot of skill and competence to solve. The stakes are high not just in terms of economic impact but potentially also in terms of human lives.

In this context the PM’s speech at the Confederation of British Industry (CBI) conference should set off all alarm bells. While we have gotten used to Johnson’s rambling, incoherent, and often inappropriate speeches, the speech at the CBI conference was on a whole different level. Not only was the PM clearly not prepared and lost the thread leading to long awkward silences and shuffling of papers, but also was the speech completely vacuous and ultimately only remembered for the PM’s imitation of car noises, comparing himself to Moses, and telling a weekend anecdote about a visit to Peppa Pig world.

The performance was so bad and bizarre that I received messages from friends from various European countries with articles in local media commenting on the PM’s mental state [GER] and ability to rebound [FR] from the ‘sleaze scandal.’

After the embarrassingly shambolic ‘Peppa Pig speech’ following weeks of turmoil around the ‘sleaze scandal,’ it looks like parts of the Tory party start to have some doubts about his leadership.

The only plan is optimism

The cavalier and seemingly reckless handling of the important issues of channel crossings, NIP, and fishing licences all remind us of one thing: Brexiters like Johnson had absolutely no plan for post-Brexit Britain, but were simply banking on an unshakable optimism which is in turn rooted in a blief in some sort of natural tendency for Britain to end up on top of the new international order that Brexit has created. This sort of wishful thinking based on imperturbable ‘oomph and optimism’ – as David Gauke put it this week – was evidenced in a video by Daniel Hannan from the 2016 Referendum Campaign that remerged on social media this week. A classic case of the ‘sunlit uplands’ narrative, the video is remarkable for its completely evidence free claims about the UK being held back by EU membership and could thrive once freed from the EU’s shackles. Five years later, these promises seem to have debunked themselves. Yet, the fundamental belief motivating much of what the hard right of the Tory party do has not changed, namely the conviction that Britannia will somehow naturally rise to the top of the post-Brexit world order to reclaim its rightful place as the dominant world power. That optimism was successfully sold to the British public in the 2016 Brexit referendum and the 2019 General Election. However, contrary to Tory politicians like Jacob Rees-Mogg who can afford to live in the past – as illustrated by his absurd remarks about the impact of long-past battles on today’s politics in Europe – voters cannot live on unshakable optimism alone. Some observers think the byelection this coming Thursday in Bexley – a constituency that has been held by the Conservatives since its creation in 1983 and has voted 64% ‘leave’ – could turn into a close race and hence a major test for the Tory’s ability to win elections based on fantasies alone.

Post-optimism Brexit

Equally significant – actually probably more significant – than the still fairly faint voices inside the Tory party questioning the PM are not so faint questions raised about Johnson’s Brexit in the pro-Tory publications the Daily Telegraph and the Spectator this week. The Yorkshire Bylines ran an article on two pieces in these publications that seem to indicate that leading Brexiters start having doubts about actually existing Brexit.

The first one was a piece by Fraser Nelson in the Spectator in which he expresses disappointment about what Brexit has delivered so far. He even questioned the often-lauded Free Trade Agreements (FTAs) negotiated – or rather rolled-over – by Liz Truss when she was trade secretary. That is a quite a considerable acknowledgment of failure from an influential Brexiter concerning a policy area where many Brexiters claim a Brexit dividend did actually materialise.

The second one, Allister Heath’s piece in the Sunday Telegraph makes for disturbing reading. Johnson’s post-Brexit travails and policy failures are attributed to a mysterious ‘blob,’ of civil servants and Remainer elite who still try to defeat the will of the people. The piece – published not on some obscure web page, but in one of Britain’s most influential newspapers – is nothing short of ‘deep state’ conspiracy thinking and further testimony to the nosedive British political culture has taken in the 21st century.

While the move from post-Brexit optimism to post-optimism Brexit is inevitable and indeed to some extent necessary for realism to emerge, it is genuinely worrying that leading Brexiters turn to such genuinely lunatic theories to explain why their promises fail to materialise.

The (lacking) popularity of a hostile environment

A Brexit Britain slowly moves from optimism to post-optimism, the struggles with labour shortages are not abating. This is very largely due to the new post-Brexit immigration systems which fails at both ends and in the middle.

At the lower end, the horrific consequences of the Tories anti-refugee policies are evidenced by the channel crossings. Yet, the system is also not fit for purpose at the top of immigration and skills. A post-Brexit scheme to attract ‘the best and brightest’ scientific talents – namely those having won a Nobel Prize or similarly prestigious awards in several fields of the natural and social sciences – has reportedly attracted zero applicants. One UK-based Nobel Prize winner expressed little surprise at the failure of a scheme he considered the result of the government’s “verbal diarrhoea of optimism.” Indeed, the scheme seems to be based on the above-mentioned blind optimism that can only see Britain as a country that anyone who is given the chance would choose to make their home. The reality of post-optimism Brexit Britain, of course is that “UK scientists’ access to European funding is uncertain, we’re not very attractive to European students as they have to pay international fees, our pensions are being cut and scientific positions in the UK are both rare and precarious.” There is no need for a blob or deep state conspiracy aimed at turning Brexit into a failure to prevent post-Brexit Britain from attracting the talents it needs. With their ‘hostile environment’ policy, the conservative party and Brexiters have made sure of that themselves. As Chris Grey remarked in his Beyond Brexit blog this week: “Building and maintaining a science base, like many other policies, requires long patient slog to build capacity, not gimmicks or endless rhetoric about being ‘world-leading’.”

In between refugees and Nobel Prize winning scientists, are the less highly skilled workers, like lorry drivers. In this segment, the failure of post-Brexit immigration system is evidenced by the failure of the easing of immigration rules aimed at alleviating labour shortages to have much effect. Just like Nobel Prize laureates, Polish lorry drivers do not seem to consider post-Brexit Britain a particularly attractive place to move and work in. s

The pro-Tory pro-Brexit press of course, does not seem to understand the link between anti-foreigner rhetoric and some of our economic struggles and continues to babble about the need to weaken human rights in order to deal with the fake problem of criminal foreigners.

The continuing labour shortages and failure of visa schemes show that the message is received loud and clear around the world and increasingly only the truly desperate – namely refugees fleeing violence and prosecution – will consider making post-Brexit Britain their home.

There is little hope that the broken immigration system will change for the better und the current government. Not just due to inaptitude, but also because of the same fundamental belief in the superiority of Britain as an immutable fact of life, which prevents any realism about what needs to be done to meet the country’s real economic and immigration needs from emerging.

In a disturbing piece in the Byline Times, Nafeez Ahmed, quite credibly establishes very disturbing links between high-level Tory policy makers and the questionable intellectual fundaments of some Tory advisors, including theories that can be linked back to Nazi and racist pseudoscientific theories. The article is particularly disturbing, because such intellectual influences seem to dovetail with the believe Britain’s superiority and would actually explain the shape of the current immigration system quite well.

As long as the Tories’ supremacist optimism does not subside for good, it is to be feared that for most of us post-Brexit Britain will remain a very hostile environment indeed.

Brexit Impact Tracker - 21 November 2021 – Christmas Truce, Cold Feet, & Levelling up and down the Country

The Northern Ireland Protocol (NIP) issue still dominated this week’s Brexit news. Most sources reported a certain de-escalation of tensions and some progress in talks between Brexit Minister Frost and Commissioner Maroš Šefčovič.

There are two interpretations of what is happening here. The first one sees the more conciliatory tone the UK government is striking as a temporary tactical change, because Johnson wants to avoid triggering Art. 16 of the NIP before Christmas. The second one is that Johnson and his government are getting cold feet. Indeed, there are some signs that people inside the government are genuinely worried about the possibility of an uncontrolled escalation of the situation in Northern Ireland and is therefore seeking to actually solve the NIP issue. The EU’s and the US’s warnings addressed to the UK, which I wrote about last week, reiterate in a letter to Johnson signed by a Republican and a Democratic senators this week, may have caused a change of heart here.

The Christmas truce thesis

Many observers and EU officials seem to expect – or fear – that the first interpretation is correct. The ‘Christmas truce’  thesis states that a beleaguered and weakened Johnson – due mainly to his handling of the so-called ‘sleaze scandal’ – is keen on not putting any additional stress on his popularity. Triggering art. 16 would most likely not only lead to a major deterioration of relationships with the EU, but also possible retaliatory measures, which in turn might affect British consumers during the festive period. On this account, the triggering of Art. 16 is still likely, but will probably happen in late December or January.

Frost’s reaction to the reports about a more conciliatory tone from the UK government may provide some hints, whether the ‘Christmas truce’ or the ‘cold feet’ thesis are more accurate. In a bizarre Tweet and in statements quoted in pro-Brexit papers, Lord Frost reacted to reports about a ‘thaw period’ by making it clear that his position had not change and triggering Art. 16 was still a possibility. At the face of it, this statement may suggest that the government’s plan to wreck the NIP have not changed.

The cold feet thesis

Yet could another interpretation be that a genuine willingness to solve the NIP issues is emerging? Irish Foreign Minister Simon Coveney stated today that he believed both sides were now serious about finding a solution. So, perhaps the ‘cold feet’ thesis has some traction. On this account, Frost’s statements about Art. 16 still being on the table may simply reflect his belief that showing too much goodwill will undermine his hard-ball negotiation tactics, which even the FT seems to think is working to some extent. In Frost’s worldview any international negotiation is a zero-sum game. What the EU or Ireland win, we lose. So, perhaps these statements could be read as support for the ‘cold feet’ thesis and that the government is genuinely preparing to reach a solution over the NIP.

The view that hardball tactics are working is questionable, of course. While the EU’s new proposals for the implementation of the NIP were clearly a reaction to Frost’s approach, it is far from certain that a similar set of proposals to improve the implementation of the NIP could not have been reached in a more cooperative atmosphere, without all the damage that Frost’s arrogance and extremism causes in other respects.

A window of opportunity?

If the UK government is genuinely interested in a solution and not just playing time before wrecking the NIP for good, the important question is whether Frost and Johnson understand where negotiation strategies stop and where the EU’s real redlines are. The EU may be ready to show some pragmatism on border checks and controls – at least as long as the UK’s regulatory regime remains fairly aligned with EU rules. But it is much less certain whether the EU will be willing to show any such flexibility regarding the European Court of Justice’s (ECJ) role as ultimate arbiter of EU law.

