Whatever the outcome, Brexit exposes UK’s woeful level of economic and business literacy
Does the government realise this is the beginning of a deadly serious process?
To diverge or not to diverge? That will be the question if Prime Minister Boris Johnson’s Brexit “deal” gets through the UK parliament.
The relief that no deal has probably been avoided should not blind anyone to the fact that this agreement represents a hard Brexit — and is merely a prelude to long and complex negotiations. Johnson’s withdrawal agreement is no more a “deal” than his predecessor Theresa May’s was. MPs will again be asked to support a divorce, without knowing what the settlement will be until after they have left the family home.
Those MPs minded to support the prime minister will therefore have to hope that he knows what he’s doing. If Brexit is to happen, I would rather have Johnson negotiating on the other side of it than Jeremy Corbyn, the Labour leader. But achieving an effective settlement will require a level of expertise that is largely absent from Whitehall and the current cabinet.
Put aside, for a moment, the mind-numbing technicalities of the Irish backstop and whether Northern Ireland has potentially got for itself a better status than Switzerland. Who will staff the joint and specialised committees that were supposed to have been set up long ago to oversee the next phase? Where are the world’s top trade negotiators who should already have been hired to land sector deals? Does the government realise this is the beginning of a deadly serious process?
Johnson must be congratulated for persuading the EU to reopen the terms of the withdrawal agreement and the Irish backstop. But to leave both the customs union and the single market, as he proposes, is to take an enormous gamble with Britain’s future.
The agreement he has struck seems to presage a more distant trading relationship than May negotiated. If the ultimate destination is a Canada-style free trade agreement with the EU, the government’s own analysis suggests that this could reduce GDP by up to 6.7%, and that Britain might lose more in trade frictions with the EU than it would gain in new deals with other countries.
The small print, therefore, looms large. If the past three years have taught us anything, it is that EU solidarity is unshakeable. British ministerial bluster has come up repeatedly against the technocratic implacability of a large trading bloc. Dublin has been stronger than London, possibly for the first time in Anglo-Irish history.
Johnson has climbed down over the level playing field rules that are a prerequisite to the zero-tariff, zero-quota EU-UK free trade deal he hopes to strike. The revised political declaration lists rules to preserve open and fair competition on everything from climate change to state aid.
Ministers are relaxed about matching environmental standards, since they aim to exceed them, and even see them as a source of possible competitive advantage. They have agreed social and employment rules — to win votes from moderate Labour MPs.
Moreover, by agreeing to abide by EU state aid and competition rules from which Corbyn’s Labour party wants to diverge, they can argue that they are curbing the ambitions of any future left-wing government. But this is a far cry from the bonfire of red tape envisaged by the Brexiters.
The fundamental tension remains unresolved: between Brexiters who have lauded the freedom to compete on own terms and business executives in most sectors who want the stability and profitability of alignment. No-one in the car industry, chemicals or aerospace is yearning to diverge from EU rules that ensure frictionless trade and integrated supply chains. No business is rushing to embrace the complexity and cost involved in complying with multiple standards in different jurisdictions. The government’s lack of understanding here is deeply alarming.
The Brexit saga has exposed a shameful level of economic and business illiteracy in British politics. A few top-flight chancellors — Gordon Brown, George Osborne and Philip Hammond — have understood how political decisions affect the profitability and viability of businesses. But they have been a thin veneer. The government’s almost total silence about the services sector — which makes up 80% of the UK economy — is appalling. It needs to explain what its vision is for services, where it wants to diverge, and why.
Johnson understands that every version of Brexit threatens the union. His version of the Northern Ireland backstop will probably lead to the gradual separation of the province from the rest of the UK. I don’t know if he accepts — as some Brexiters privately do — that every version of Brexit will make the UK poorer. But if he is determined to see this through, and end free movement of people, he must up the government’s game.
He should be hiring negotiators with a deep understanding of the realities of trade and investment. He should be launching a bureau ruthlessly dedicated to attracting foreign direct investment and dissuading businesses from moving their operations. He should be revamping the Brexit department so that staff working with different allies sit under the same roof and can make trade-offs explicit. He should be creating a government of all the talents and listening seriously to business.
For a brief moment, Johnson seems to be in a win-win situation. Either he chalks up a victory by getting his deal through parliament, or he can blame MPs for blocking it and call an election he will probably win. But he must stop pretending that we can just “get Brexit done”, and put the kettle on. The real fight has barely started.
• Cavendish, a former head of the Downing Street policy unit, is a Harvard senior fellow.
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