EU law experts – like Catherine Barnard – see one possible solution in the extension of the dispute resolution mechanisms of the Trade and Cooperation Agreement (TCA) to the NIP. That may be the case, but of course would strictly speaking not remove the ECJ from overseeing those parts of the protocol that relate to EU law. Indeed, the TCA dispute resolution mechanisms means that ECJ oversight is just one step removed. EU law remains the ultimate backstop. More generally, ECJ supremacy over the interpretation of EU law seems to be the one red line that the EU insists on in all its contractual arrangements with third countries. It seems highly unlikely that the UK will be able to change this fact. Still, such a ‘fake solution’ to the ECJ oversight issue could provide Frost and Johnson with a way out if they were indeed minded to settle the NIP issue.

Between the poles of finding a permanent solution for the NIP and blowing it up altogether, some observers have expressed the view that a permanent state of limbo, where the NIP remains only partially enforced, is possible – perhaps even desirable. But such a state of permanent tension and negotiations in Northern Ireland is hardly a positive post-Brexit outcome. If the border regime issues in NI remain unresolved, peace is simply on much shakier grounds than with a permanent solution accepted and supported not only by the UK government and the EU, but also by the Unionist and Republican sides in NI.

Many observers, including myself, have pointed out that keeping tensions with EU neighbours flying high is important for the Johnson government to maintain its popularity. This may suggest that settling the dispute over the NIP may not be in the government’s interest. English nationalism seems to be the one thing that unites the heterogenous coalition of rich rentiers and former labour voters in ‘Red Wall’ constituencies that formed the core basis of the Tories’ 2019 General Election victory. For some time the NIP was the perfect tool to keep those constituencies happy: provoking the EU over the border checks provided easy anti-EU headlines that the government feeds on, while any fallout from an escalation would only have hit Northern Ireland, which few Brexiters – and hence Tory supporters – in England actually care about.

Yet, with the EU’s threat to suspend or even cancel the TCA if the NIP could not be made to work, the dispute in the ‘unloved province’ may impact English voters more directly and in ways they actually care about; Namely when it comes to their ability to consume. Johnson may hence have strong reasons related to his political future to settle the NIP issues and move onto different battled fields with the EU, where the consequences are less severe if the conflict gets out of control.

Whether or not the Christmas Truce can morph into permanent peace over the NIP will also depend on the influence of the hard right inside the Tory party and in the press. Frost is under pressure from the Brexit ultras to go for confrontation and make maximalist claims. Yet, as Chris Grey wrote this week, the ultras are currently ‘weakened because of having driven the fiasco stemming from their attempt to protect Owen Paterson.’ The coinciding of the crucial NIP talks with the weakening of the Brexit ultras may create further leeway for compromise.

There may hence be a real window of opportunity opening up, whereby – by coincidence – Johnson’s pursuit of his own political self-interest without regard for anyone else – possibly throwing Frost under the bus in the process – may align with what is needed to solve an actual problem that the country is facing – and the temporary weakening of the ultras in the Tory party may provide the necessary space for this.

The ‘migrant crisis’ – a new battlefield?

Another reason why the political stars may be aligned to allow a solution in the NIP row is that Johnson will be worried about developments in what the media have started to call the ‘migrant crisis.’ The number of asylum seekers crossing the English Channel in small boats from France have increased to record hights in recent weeks (although that depends on which figures one relies on). Conservative sources see the handling of this crisis as a potentially very serious threat to the electoral support for the Tory party. Indeed, the Telegraph cites polls that show it is on migration – ahead of the handling of the ‘sleaze scandal’ – that voters rate the PM’s performance worst, with 54% disapproving and only 21% approving of his actions. Similarly, pressures within the party – and especially the 1922 backbench committee – are increasing for Johnson and Patel to deliver on promises to cut immigration.

In this context, it may well be that the PM could be tempted to make cross-Channel migration the next battlefield on which more controlled and limited tensions with the EU can be exploited for electoral gain. Home Secretary Patel has already started a bellicose attack on the EU’s immigration policies blaming the EU’s policy for the problems rather than the UK’s exiting the Dublin agreement after Brexit.

Levelling up and down: Another zero-sum game?

The other big topic this week was the government’s ‘levelling up’ agenda. The scrapping of the eastern leg of the HS2 highspeed railway link between Manchester and Leeds has met with a great deal of criticism from politicians and economic actors in the North of England. It is indeed an important decision that provides some clues about the government’s commitment to this electorally important policy.

Last month, the Byline Times ran a series of articles about levelling up – or rather down – of the Red Wall constituencies in the North and Midlands of England. They show in impressive fashion how a decade of Tory policies have made the situation there so bad that bringing about some improvements would seem like a very low bar. Living standards, investments, income, access to health and food all have declined dramatically due to Tory austerity after the Global Financial Crisis of 2008. Yet, even though regaining some of the pre-crisis levels of public services would not seem out of reach, the Johnson government falls short of delivering anything concrete.

As mentioned last week, the grants distribute by the levelling up fund seem ludicrous in comparison to the lost EU funds. Similarly, the money promised to Northern councils as part of the government’s levelling up strategy seem like a Band-Aid on the gaping wound left by a decade of austerity bloodletting, which affected local councils in the North more than in other regions.

In this context, the axing of the eastern leg of HS2 should dispel any illusions over how committed Johnson really is to the goal of making the country more equal.

Equally interesting – and concerning – were Johnson’s reaction to criticism of that decision. The Independent reported that the Transport for the North authority was immediately punished for strongly criticising the government’s decision, by removing some of its funding and powers. In a trade mark shift of argument, the PM now rejected new train lines for their impact on ‘unspoiled country side’ and because they take decades before becoming operational. This statement comes from the same person who less than two years ago used HS2 as prove that his government had ‘the guts to take the decisions’ to deliver prosperity across the country and who ignored any criticism by campaigners over the serious environmental damage the project has done to wildlife during the first phase between London and Birmingham.

A related piece of news this week was London Mayor Sadiq Khan’s letter in the FT imploring the government to end its ‘anti-London’ stance in the row over post-Covid funding for Transport for London (TfL). The government’s refusal to provide sufficient funding for TfL illustrates another flaw in Johnson’s approach to ‘levelling up.’ Namely, that in this government’s world view everything is a battle between two forces and therefore everything is a simple zero-sum game. From this perspective, ‘levelling down’ London may seem like a logical – indeed necessary – corollary to ‘levelling up’ other areas of the country. More broadly, as the FT also reported this week, the government’s approach to levelling up betrays a lack of understanding of the complex economic relationships between different economies both at the sub-national and the international level.

Brexit dividends?

In one of the increasingly rare instances of an alleged ‘Brexit victory,’ pro-Brexit newspapers reported about Royal Dutch Shell’s decision to move its fiscal headquarters from the Netherland to London and drop ‘Royal Dutch’ from its name. What the pro-Brexit papers do not tell you, of course, is that nothing causing this move has got anything to do with Brexit. The fact that Shell finds the UK a more attractive fiscal location is not the result of any post-Brexit regulatory or legal changes. Rather, the decision has been taken based on differences in rules about the taxation of dividends that existed in the exact same way when the UK was a member of the EU. Rather than illustrating a benefit of Brexit due to the UK exploiting its newfound freedom, the case illustrates that such divergences and regulatory competition were possible even within the EU. Indeed, Shell’s announcement immediately led the Dutch government to encourage the Dutch Parliament to drop the 15% withholding tax on dividends which prevent share buyback in the Netherlands and which is reported to be the main cause of Shell’s decision.

While the pro-Brexit press has become desperate enough to latch onto this kind of non-Brexit related events to deliver their readers a bit of good news, if the ‘cold feet thesis’ is right, perhaps there is some hope that the rest of us will have some genuinely good news for Christmas.

Brexit Impact Tracker - 14 November 2021 – Making Brexit Work

This week’s Brexit news was a roller coaster ride around the possibility of the UK government triggering Art. 16 to suspend parts of the Northern Ireland Protocol (NIP). At the start of the week the triggering of the article seemed all but certain. The Irish government reportedly started preparations for a trade war between the EU and the UK. But then the EU started taking a tougher stance on the consequences of triggering Art. 16, von der Leyen met with Biden who gave a rather lukewarm support to the EU, but the US House Foreign Affairs Committee issued a stronger warning to the UK. Probably as a result, Frosts’ tone became more measured mid-week, telling the EU – in a signature act of gaslighting – to ‘calm down.’ The meeting with EU Commissioner Maroš Šefčovič on Friday, then led to a statement by Frost that sounded rather more conciliatory. The statement was remarkable in that it referred to continuing talks on the technicalities of the NIP, but did not mention the more important sticking point of European Court of Justice (ECJ) oversight over parts of the protocol. The latter clearly is a non-negotiable deal-breaker for the EU. The UK government’s de-emphasising of the issue and the more conciliatory tone has therefore been seen by some observers as a sign that the government had blinked. The change in ‘tone’ was widely reported on and lauded by Šefčovič.

While the climb down may or may not be explained by the increasing pressure and threat from the EU and the US, it is not clear what the government’s plans are now. Some observers speculate that that this may just a temporary reprieve allowing the government to focus on other things before triggering Art. 16. It is probably still more likely that the UK government will trigger Art. 16 rather than not. Yet, as Philip Rycroft argued on the Encompass web page this week, there simply is no alternative to the NIP or an arrangement very close to it if the UK wants its ‘hard Brexit’ that implies leaving the Single Market and customs union. So, it is difficult to see what a triggering of Art. 16, the possibility of the EU suspending the Trade and Cooperation Agreement (TCA), and then a new prolonged period of political negotiations could possibly achieve. It is therefore to be hoped that the momentary de-escalation, does mean that it will not come to the nuclear option of Art. 16 and the two sides focus instead on solving the existing issues with the implementation of the NIP.

More broadly, some sort of agreement between the EU and the UK that the NIP simply has to be made to work could then also mean that the UK and EU could focus on making their post-Brexit relationship work more broadly. Whether or not that is what the UK government wants is still unclear. Some think Johnson desperately needs ‘Brexit undone’ – ideally by the EU – in order to avoid criticism from the general public or Brexit ultras about the shambles that actually existing Brexit has been so far. With Johnson’s priority being to consolidate his own power, he will always be tempted to use the relationship with the EU simply as another tool to increase his popularity when he needs it. If increasing tensions with the EU allows him to get a temporary popularity boost from a rallying around the flag, he will probably choose to do that.

Yet, with every passing week, the PM’s strategy of building his popularity around Brexit and nationalist anti-EU sentiments becomes more difficult. Eleven months into actually existing Brexit, there are still no signs of any Brexit dividends and the Covid19 pandemic, labour shortages, and rising living costs are starting to wear people down. The growing fall out of the Owen Paterson scandal and the accusation of ‘Tory sleaze’ does not help the PM either – at least not in the short run.  In this context, reigniting the Brexit battles of 2016-2019 may not have the same positive impact on Johnson’s popularity than during the first run. For one, the PM would have to explain why the ‘have your cake and eat it’ Brexit deal he boasted about in December 2020 was so bad that less than a year later he himself wants to tear it up. For the other, eventually people will want to see solutions to the problems that are plaguing the country, which is not helped by precipitating it back into the uncertainty of another long period of fraught negotiations with the EU during which much of the government’s attention is diverted away from the pressing domestic issues and at the end of which a ‘no deal’ outcome is looming.

‘Making Brexit work’

Worse still, for the government, since last week, it has become clear that Labour will not be an easy target in a General Election as Johnson may have hoped for. Many Remainers were upset about Keir Starmer’s surprise statement on the Andrew Marr show that his focus would be on ‘making Brexit work’ not overturning it or ripping up the TCA.

One could argue, of course, that public opinion is already shifting towards a ‘re-join’ majority with recent polls indicating a 53% majority in favour of re-joining the EU and therefore considerable political benefit could be gained from adopting a bold-re-join strategy. But if the Brexit referendum has taught us anything, it is that what ‘the people’ want does not always make for realistic or wise policy. The fact is that re-joining the EU remains a faint possibility in the current context, not only for domestic reasons, but also because the EU has a say in the matter. So, the choice really is just between continuing the Johnson government’s approach of making Brexit a permanent conflict with the EU and looking for a way of making the new relationship with the EU work for both sides.

Starmer’s indecisiveness – or strategic ambiguity – about labour’s stance on Brexit may have cost him a lot of sympathy from remain-voting labour supporters without helping him regain support in the ‘Red Wall’ constituencies of the North of England and Midlands. However, as Anthea Simmons observed in an insightful article in the Westcountry Bylines, the fact that Starmer does not advocate to overturn Brexit increasingly becomes a problem for Johnson. Johnson won the 2019 GE on the promise to get Brexit done. Yet, Brexit has turned into a mess. Starmer can now point at the shambles that Johnson has made of Brexit and campaign on the promise of simply doing better. It makes good political sense to not strongly advocate for re-joining the customs union, the Single Market, or even the EU at this stage. Rather, it is enough to promise to do better than Johnson, because that is what the majority of people certainly will want regardless of their attitude towards Brexit.

Doing better than Johnson would most certainly imply establishing a more cooperative and closer relationship with the EU and could well lead, in time, to re-joining the customs union, the single market, the EEA. But right now, neither of these are realistic political goals, nor is promising either of them necessary in terms of political strategy. Simply pointing out that Johnson has made a mess of Brexit, will put the government in a more difficult position than promising to overturn it. Rather than campaigning on a promise to save Brexit from a Labour party that promises to overturn it, Johnson will have to campaign on defending his own record. That would finally force the government to move from symbolism and jingoistic grandstanding onto the territory of delivering real policy outcomes, which is something the government is always struggling with as other Brexit news this week illustrate once again.

Getting ‘levelling up’ done

BBC’s Alex Forsyth reported this week on Michael Gove’s push to turn ‘levelling up’ from a slogan into an actual policy. This involves changes to the way in which different funds connected to the levelling up project are administered – possibly merging them into one – and the way departments coordinate their efforts in this area. Beyond that, however, the government is still struggling to go beyond the level of slogans. The government has promised a ‘White Paper’ on levelling up policies by the end of this year. What exactly it will contain is unclear. For now, all Gove has don is turn the two words slogan of ‘levelling up’ into a nine word one, promising that the levelling up strategy will include ‘local leadership, living standards, public services and "pride of place."’ Reportedly, part of the plan will be to give more power to local leaders and to build 300,000 new homes a year. What we do not know is how the government plans on meeting these targets.

Indeed, while the government continuous to use grandiose language and sets out ambitious goals across policy areas like infrastructure investment, housing, skills and education, the bits of the ‘levelling up’ agenda that the government has started to implement speak a different language. Thus, Cornish news outlets reported this week that the Community Renewal Fund – seen as a pilot for the Shared Prosperity Fund which will replace EU funding next year – is expected to pay out just £1m for two project in Cornwall compared to the £100m funding a year the region used to get from the EU. Cornish sources suggest that the money from the fund is instead spent on the electorally important Red Wall constituencies in the North of England. Indeed, Tory MPs of the 2019 intake in the Midlands and North of England see government spending on local projects as a key element to their successful re-election campaign in 2024. No doubt the latter will be the government’s priority and therefore levelling up will turn into a very selective policy driven by political rather than socio-economic needs.

Brexit impact on trade: Project fear
That ‘making Brexit work’ should be a priority – regardless of whether one favours eventually re-joining of the EU or not – also becomes clear when looking at new evidence on the economic damage that the non-working type of Brexit is inflicting on the UK economy.

An interesting new study on the impact of Brexit on trade shows just how sensitive trade is to political uncertainty. The study carried out by Mustapha Douch of the University of Edinburgh and Terence Huw Edwards of Loughborough University covers the period 2015 to March 2018. It uses a so-called synthetic control method (SCM), which compares Britain to a ‘doppelganger’ that captures – based on trade between comparable countries – what the trade patterns most likely would have been without the external shock of Brexit. The study suggests that Brexit started hitting UK exports long before any formal trade barriers had been imposed and in fact even before the Referendum was held and its outcome known. Indeed, exports to the EU started declining below trend as early as Cameron’s surprise 2015 General Election victory. By March 2018, way before the shape of Brexit was known, UK exports to the EU “were already 20% to 25% below trend” for goods and 8% below trend for services. The very early impact of just the possibility of Brexit on UK exports can be explained by the fact that importers in other countries anticipated supply chain difficulties or extra costs early on and started adapting their supply chains just in case.

Politically, the sensitivity of trade to political uncertainty plays into the hands of Brexiters, because the effect of Brexit is ‘spread out’ more thinly across a longer period of time. Consequently, the effect of Brexit on the economy when it eventually did happen appears much smaller than it actually was, simply because it happened gradually long before the actual exit from the EU took place. This makes it easier to downplay the impact of Brexit and decry ‘project fear’ as pure hysteria.

Another implication of this study is that Lord Frost’s threats are no doubt already affecting trade and investments into the UK. Businesses do not sit around and wait for the worst-case scenario to materialise. Rather, they will already factor into their decisions and planning the possibility of another no-deal cliff-edge. A very obvious sign of this effect was the Irish government’s announcement this week to allocate EUR 70m to help Irish food producers to reduce their dependence on the UK market for exports and thus actively encouraging a reduction of trade with the UK.

The anticipation effect may also provide an explanation for why financial analysts at ING anticipate that the impact of a new no-deal scenario on the UK economic “may not be gigantic.” I doubt ING economists’ argument that the reason for a limited impact of a no deal scenario would be due to the fact that it would not add many additional costs above and beyond the costs ‘already accrued in terms of form-filling and custom processes’ since the end of the transition period. A no deal scenario would potentially add a lot more costs, not just in terms of admin hours spent on forms, but in terms of actual tariffs being imposed on goods. In one sense, however, the ING economists may be right: A new ‘no deal’ threat looming over the UK-EU relationships due to Frosts NI strategy is certainly already factored into business decisions, meaning that if ‘no deal’ situation does materialise, the impact will look much less bad than it actually is. In this sense – and only in this one – the term ‘project fear’ is actually a quite accurate description here: The fear of what may be coming is as important – and indeed perhaps more important – than the actual occurrence of an event not just for Remainers, but also to explain businesses’ decisions.

With every passing day that uncertainty over the NIP and the TCA lingers on, the UK economy is being damaged even if Frost and Johnson do not make good on their threats. The economic consequences of Brexit have always been an afterthought for the Brexit ultras. The fact that the election victory of the traditionally pro-business Tory party in 2015 had a negative impact on UK exports, is a very striking illustration of how the party has increasingly become a party of the takers not of the makers. This change clearly happened long before ‘f**k business’ Johnson took over the party leadership. Refocussing the debate on impact of Brexit on the economy is crucial. In the short term, that necessarily means that we try and make Brexit work.

Brexit Impact Tracker – 7 November 2021 – The Wrong Kind of Brexit – and how the government wants to fix it

This was another week in post-Brexit Britain that felt like the relative calm before the storm in terms of our relationships with the EU and its members states. In terms of domestic politics, however, an autumn storm made landfall with full force.

The Paterson Case: British politics under the Brexit government

This week’s political news coverage was dominated by the chaotic handling by the government and the parliamentary Conservative Party of the parliamentary Standards Committee’s call to suspend Tory MP Owen Paterson for having repeatedly broken lobbying rules. On the face of it, the Owen Paterson corruption case (because that is what we would call “paid advocacy” if it happened in any other country than our own) does not seem to be Brexit-related. Brexit did not cause Paterson to take half a million pounds from two companies to use his public office to try and influence the Food Standards Agency in their favour. At one level, however, what Paterson did and the way the Tory party and the Prime Minister defended him is very much in line with a broader pattern of behaviour that has everything to do with Brexit. In fact, the case reminds us that Brexit was fundamentally a means in the pursuit of a broader political end, which rallies a heterogenous elite of kleptocrats and plutocrats around the objective of reshaping the British political system in a way that better serves their interests. Making corruption harder to control is in line with that.

In an extraordinary move, the government not only issued a three-line whip to Tory MPs to vote against the suspension of Paterson, but to support an amendment put forward by Andreas Leadsom that turned the vote into an attack on the Standards Committee instead. Indeed, rather than suspending their colleague, the majority of Tory MPs voted to subject the standards regime to a review by a new, conservative majority Select Committee.

Many Tory MPs reportedly voiced concerns and had personal misgivings about being instructed to vote for the amendment.  Still, a majority followed the party whip allowing Paterson to avoid suspension. Yet, less than 24 hours later, Johnson performed one of his trade mark U-turns when he realised the public backlash against his support for a corrupt colleague. Johnson’s change of heart led to Paterson’s resignation and wide-spread condemnation; not just from the usually toothless opposition, but also from senior Tories such as former conservative PM John Major.

There are many possible explanations of what moved Johnson to initially support Paterson and the Leadsom amendment. Thus, some sources suggest the PM was simply distracted by the COP26 summit, or gave in to the staunch lobbying in favour of Paterson by Tory grandees like Ian Duncan Smith. Yet, it seems difficult to ignore the parallels between the behaviour of the government and senior Tories in this case and other recent governmental initiatives. Thus, Dominic Raab’s attack on judicial independence and human rights, for instance, seems perfectly in line with what increasingly looks like a plan by the government to not just ‘unchain’ Britain from EU rules, but also liberate the governing elite in the UK from any responsibility and accountability.

In light of this, it is difficult to avoid the conclusion that the Leadsom amendment was a conscious attempt by the PM and senior Tories to weaken the Standards Committee and its head Commissioner Kathryn Stone. Of course, it may be exaggerated to see Johnson’s actions in this case as part of a well-crafted and thoroughly thought-through plan. Rather, it becomes increasingly clear that whenever Johnson has to make a decision his instinct leads him to undermine liberal democracy in order to maintain his grip on power or benefit his allies.

LBC’s James O’Brien in a truly brilliant comment on the Paterson case explained the strength of public backlash by the fact that after 11 months of real existing Brexit, the promise of ‘getting Brexit done’ can no longer be used as a trump card that excuses any level of wrongdoing and corruption in the name of saving the country from the EU – as Business Secretary Kwasi Kwarteng was still trying to do on Thursday morning after the Paterson vote and just hours before Johnson’s U-turn.

It increasingly looks like rather than banking on the promise of getting Brexit done, the government puts all its effort into making sure it comes undone.

Fishing licences row

Regarding the row over fishing rights with France, early in the UK government was still ratcheting up the rhetoric, warning France that it will not ‘roll over’ and Foreign Secretary Liz Truss issuing an ultimatum for France to suspend the threatened retaliatory action. More licences to French fishing boats were eventually issued by Jersey and France did suspend the threatened retorsion measures against UK boats. The pro-Brexit press talked about Liz Truss’s ‘masterstroke’ and a ‘sensational’ climb-down by Macron.
As Chris Grey’s Brexit & Beyond blog this week shows in its usual thorough and nuanced way, the fishing licence row is more complicated than what meets the eye. What does seems clear, however, is that – with all due respect to the fisherman and -women involved – this row over a rather trivial issue in the bigger scheme of things will not have any winners. Rather, it puts an unnecessary strain on UK-French and UK-EU relations and could have considerable implications for international politics and the negotiations over the Northern Ireland Protocol (NIP).

The Northern Ireland Protocol

In terms of the ongoing discussions between the UK and the EU over the NIP, for the first time one gets the impression that the UK government actually has a plan – albeit only a short-term one.

Indeed, it is becoming increasingly clear that the UK government is not just using the threat of triggering Article 16 of the NIP as a negotiation strategy, but is actually preparing to do so after COP26.

Triggering art. 16 does not solve anything of course. As Katy Hayward and David Phinnemore argue, art 16 was designed as a safeguard “to create a temporary breathing space to resolve serious issues arising out of the implementation of an agreement and in such a way that allows that agreement to persist.” Johnson and Frost – and the DUP – are of course not interested in seeing the NIP persist. So, all triggering art. 16 will do is require more negotiations with the EU, which of course are already ongoing and not going anywhere and are unlikely to go better in an even more acrimonious atmosphere. So, what is the government’s plan?

According to several observers it involves time travel: The UK government seems to be under the impression that triggering article 16 will allow them to “re-wind the clock” and get the chance to negotiated another Brexit deal. More specifically, the government will let the discussions with the EU over the NIP go nowhere, decry the EU’s lack of flexibility – despite considerable new proposals –, trigger article 16 and hope that this will somehow allow the government to have another go at negotiating a new Brexit deal.

Indeed, the government seems increasingly to be driven by the view that the deal that it did get is not what it wanted.  The Withdrawal Agreement and the TCA that Johnson lauded when he signed it as a ‘have our cake and eat it’ deal is now being portrayed as the basis for the ‘the wrong kind of Brexit’ that the government had no choice but to sign due to mistakes made by Theresa May (in the form of the “Joint Report” of December 2017) and Parliament (in the form of the Benn Act).

The right kind of Brexit that the government wants, of course, is having all the benefits of EU membership, but making none of the contributions; and having all the rights of a member state, but none of the duties that come with it. Needless to say, that outside the Brexiters’ fantasy world, everyone would agree that getting such a deal is an illusion. Most observers seem to agree that triggering art. 16 in the hope of renegotiating an new deal is a massive miscalculation with no chance of success.

This seems to be supported by EU member states’ reaction to the UK’s intransigence. Even rather placatory ones like Belgium openly support strong EU action including suspending the TCA. That will not put off the Johnson-Frost duo who probably see such threats only as a hardball tactic that the EU will not be able to follow through with. Even if it were, the suspension of the TCA seems like a price the government is willing to pay in the hope for a chance to ‘get Brexit done’ a second time.

So, we risk getting trapped in a dystopian Brexit groundhog day where the government continues to pursue the impossible, settles for a deal that it first sells as prove that having your cake and eating it is possible, but when reality kicks in starts blaming external forces for the very same deal, proceeds to renege, undermine, and torpedo it in the hope of having better luck next time.

The economic impact

While the government is busy pursuing its ‘Brexit undone’ strategy, the economic impact of Brexit continues to look grim.

The government finally unveiled the new Shared Prosperity Fund (SPF) which will replace the EU’s structural fund supporting poor areas in April next year. Considered as part of the so-called ‘levelling up’ agenda, it seems increasingly likely that the areas who previously benefitted from EU funding will take a financial hit. Thus, the Welsh government complained that instead of receiving at least £375m annually the announcement seems to confirm that Wales will receive just £46m.

Regarding trade, a recent article published in the Byline Times cites government figures that show a decline in trade with top European trading partners equivalent to £515m a week. These figures need to be treated with caution as they do not clearly distinguish between the impact of Covid and the impact of Brexit and include trade with non-EU member states like Switzerland. Still, there seems to be an increasing acknowledgement by officials and government bodies that the UK will take a hit due to Brexit which the Free Trade Agreements (FTAs) with non-EU partners will do very little to compensate for.

Brexit’s economic impact does not look pretty in other respects either. Ryanair has announced that it considers delisting from the London Stock Exchange to comply with Brexit. Meat producers have started exporting carcasses to Ireland and the Netherlands for processing, before reimporting the meat for sale into the UK. This increases costs for producers and means that pork for instance cannot be labelled as ‘British pork’ after reimporting; but producers see it as the only way to get around the labour shortages in the UK and take advantage of the plentiful workforce in Ireland and the Netherlands.

Given the negative impact of the current post-Brexit arrangement, it is perhaps understandable that the government is doing everything it can to undermine the agreements it has signed with the EU in the hope of rectifying the ‘wrong kind of Brexit’ in a second attempt. The problem, of course, is that triggering art. 16 and risking the suspension of the TCA is hardly the ‘right kind of Brexit.’

BIT 31 October 2021 – On the Path to Self-Destruction

In the shadow of the autumn budget and the preparation for the COP26 climate summit, the past week’s Brexit-related news were dominated by the escalating row with France over fishing rights. In the meantime, as expected, things have been relatively quiet around the Northern Ireland Protocol (NIP). In the past few days, the EU seems to have made its stance on the European Court of Justice (ECJ) issue very explicit by reportedly stating that the ECJ’s role under the NIP was not up for negotiation. This would make it more likely for the UK government to trigger Art. 16 of the protocol that would allow it to partially suspend certain provisions. It is very unlikely that such a move would lead to anything else than a further hardening of the positions on both sides.

There were also rather worrying, although less high-profile news items that suggest that the worse is still to come in terms of Brexit. Importantly, the EU’s grace periods on the ‘rules of origin’ which need to be met for UK products to qualify for tariff-free exported to the EU will end in two months’ time. Most British businesses are reportedly not ready for the change, which could have a major impact on UK exports. Similarly, the slow return to some kind of normality as the pandemic is waning in many European countries – although not in the UK -, means that other Brexit-induced problems that we have largely been spared so far, are starting to rear their ugly heads. These include the problems that touring artists and musicians are facing.

So, everything suggests that we have not seen the worst of Brexit yet. Indeed, the Office for Budget Responsibility (OBR) now expects the long-term impact of Brexit on GDP growth to be around twice as bad as the impact of the pandemic. All this is happening in front of the backdrop of a government that increasingly looks like a typical populist government that is stuck in its ideology and unable to develop any coherent strategy.

The (painful) return of live music

Now that live concerts and festivals are back on, voices from the music industry are growing stronger, warning about the catastrophic impact that the new post-Brexit rules for touring musicians have on the industry. A recent EU-UK Forum event on the impact of Brexit on the cultural industry illustrated that in this respect the devil truly is in the detail. Some of the issues that make UK artists’ life difficult include the cost of visas (in excess of £180 per performer in Spain for instance), the fact that value added tax (VAT) has to be accounted for in each single country where merchandise is sold rather than just once for a multi-country tour, but also much more subtle issues such as the fact that transporting across international borders instruments that contain ivory requires special certificates. Another issue is that while the Trade and Cooperation Agreement (TCA) does not cover services and hence the music industry, the rules about road transport still apply. Here, the TCA does not distinguish between moving someone else’s goods as a haulier and moving goods on one’s own account. That means that the cabotage rules apply to musicians touring the EU in their own van with their own instruments. The cabotage rules – recently relaxed in the UK in order to address the lorry driver shortage – imply that the number of unloads in the EU is limited to three in ten days, after which the truck has to return to the UK before being allowed to re-enter the EU. Besides the environmental impact of such a policy, it adds to the costs of tours.

Many of these issues certainly are the result of the Johnson government’s reckless approach to exiting the EU without a plan and at any cost. In a message to a panel on the impact of Brexit on the music industry organised this week by West Country Bylines composer Howard Goodall called the omission of services from the TCA ‘not only […] an act of gross negligence, it was an act of economic madness for the UK’ that does enormous damage ‘to the livelihoods of the many, many thousands of people working in the creative industries.’

However, not all these issues can be attributed to negligence, recklessness, or lack of interest in details. Mark Pemberton, Director of the Association of British Orchestras, speaking at the EU-UK Forum event, underscored that on the cabotage rules, the UK side had been aware of the problem during the negotiations of the TCA and had asked for a different rule. Yet, that request was refused by the EU. No doubt, Brexiters will see that as EU ‘punishment.’ Yet, the fact is that the UK has chosen to break free from the EU and enter the post-Brexit world in which – as Chris Grey aptly puts it – “the currency is relative power.” Outside of the legal order of the EU, the UK negotiates with the bloc and its members states in the space of international politics where everything is political and hence subject to differential power relations and ultimately force. And that brings us to the fishery row with France.

The shape of things to come: Fishing rights and new British vulnerabilities

The row over fishing licences for French boats that want to fish in UK waters is interesting in many respects. For one, it illustrates that Brexit and all the problems it brings with it are not just problems that opposes the UK to the EU, but that potentially opposes the UK to each one of the member states as well. Indeed, in the case of fishing licences, the conflict is partly spurred by France’s internal political logic. With a tight presidential election contest looming next year, President Macron will be wary to show that he supports French fishermen who have been tempted to vote for far-right challengers of the President in the past. In this context, the escalation of the situation is not too surprising. Still, the very openly confrontational language used on both sides does seem unusual. Thus, the French Secretary of State for European Affairs Clément Beaune stated that “[n]ow we need to speak the language of force because, unfortunately, that seems to be the only thing this British Government understands.” Similarly, French Minister of the Sea Annick Girardin characterised the situation [FR] as ‘not war, but a battle.’ Perhaps this was meant as a conciliatory note, but even just being in a battle with your neighbour sounds bad enough. The UK government in turn signalled its readiness for a tit-for-that approach that may be ensuing, with George Eustice saying ‘two can play at that game.’

Another interesting aspect of the row, is the contrast between the confrontational language used by top politicians on both sides and what RTE’s Tony Connelly reported to be a ‘very technical, non-political, non-controversial exchange of information’ between French and UK officials in the EU-UK Specialised Committee for fisheries set up under the TCA. This contrast illustrates a point that for our, post-war generation may not seem of much importance, but is arguably one of the EU’s greatest achievements. Namely, to pacify the interactions between European countries in various areas by making them questions of technicalities rather than leaving them in the realm of politics where they become questions tied in with national identity, pride, and power.

Of course, that function or effect of the EU is also one of the most widely-shared critiques – both on the left and the right – of ‘Brussels’ as a huge technocratic machine that somehow usurps democratic power by subtracting important issues of daily life from direct democratic scrutiny and subjecting it to technocratic governance instead. That is to some extent a fair and understandable criticism. But the fishery row precisely provides an example that ‘technocratising’ and subtracting certain questions from the political realm is not always a bad thing. One of the great benefits of bureaucratisation is precisely to take the passion and emotion out of important issues and thus subject them to more rational policy-making. Brexit has moved these issues back into the realm of politics, which implies that at every turn the political logic may dominate rational policy-making. In that respect, Clément’s statement that force is the only language the UK government understands is shocking, but spot on.

Finally, the fisheries row also reveals the position the UK has manoeuvred itself into. Brexit was meant to be a great liberation. Instead, as the French reaction shows, the UK has become vulnerable and exposed to retaliation measures from its neighbours. Indeed, what is remarkable about the list of retaliatory measures set out by the French government is that some of them are actually nothing more than strictly enforcing the customs checks that have been agreed in the TCA. In other words, the post-Brexit arrangement that the UK has signed up to provides the EU and its member states with new leverage and power over the UK. That was inevitable and a simple fact of leaving the Single Market and not a result of the fact that the TCA is a suboptimal agreement for the UK. But the fact is that ‘taking back control’ seems to have conferred new means of control to the UK’s neighbours.

Of course Johnson threatens to retaliate – but just like you cannot defeat gravity, so there is no denying that any ‘trade war’ between the UK and the EU will damage the UK far more than the members of the much larger Single Market. The UK’s vulnerability will further increase with the entry into force of the full range of export rules on January 1st, 2022.

The Hugo Chavez path to self-destruction

Given that dark Brexit clouds are gathering once again, it is crucial to understand what the UK government is seeking to achieve. We are closing in on two years of Johnson government, but it remains difficult to understand what that is. This is partly due to the fact that there are no consistent policies in any area, as Chris Grey convincingly argued this week. The lack of a consistent policy does not concern just Brexit-related issues, but virtually every policy area. For instance, the Commons’ decision to let water companies dump raw sewage into rivers and the sea at a time when the government portrays itself as a world leader of the green transition ahead of the COP26 summit perfectly illustrates the lack of coherence. Moreover, once again, the government ultimately had to make a U-turn on the issue in face of the public backlash. The image of the out-of-control shopping trolley smashing into aisles left, right, and centre springs to mind once again.

It is not just inconsistent individual policies the government is adopting that leave one puzzling though. It is not easy to figure out what the ultimate goal – if any –  the UK government’s actions (to avoid the term strategy) are meant to achieve. Many attempts at explaining the government’s behaviour try to rationalise the government’s actions by identifying some overarching goal. Thus, Chris Grey has repeatedly advanced the mad-man strategy whereby the government wants ‘the other side’ to believe that it will not shy away from even the most extreme and harmful course of action in order to get what it asks for. Similarly, I have repeatedly referred to the ‘chaos theory of Brexit’ which surmises that the government’s actions can be understood as a strategy to inflict maximum damage in the believe that weakening the EU is somehow good for the UK. One reader of my blog commented that a simpler explanation is that this government only has one goal, which is to remain in power. That is another plausible explanation, but it does not sit comfortably with some of the most self-destructive and harmful actions the government has undertaken. Thus, rising living costs due to the stubborn insistence on self-harming immigration rules that induce labour shortages, cuts to welfare spending, and sacrificing farmers’ livelihoods to be able to claim a rare ‘Brexit dividend’ by signing reckless trade deals are hardly conducive to achieving that mid-term, selfish goal.

So, there must be a more fundamental explanation of the behaviours and actions we observe that does not have to rely on the assumption that there is some sort of goal or ultimate strategy. It may be hard to believe that Johnson and his government actually believe in anything other than their own interests. As such, the most likely behaviour we would expect from the government is that of cynical opportunism – and we certainly have plenty of examples of that sort of behaviour by Johnson and his fellow Brexiters. Yet, there may be another layer to it that is of the order of deep convictions and values. And this may be what makes this government particularly dangerous for the country.

I have repeatedly pointed out the parallels between the UK government’s policies and Victor Orbàn’s illiberal or post-liberal transformation of Hungary. There is one important difference between Johnson and Orbàn, however. Namely, Orbàn has a coherent and quite successful industrial strategy. For my research project, we interview German business leaders working in Hungary, who often tell us that for a company that is active in the right sector (i.e. a sector that does not threaten Orban’s interests or his nationalist strategy), working with the Orbàn government is a very smooth and beneficial experience. There is a clear strategy that has allowed the regime to attract a lot of foreign direct investment to the country and thus provides jobs. Orbàn does enrich himself and people close to him, but in parallel there seems to be a genuine concern and strategy for the economic development of the country. It is hard to detect any similar concern for the common good in the actions of the Johnson government. The haphazard, bombastic, three-word-slogan driven policies hardly amount to an industrial strategy.

The only consistent trait of the Johnson government’s behaviours is the agonistic and confrontational understanding of politics that underlies everything it does. Domestically, it is the ‘real,’ ‘little,’ ‘authentic’ people against the ‘woke,’ ‘intellectuals,’ or ‘urban elites.’ Internationally, it’s Britannia against the EU, the Anglosphere against China etc. Partly this may be a strategy that helps to explain in simple terms to core voters what Johnson stands for (the ‘us’). However, I increasingly feel attributing too much strategic intent to this government may be giving it too much credit. The ‚us v. them’ approach may not be a carefully calculated electoral strategy, but more just an instinct. It may not be a means to an end, but simply the reflection on Johnson’s and other Brexiters’ worldview. They see the world as a neat opposition of black and white (in some cases literally), good and bad, in and out, us and them. This Manichean world view leaves no room for compromise and no need for reasoned public discussion, because there are only two sides to the coin and these sides are established and immutable. There is no need for expertise either, because ‘the real people’ intuitively know through their ‘common sense’ what is right. There is no need to listen to the ‘other’ who is irredeemably ‘not one of us.’

It is this worldview that makes the Johnson government not so much resemble Orbàn’s Hungary (although Orbàn does adhere to some of these views too), but more the suicide mission that Hugo Chavez embarked Venezuela on. Indeed, experts of left-wing populism in Latin America have shown that a key feature of that type of populism is a fundamentally and irredeemably conflict-centred view of politics. This view sees the political process not as one of reasoned argumentation with a view to solve problems or find agreement or compromises amongst a multitude of legitimate interests and preferences in society. Rather, politics is about establishing political distinctions between friends and enemies in order to unify and reaffirm popular demands against the dominance of elites. It is by ‘affirming difference and separating actors, [that] political identities come into being.’ Worryingly, this approach to politics that necessarily leads to division and strive is not only characteristic of left-wing populists like Hugo Chavez, but has close affinities – albeit with inverted signs – with the theories of right-wing thinker and Nazi-jurist Carl Schmitt.

Concretely, in the case of the Johnson government, this worldview has two consequences: Firstly, it leads to a very high pain barrier: Given the high stake of the battle between the absolute good and the absolute evil, adherents to this ideology are willing to sacrifice a great deal. An illustration of this came this week in the form of Environment Secretary George Eustice’s claim that he was “quite happy to live with the consequences” of Brexit after the Office for Budget Responsibility (OBR) forecast that the economic impact of Brexit would be double that of the pandemic. Of course, one can legitimately argue that Eustice is not the one who will be struggling paying their bills, finding a job, putting food on the table as a result of the Brexit-induced economic decline. But I think there is a more fundamental truth in what he said, which is precisely that we are engaged in an eternal battle that – like any war – requires sacrifices.

The other, consequence is that any political interaction and any international negotiation necessarily has to have a winner and a loser. Compromise and ‘meeting in the middle,’ do not exist in the black-and-white world of absolutes. If you win, I lose. Therefore, the only reasonable stance to take in a negotiation is to ask for everything. Not in order to get as much as possible after negotiation and compromise, but because it is the only thing that makes sense.

In his message to the West Country Bylines panel, Sir Howard Goodall asked: ‘What kind of person goes into politics with this grim, two-fingers-to-the-neighbours gesture as their legacy?’ The answer is the ideologically blinded, Manichean populists that currently occupy the highest spheres of the Tory party and of British politics.

This interpretation implies that the Johnson government’s approach is not some sort of elaborate strategy that eventually can be changed into something more conciliatory. Rather it is the only game in town as long as this government is in power. Or, as Emma de Souza writes in the Irish Times, as long as Johnson and his fellow Brexiters are in power, there will be a ‘forever war with the EU.’

Brexit has moved our relationships with our neighbours back into the realm of international politics where problems are ultimately solved based on power and (threat of) force. In that realm realism and pragmatism are key. It does not look like this government is capable of providing that.

A rude awakening is still awaiting many Brexiters who dream of Global Britain, but will have to come to terms with the reality of power relations in today’s global economy. The writing is on the wall both in terms of the NIP, fishing rights, and yet more border disruptions to come. This will potentiall be painful, but it increasingly looks like a rude awakening is the only thing that can move the country away from the Hugo Chavez path to self-destruction that it has embarked on.

Brexit Impact Tracker 23 October 2021 – Moving on…From what and where to?

This has been a quite normal week in Brexit news terms, in the sense that it was characterised by a steady stream of news of mostly low-level impacts of Brexit in all sorts of areas, that cumulatively will still fundamentally transform the British economy, politics, and society. For instance, there are signs that the relative limited impact Brexit has had on jobs in the City of London – which has been triumphantly proclaimed by the pro-Brexit media as proof that ‘Project Fear’ was wrong – may not be the end of the story. The Financial Times reports that the ECB is now starting to pushe UK-based banks to relocate more staff to the offices they set up inside the EU after Brexit.

Remainers and Rejoiners to face reality

On the other hand, there were also the now customary calls from Brexiters and people resigned to Brexit because they are ‘truly sick of the subject’ telling us (Rejoiners strictly speaking, but as a Remainer I feel targeted) that we should ‘face reality’ and ‘move on.’ That’s an interesting proposition, because it is not clear to me what we can move on from and what we will move on to.

What is that reality we need to face? The reality is that Brexit is not going to go away and that it will never be ‘over’ or ‘done.’ Brexit is not an event, it is a permanent process. A state of permanent negotiations with the EU and its member states in all areas that were previously regulated by EU law.

Of course, the negotiations do not have to take place in an atmosphere of aggressive nationalist rhetoric, lack of realism, and bad faith. And alternatives to membership – such as joining the EEA or joining the single market in some other way – would mean that negotiations would be less permanent. Certain things would be settled in a more extensive agreement than the Trade and Cooperation Agreement (TCA). Also, moving on from the spiteful rhetoric that brought us the Brexit vote and then Brexit itself is certainly important to start building a more positive and cooperative relationship with the EU. But it is hardly the Remainers’ (or Rejoiners’) fault that the UK-EU relationship is currently moving in the opposite direction.

The claim that we all need to move on from Brexit is a cheap way for Leavers and Brexiters to deflect any criticism of ‘actually existing Brexit’ (‘Yes we messed up. But let’s talk about something else now!’). The reality is that advocating re-joining is at least a proposition that would solve many of the problems Britain is currently facing. The Brexiters’ plan for post-Brexit Britain, on the other hand, still seems to cause more than it solves.

I personally do not think re-joining is a realistic solution for at least a decade. So, in the short- medium term, the focus should be on other things. But the fact that Remainers/Rejoiners are accused of preventing the country from moving forward is rich. If anyone needs to move on from Brexit, it is the Brexiters.

Brexit: Milking it or moving on?

For Boris Johnson, Brexit has never been a goal in itself, but rather a means to an end. Namely, his life-long goal of becoming Prime Minister. His strategy of sitting on the fence on Brexit, before choosing which side to join during the referendum campaign illustrates that to perfection. Johnson did not think Brexit was good for the country. He thought it will help his political career. He will milk it as long as it is electorally interesting to do so, but then will want to move on to other issues that will allow him to posture in front of cameras pretending to be a great statesman or a ‘man of the people.’

The point where Brexit is becoming an electoral liability, rather than an instrument for electoral success, may be drawing closer. A recent Ipsos-Mori poll shows that half of the people surveyed think that leaving the EU is having a negative impact on the UK. That is a remarkable increase of 7% within a month. It indicates that Brexiter’s best attempts to portray the recent variety of crises as being unrelated to Brexit may not convince everyone. Indeed, even 24% of Leave voters share the opinion that Brexit is having a negative impact on the country.

What is interesting though, is that if people are asked how they would vote in a re-run of the Brexit referendum of 2016, the vast majority states that they would vote the exact same way. This seems contradictory at first glance but indicates the persistent divide between reality and ideology. The two different poll results suggest that people who now feel Brexit did not deliver the promised positive outcomes, still consider it was the right decision. The key to interpreting this contradictory results may be that these people feel like they have ‘taken back control’ and – just like our fish – are now ‘better and happier for it’ regardless of material consequences.

Yet, as Brexit-induced problems continue to pile up and Brexit dividends remain evasive, people may remain pro-Brexit in principle or in theory, but they will start blaming the government for having made a mess of it.

The PM is hence in a tricky position where keeping the Brexit divide alive can provide him with a welcome target for his scapegoating strategy of blaming everything that’s not going well on the EU. On this blog, I have often argued that keeping relationships with the EU tense helps Johnson using his jingoistic politics of symbols to garner support amongst the pro-Brexit English public.

If Brexit reality gets too dire, this strategy may stand in the way of solving the actually existing Brexit-related problems, of which there are many: Most obvious is the unresolved situation of the Irish Sea border, but also visa- and immigration rules (which according to the director of the Road Haulage Association currently are ‘designed to fail’), still to-be-introduced additional border checks, fishing rights, an agreement on trade in services, visa rules for touring musicians etc. etc. etc.

Without any clear Brexit dividends on the horizon and a large number of Brexit wounds, eventually Johnson will have to start addressing these real-world issues. As the need for realism becomes increasingly urgent, Johnson will be dragged off his home turf of symbolism onto the turf of competent problem-solving. It is an open question how the public will judge his performance on that criterion.

Good news – muted reactions

Another sign that Brexit may lose some of its political potential is the remarkable change the way pro-Brexit media outlets report on positive news.

For instance, Ford’s announcement this week to invest £230m in its Merseyside plant in Halewood was hardly picked up by the pro-Brexit press. The Sun did not mention Brexit in its report on the announcement and the Express only mentioned in the sub-heading that Ford ‘has shown faith in post-Brexit Britain.’ This contrasts quite starkly with the typical headlines that would have accompanied such an announcement a few months ago when undoubtedly a big, fat headline would have read ‘Project Fear smashed!’ or something to that effect.

The recent government decision to rename the planned ‘Festival of Brexit’ into Unboxed, further lends credence to the hypothesis that Brexiters are slowly losing confidence. Brexit ultras like ERG deputy chair David Jones – who sees Brexit as “rebirth of the UK as an independent nation” – were of course outraged by the decision. But outside the circle of Brexit ultras, calls to celebrate Brexit may sound increasingly hollow.

The return of FTAs: The UK-NZ trade deal

The hypothesis that even amongst pretty staunch Brexiters jubilation about having won the Brexit battle is giving way to the hangover of Brexit reality, seems hence plausible. Another piece of evidence supporting it comes from the announcement of an agreement in principle on – yet another ‘historic’ – trade deal with New Zealand.

During the first months of actually existing Brexit Free Trade Agreements (FTAs) were probably the most important symbol brandished by the tabloid press and the government to illustrate the benefits of the new-found freedom of post-Brexit ‘Global Britain.’ ‘Super Liz’ Truss’s promotion to Foreign Secretary in the recent cabinet reshuffle and her popularity are very closly related to her claim to have concluded 68 FTAs in her time as Trade Secretary.

In the last few months, however, it went a bit quiet around FTAs. Presumably because the low hanging fruits – i.e. the simple roll-over of trade deals that the UK were part of as a EU member – had been reaped and the more ambitious deals promised as Brexit dividends morphed into very underwhelming investment partnerships (with India) or are all but dead in the water (with the USA).

Then this week, the new Trade Secretary Anne-Marie Trevelyan could announce a deal in principle with New Zealand. Interestingly, though, this time round the announcement did not make many of the front pages. Perhaps this is due to the fact that UK-NZ trade really is small beer even by the government’s own standards: A report by the Department for International Trade estimates the impact of the deal to be virtually negligible (of the order of +/- 0.01% of GDP). A finding that the Mirror brilliantly summarises as “New Zealand trade deal could boost UK economy by between 0.01% and minus 0.01%.”

The relative silence around the agreement could also be due to the fact that it comes shortly after another ‘Brexit dividend’ is failing to materialise, namely the FTA with Australia. Despite an agreement in principle with Australia back in June, negotiations about the final legal text seem to progress more slowly than expected. The Australian trade minister Dan Tehan left the UK last week having failed to secure a deal. Politico reports that the deal is now likely to be signed only in the summer of 2022.

Still, the government continues its reckless approach to trade deals agreeing to very far-reaching liberalisation – for ideological reasons or to prove that ‘Brexit works’ – without any regard for UK farmers or businesses.

In the NZ case, the best Brits can hope for is to get a bottle of NZ Sauvignon blanc 20p cheaper. But that diffuse benefit for consumers is offset by very concentrated losses for UK farmers. Indeed, beef and sheep farmers will face – in 10 and 15 years’ time respectively – stiff, tariff-free competition from a country producing at a larger scale and to lower standards than Britain. Even the DIT’s own report expects a decrease in the output and employment in farming in the UK as a result of a NZ tariff-free deal.

Unsurprisingly, farmers especially in Scottland and Wales are worried. The Scottish Herald quotes SNP MP Deidre Brock’s as pointing out the fundamental contradiction in the government’s talk about “high food and environmental standards” while ignoring “that farmers will be forced to reduce those standards when they're competing against tariff-free goods produced to lower standards from countries like Australia, New Zealand and now, as these trade deals have set a precedent, all the other countries to follow.”  Equally telling is Trevelyan’s response to challenges in the Commons, which amounts to little more than hot – in fact lukewarm – air: "I am very confident that the deal we have struck will provide the opportunity for our wonderful food producers to continue to sell their goods across the world and, as we make more trade deals, creating new markets for them also."

The NZ trade agreement – just like the Australia one if it comes off – is another example where Brexiters’ overconfidence and hubris leads them to create trade terms that benefit the other party more than Britain. Rather than a symbol of Brexit dividends, the NZ FTA is the perfect symbol of the self-harm Brexit has meant all along.

That’s it for the ‘good’ news. In less positive news, the relationship with countries closer to home continue to deteriorate. Most importantly, the one with France and possibly soon with Spain.

Permanent Opportunism: Strains on the Franco-British (and Spanish) relationship

In a witty comment for euradio, my colleague Prof. Helen Drake summarises the current dire state of Franco-British relationship. Her comment underscores that the relationship has soured to the point where the usual diplomatic restraint on both sides does not apply anymore. A French minister accusing the UK of ‘permanent opportunism’ following the signing of the Aukus agreement goes some way in showing just how tense relationships are. French newspapers doubt Johnson’s good faith and consider the UK government’s demands over the NIP inacceptable. In the meantime, tensions continue to mount over the rights of French fishermen to fish in British waters. The spat over fishing rights start impacting other aspects of the UK-EU relationships. Thus, French politicians have threatened to veto UK access to EU research programmes if the fishing rights issue is not solved.

Tensions are also growing with Spain. The issues over Gibraltar has been somewhat diffused when EU members states decided that the border with Spain should be policed by members of the EU-wide Frontex force rather than the Spanish police. Yet, the pro-Brexit press continues to pile pressure on the Johnson government regarding visas and residence permits for UK ‘expats’ (i.e. immigrants) in Spain who own property there. UK citizens who bought a house in Spain prior to Brexit without having a residence permit now face a situation where they are only allowed to reside in the country for 90 days in any 180 days period.

It is beyond ironic to see the Express whining about Brexit having deprived ‘Britons’ of their fundamental rights. It is even more ironic – or rather cynical – to see them invoke the European Convention on Human Rights (ECHR) to protect the interest of Brits living in Spain, when the ECHR has been a long-term target of Brexiteers, Tories and is now under serious threat from the new Justice Secretary Dominic Raab.

Moving on from Brexit: The next frontier for the Tory’s postliberal project

In some important respects Brexiters have moved on from Brexit. While Brexit-induced issues will continue to keep the government busy for a long time, they have now started to set their its sight on other political goals. Having ‘unchained Britannia’ from the bonds of the EU, the goal now is to break the domestic shackles by reforming the UK’s legal order. A few months ago, I wrote about the worrying similarities between some of Johnson’s policies and those of Hungary’s Victor Orbàn. At the time, I still had some doubts about the real motives and goals of the Johnson government. Sadly, recent developments have made it clear that the illiberal Hungary path, is indeed what the Johnson government has in mind for the UK. Most strikingly, in a Sunday Telegraph interview, the new Justice Secretary Dominic Raab set out his plans for a judicial reform. While Johnson and Frost have launched an attack of the European Court of Justice (ECJ) oversight of the NIP, the Justice Secretary has moved on to the next target: the European Court of Human Rights in Strasbourg, which interprets the ECHR.

Beyond Raab’s promise to stop the Strasbourg Court from ‘dictating us’ and from judging ‘British soldiers,’  there is also a domestic agenda. The insightful comments by professor Mark Elliott reveal that Raab’s attack does not stop at foreign courts, but also questions the legitimacy of domestic ones. Most worryingly, the judicial review reform that Raab hinted at includes the introduction of a mechanism that would essentially allow Parliament to ‘correct’ politically inconvenient court rulings. This plan has striking similarities with the Polish disciplinary chamber of the Supreme Court that has the power to discipline judges whose rulings were considered politically problematic by the government.

Under the pressure of the EU, the Polish government has now agreed to eliminate that disciplinary chamber. In the UK, there is no counter power left that could prevent the government from going ahead with its plans. As professor Elliott points out in a video recording, while the official justification of these reforms is ‘Parliamentary sovereignty,’ a much more likely outcome – and goal – of the reforms is to enhance executive supremacy – moving us closer still to an elective authoritarian system with very few checks and balances.

The decline of liberal democratic culture

There is little hope that people will be outraged by such attacks on the country’s constitutional order. Indeed, people seem to have gotten used to a government that disrespects any principles of good governance in the name of sovereignty. A rather shocking piece of news this week was the decision by the Labour Party to tune down its attacks on the government’s use of levelling up funds to secure electoral support in the North of England, because they realise that voters are fine with it. There are scientific studies that show that the Towns Fund is being used by the Tory government to channel public funds to enhance electoral support in certain parts of Northern England. In other words, the governing party uses the control it has over taxpayers’ money to advance the party’s private interests. You cannot get much closer to the definition of corruption as abuse of public office for private gain. Equally shocking are the defences of such behaviour one can read in the press. Will Tanner, director of a right-wing think tank, for instance, defended the government by simply stating that “I don’t think the way in which the government is distributing these funds suffers from pork barrel politics.” The fact is that there is actual scientific evidence to the contrary. But in post-truth Brexit, the unfounded opinion of a think tank director matters as much – or more – than solid scientific evidence.

The normalisation of corruption and the spread of post-truth arguments in the press signals a decline of political culture, which will prove difficult to reverse even after the Johnson government is gone. Or in Chris Grey’s words Brexit has bequeathed us “a government and a form of governing which are irredeemably dishonest.” The former can be corrected at the next General Election, the latter will haunt us for a long time. That is what will make moving on after Brexit difficult.

Brexit Impact Tracker 16 October 2021 – Northern Ireland Protocol: One move away from checkmate…and then what?

The Northern Ireland Protocol (NIP) has been the all dominating Brexit-related topic this week. The key development was the EU Commission’s response to the UK government’s command paper published this summer and proposing far-reaching changes to the NIP.

Some experts consider that the EU is overselling the extent of the concessions, others point out the lack of detail, still others considering the EU has ‘caved.’ There is hence some disagreement about the significance of the proposals. Yet, most observers do seem to consider the proposal to constitute pretty major concessions by the EU to solve the problems by removing a large part of the regulatory and customs check between Great Britain and Northern Ireland.

Many commentators have provided excellent overviews of the proposals (e.g. the Institute for Government’s summary and Chris Grey‘s most useful list of Brexiter NIP excuses, myths, and lies). There is hence no need to summaries the proposals in any great detail again. In a nutshell, though, the proposals aim to reduce border checks and customs controls notably by reducing – although not removing – the need for checks on goods moving from GB to NI that are destined for NI rather the Republic of Ireland (ROI). To limit the risk that such goods end up inside the EU single market in the absence of extensive border controls, the EU suggests that some conditions need to be met, e.g. the introduction of a ‘UK only’ label for GB goods sold in NI. To me, this seems like a major concession, because it does imply that Great British producers could export food and other goods to NI without the UK having to agree to an alignment of its sanitary and phytosanitary standards (SPS) on EU standards. Indeed, the proposals mean that the EU is moving somewhat closer to the UK’s favoured ‘risk-based approach’ whereby border checks would only apply to goods for which there is a real risk they may enter the single market.

Yet, the UK government’s immediate reaction to the proposals was to reject them as not going far enough and to bring into play a new demand, namely the removal of the European Court of Justice from overseeing the withdrawal agreement (WA) and hence the NIP.

We are now at the beginning of a short period of intensive talks between the EU and the UK based on the proposals the two sides have put on the table. Based on what we have seen this week, it is hard to imagine that they will end well. Indeed, Brexit minster David Frost, who rejected the proposals before they were published, set the tone in a bellicose speech that many found insulting and counter-productive. It seems to me, that we are one move away from ‘checkmate’ and it is the UK which is in the process of checkmating the EU.

Back against the wall: The EU’s limited options

Going into the talks it seems obvious that the UK government is going to ask for more. How can the EU react to these additional claims? Let’s first look at the new demand to remove ECJ oversight of the WA. How likely is the EU to concede on this issue?

ECJ oversight

It is very unlikely that the EU will concede on the role of the ECJ under the NIP. Indeed, the ECJ’s supremacy in interpreting EU law is increasingly becoming one of the EU’s most stubbornly defended – but also disputed – fundamental principles. A recent ruling by the Polish supreme court, found that the Treaty of the European Union (TEU) is incompatible with the Polish Constitution, putting ‘effectively […] an end to primacy of EU law in Poland.’ Some observers have considered this ruling as equivalent to de facto triggering of Art. 50, although others contradict that interpretation. In parallel, this week also saw the ECJ deliberate a legal challenge brought by Hungary and Poland against the so called ‘Rule of Law mechanism,’ which makes payment of EU subsidies conditional on the respect of the Rule of Law. The EU’s fundamental legal order – and the status of the ECJ – are hence facing very serious challenges from within, which makes it even less likely for the EU to compromise on this issue in its talks with the UK.

That said, the question of supremacy of EU law is giving the EU considerable headache not just regarding Northern Ireland and some of its member states, but also with other neighbours such as Switzerland. Coming up with a creative solution that reassures the EU of the supremacy of ECJ jurisprudence over EU law, while accommodating the worries of countries that are not willing to accept it, could be in the EU’s interest too.

What could such a creative solution look like?  Several commentators this week have referred to arrangements in other international agreements between the EU and third countries that essentially consist in making the ECJ disappear into the background, rather than removing it completely. Katya Adler, for instance referred to the Swiss model, while the Financial Times mentioned the EU-Ukraine Association Agreement.

The Swiss model

Switzerland’s close relationship with the EU is the result of a more than 100 sectoral, ‘bilateral agreements.’ Dispute settlement under these agreements is subject to a two-pilar system based on the national courts in each country as one pillar and so-called ‘joint committees [GER]’ as a second pillar. Yet, this dispute settlement procedure is a diplomatic and political not a legal one. It can only settle disputes in amicable manner, and they are not legally binding on the contracting partners. Nevertheless, some legal experts [GER] consider this political and diplomatic procedure as equivalent to legal dispute settlement, because it is subject to the principle of ‘sincere cooperation’ stated in art. 4 §3 of the Treaty of the EU (TEU).

The reason why the EU accepts this solution, however, is because it only applies to those agreements that are international in nature and not to those which imply supranational integration. The agreements on civil aviation and membership of Schengen, are of the latter type. Here the application of ECJ jurisprudence in Switzerland is potentially more direct. However, this becomes rarely obvious to Swiss citizens due to another ‘trick:’ The Swiss Federal Tribunal – Switzerland’s supreme court – applies a doctrine whereby it proactively interprets EU law in accordance with ECJ jurisprudence. This approach means that very few disputes emerge to begin with, which means ECJ jurisprudence acts mostly in the background.

Even so, in the past decade the EU has made it clear that it is not willing to accept this type of arbitration-based dispute settlement any longer without the ECJ having the ultimate oversight over the agreements. From 2013 Switzerland and the EU were therefore negotiating an institutional framework agreement that was meant to settle these governance issues. The issue of ECJ oversight remained one of the key sticking points, which led the Swiss government to reject the draft framework agreement earlier this year and end the negotiations after eight years. The future of the bilateral way is hence uncertain to an important extent precisely because the EU insist on a legal dispute settlement procedure not a political one.

The Ukrainian model

Another model that has been mentioned by some observers as a possible alternative to ECJ oversight is the Ukrainian model: The association agreement between the EU and Ukraine contains a similar dispute settlement procedure to the Swiss ‘joint committees’ in the form of the EU-Ukraine Association Council. However, if an amicable agreement cannot be reached in the council, the agreement provides an additional arbitration procedure. The two parties can establish an ‘arbitration panel’ with three arbitrators chosen from a list of 15. Each party can nominate five independent arbitrators and the two parties together choose another five who cannot be nationals of either Ukraine or an EU member state. The chair of the panel is chosen from the latter five. The composition of the panel is decided consensually or by lot if the parties cannot agree. The three arbitrators settle the dispute – either consensually or by majority vote –, and their decision is binding on both parties. This procedure therefore goes beyond a diplomatic-political dispute settlement procedure.

However, here too the EU accepts this solution without ECJ involvement only as long as the dispute does not involve interpretation of EU law. In the latter case, the arbitration panel is obliged to submit the matter to the ECJ, which remains the ultimate arbiter of EU law.

In short, it is unlikely that either of these solutions would satisfy the UK government. Conversely, it seems clear that the EU will not accept any other instance than the ECJ as ultimate instance in the interpretation of EU law.

The only hope for the talks to go anywhere, would hence seem to be that the EU manages to persuade the UK that the issue of ECJ oversight of the WA should be dropped. It is not certain that this will happen. As David Allan Green put it "The European Court of Justice is a sham issue – it is a contrived, bad faith attempt to find something – anything – to open up the protocol. If the ECJ issue is indeed just an excuse to torpedo the NIP rather than an actual concern for the UK government, there is little hope the talks will get past this stage. Yet, there may be some hope. Lord Frost did signal after his Lisbon speech that the ECJ issue was not a red line.

Side-stepping the ECJ issue and conceding more on border checks

If the ECJ issue can be taken of the table, the EU would probably need to concede more on other issues to get the UK to sign up to any proposals. A little more leeway exists in terms of further reducing border checks. Here, the EU’s proposals may hint at an increased openness to a solution that comes close to a ‘trusted trader scheme’, that some UK food and retail groups have advocated for. Under such a scheme, food businesses’ supply chains would be certified according to EU standards. Accredited traders could then self-certify rather than providing health certificates for each shipment, further reducing non-tariff trade barriers. The EU’s proposals this week regarding packaging and labelling of goods for sale in NI only, may indicate that there is some room here to think further in that direction and combine the two approaches.

Yet, even such an arrangement is based on the assumption that the UK government is interested in finding a solution. Brexiters clearly feel that their hardball tactics are working and are hence unlikely to accept anything short of their maximal demands. Even if the UK government were inclined to think about solving the concrete issues around trade, the DUP has made it clear that the NIP is not about frictionless trade, but about constitutional issues regarding the place of NI in the Union. As such, it is unlikely that they will accept even the faintest whiff of a border in the Irish Sea. Hardcore Brexiters inside and outside the government will use this as an excuse to continue opposing any solution short of abolishing the NIP. The not very surprising, but still rather shocking, revelations by Dominic Cummings and Ian Paisley jr that the Johnson government never intended to adhere to the protocol, support this view. Therefore, however much (or little) the EU is ready to further concede, it now seems all but certain that the UK’s next move will be to trigger art. 16. In which case, it is checkmate for the NIP.

 Break down of talks and triggering of article 16

What can the EU do if the UK does go ahead and invokes article 16 to partially suspend the NIP, or simply continuous to refuse the implementation of the protocol?

The widely expected reaction is for the EU to initiate (or rather restart) legal action against the UK and impose punitive tariffs on products moving from the UK to the EU. Indeed, EU members states reportedly have started lobbying the Commission to develop a tough retaliation strategy, including not just legal action and tariffs, but also rescinding the Trade and Cooperation Agreement (TCA) and even threats of cutting energy supply to the UK (We should pause for a moment and let this sink in: Due to Brexit, the relationship between the UK and its European neighbours has soured so much that there is now serious talk of cutting off the UK’s energy supply! An important time, perhaps, to remember that the initially impetus for the European integration project was to secure peace on the continent).

What would such a robust EU response achieve? Legal action will take months or even years and therefore not provide any solutions on the ground in the short term. Punitive tariffs, on the other hand, will hurt UK exporters – and possibly EU customers and importers –, but it is difficult to imagine that either legal action or tariffs would achieve their goal of forcing the UK to implement the NIP. This is a government that defines international diplomacy as a zero-sum game and compromise as a sign of weakness. A tough reaction by the EU would also spur nationalistic tendencies in Britain and would encourage the UK government to ride that wave rather than backing down.

More practically, tariffs and legal action alone would simply not stop goods from entering the EU single market unchecked via the Irish Sea border. It is unlikely that the EU could accept such a situation. This is partly as a matter of principle, but partly due to a genuine worry that sub-standard goods might be sold inside the EU single market once the UK starts diverging from EU standards (e.g. through the agreement in principle on a trade deal with Australia). The new EU regulation on market surveillance (see below) strongly suggests that the EU is indeed very much concerned about such matters.

Therefore, if the UK continuous to refuse to carry out the regulatory and customs checks it agreed to, there is only one thing the EU can do: carrying them out itself. Unless some miracle technological solution can be found (which Brexiters dream of), there are two places where the EU’s own customs checks can take place: First, the border between the Republic of Ireland (ROI) and Northern Ireland; second the border between the ROI and the rest of the EU.

Avoiding the former border was of course the whole point with the NIP and imposing it is considered to be an almost certain return to sectarian violence in NI. It may be what the UK government seeks to achieve, as forcing the EU to impose that land border would certainly be a major victory for Eurosceptics who have been making a living of vilifying the EU. But this option is most certainly not going to be seriously considered.

The other place where checks could be introduced is between the Republic of Ireland and the rest of the EU. This option has been mentioned before, but it would constitute a major betrayal by the EU of one of its member states and could be perceived by the Irish side as an annexation by Britain. Therefore, this option is equally unviable from the EU perspective.

Market surveillance

If border checks are impossible for the EU to carry out, one alternative could be a recent new tool in the EU’s toolbox, namely market surveillance. The EU’s market surveillance regulation entered into force in July 2021 and considerably increases both the member states’ duties to police product compliance with EU standards and their powers to do so. This tool could open up an additional possibility for the EU on the Island of Ireland. Rather than using border check to police any violation of the single market, it could be policed in supermarkets and at companies south of the NI-ROI border. While this system may be costly and less efficient than proper border controls, it would be a second-best alternative to avoid violations of the single market. Indeed, experts consider increased market surveillance as a likely outcome if the NIP is suspended. Politically, however, this outcome would mean a complete capitulation of the EU.

A ‘Madman'-’ or ‘Chaos Theory’ of Brexit?

The above analysis is based on the assumption that the UK government is hellbent on destroying the NIP rather than making it work. The question whether that assumption is correct.

Chris Grey has advanced the madman theory to explain what is going on: Could it be that Frost pretends to be mad enough to stop from nothing – including pushing the ‘red button’ (i.e. triggering art. 16) – to get what he wants? This is a possible explanation. The problem, of course is that – as Prof. Grey notes – none knows if Frost and Johnson’s intransigent and extremist positions are really just part of a strategy or whether they are indeed mad – or just immature? - enough to suspend the protocol and thus accept a significant deterioration of relationships with the EU and probably much damage to the UK economy and peace in NI.

There is an alternative explanation to madness though, which is that the damage the madmen in Johnson’s government are threatening the EU with is not a means to an end, but rather the end itself. This is what my chaos theory of Brexit would suggest: Namely, that Brexit has been ‘project chaos’ from the beginning and its goal is simply to inflict as much damage on the EU as possible – even if the UK too gets hurt in the process. If that theory is right, there are dark days ahead of us indeed.

A happy ending?

This is a very sinister outlook on where we are headed. Is there any hope that somehow things may look up soon? To me, the only hope for that to happen would be major political change in the UK. The recent electoral defeat of Czech PM Andrej Babiš has shown that entrenched populists can be defeated and has led to some commentators to hope similar things could happen elsewhere in Europe. However, the UK reality with its first-past-the-post electoral law makes this very unlikely. A possible solution could come from the people in NI themselves. Prof. Chalmers draws a bleak picture as to how the UK government could use the triggering of art. 16 to get people in NI to vote against the NIP during the first democratic consent vote in late 2024. Yet, before then, elections to the NI assembly are scheduled for May 2022, but could take place earlier if the DUP makes true its threat to collapse the Stormont executive if the NIP is not abolished. Such elections could provide a way out of the protracted and politically toxic situation, whether art. 16 is triggered or not.

According to a recent poll for the Belfast Telegraph, Northern Irish opinion is quite evenly split about whether the NIP is appropriate for NI or not and the people of NI are divided over whether border should be in the Irish Sea or on the Island of Ireland. Yet, if given a chance, they may also be inclined to vote for a resolution rather than continuing tensions and uncertainties. Moreover, 56% of respondents consider that the protocol provides unique economic opportunities for NI. Especially with some additional improvements, the NIP has considerable potential to provide many northern Irish businesses with the best of both worlds: frictionless trade with the EU and unfettered access to the UK market. Therefore, people in NI may very well come to support it. Depending on the outcome of the next NI Assembly election – currently the DUP is at a historic low and Sinn Fein likely to become the largest party – the NIP could be saved by popular support.

Lord Frost proclaimed this week that he was a populist who is ‘doing what people want.’ If we take him at his word, perhaps there is hope for a solution to the issues on the Island of Ireland.