Monday, 10 July 2017

How Did We Get Here?

How did we end up in this mess? I know there was a dreadful referendum where politicians of all stripes lied about the EU.  Certain newspapers have been at it for years and years, whipping up a foul public mood of racism and xenophobia and English exceptionalism. There was also an entire class of people who were never invited to join the shiny post-industrial jamboree.  Apart from arguments about appropriate levels of benefits, there hasn't been a plan for these communities since the 1970s.  Well, they certainly got their own back.  Let's set aside all of that and instead think about how we started out on 24 June, 2016 and ended up in the mess we are in today.  We're about one year in to the process of implementing Brexit so the time is nigh to review the government's performance and see if we can work out what mistakes were made along the way.  Think of it as a kind of report card and it might be more fun than you imagine.


Customs Union


Theresa May committed the UK to a departure from the European Customs Union
as far back as 13th July, 2016.  Without a change of government this is an immutable decision that has never been discussed,  costed or agreed.  Hmm, but surely every decision is costed and debated and agreed?  Welcome to the world of Brexit.  In the world of Brexit decisions are made without any understanding of the institutions involved or the long-lasting consequences or their economic or political costs. As we proceed through today's report card we're going to come to recognise this as a familiar pattern.

What did Theresa May do on 13th July, 2016 that committed to the UK to a departure from the European Customs Union?  Well, she appointed Liam Fox as Minister for International Trade.   There is simply no need for a Minister for International Trade unless the UK leaves the European Customs Union.  As a consequence, Liam Fox's appointment set the UK on a course to leave the Customs Union.  That is a perfectly legitimate policy decision except, of course, that it wasn't a policy decision of any sort at all.  The rational timeline is to announce the policy and then make the necessary appointments to implement the policy.  Brexit logic means that you make the appointment first and then neglect to ever make a policy announcement because nobody in power actually understands the problem at hand.
July 26, 2016: https://www.ft.com/content/e87614da-533a-11e6-befd-2fc0c26b3c60
December 18, 2016: https://www.ft.com/content/f2f8b090-c511-11e6-9043-7e34c07b46ef
Is the UK going to leave the Customs Union?  We all know the answer but let's have a look at the policy statements on this issue, starting at Tory Conference 2016.  There was literally no formal statement on the UK's future relationship with the Customs Union.  Amazingly, Liam Fox signalled that he backed leaving the CU at a fringe meeting.  That's right, despite his appointment being a cast-iron guarantee that the UK plans to leave the Customs Union even Liam Fox still thinks it is an open question.  What does he think his role involves?  Well, he seems to think his role involves changing his mind about Customs Union membership.  Just two months later, in an interview on the Andrew Marr show, he stated that membership was not a binary position and that it was a collective decision still to be made. I can't keep up with this chicanery, can you?  Happily, we have experts on hand who can confirm that FTAs are indeed binary propositions and that to behave otherwise is in breach of WTO rules.

Let's fast forward to the exciting days of December, 2016.  Liam Fox has been in his post for about 5 months and the debate about CU membership rages on within the Tory Party.  No joy there so let's zoom forward a few more weeks into the New Year.  Right, what about Theresa May's Lancaster House speech where she laid out the UK's position on leaving the EU?  Surely we can find clarity somewhere in there.  Think again.  If anything, the position becomes less clear with each reading.  She spluttered on about sectoral deals (more of that later), frictionless trade and associate membership but none of that is a definitive statement on the Customs Union and its membership options.

Can anyone in power answer this logical conundrum?  It's just as well Theresa May called an election because it finally gave her the chance to clear this up once and for all with a manifesto pledge. 
"As we leave the European Union, we will no longer be members of the single market or customs union but we will seek a deep and special partnership including a comprehensive free trade and customs agreement."
Finally, an answer to the riddle. Hallelujah.  Hang on a second, let's read that through one more time.  Right, ".. no longer be members of..." means that we're leaving the CU.  At last, some clear English we can all rally round.  Where's the confusion?  The problem is that, "... comprehensive ... customs agreement" doesn't mean that Liam Fox will have the freedom to go around signing trade deals with all and sundry.  In fact, the second part of that sentence flatly denies the existence of the first.  What exactly is the difference between a customs agreement and a customs union?  Aren't they pretty much the same thing?   Oh dear, this is a vexatious puzzle.

What about after the election? If there was a time for definitive policy statements it was immediately after Theresa May formed her new government.  Well, what do they have to say for themselves?  Oh dear, this is where it gets really confusing.  It turns out that Philip Hammond thinks the UK should remain a member, while Liam Fox is dead against it.  It looks like Hammond has even started crunching the numbers.  I'd go further than that and say that he has actually formulated a quantitative argument for the status quo.  In effect, he has laid down a challenge to Liam Fox to prove that future trade deals will be more profitable than the current ones.  What is Liam Fox's response?  We'll never know because a bout of shyness has led him to conduct his business indoors for the time being.  There's always the old chestnut about a customs union with the Customs Union but formal policy is as tangible as a fart in a wind tunnel.

What has Liam Fox been up to for the last 12 months?  He used to optimistically bang on and on about signing trade deals.  He even said that dozens would be in place as soon as the UK left the EU.  The problem he faces is that he can't do any of that without a formal policy on leaving the EU Customs Union.  Now, the UK has been signalling to the entire planet that it will be leaving the Customs Union ever since Liam Fox's appointment.  However, it has also been simultaneously signalling that it might choose any other option on the metaphorical table and is even considering options banned from the table under international law.  Make no mistake, the UK is on course to leave the Customs Union; it just doesn't know it yet.  They'll only know it when they wake up one day and there's a massive queue of lorries all the way to Kent.  

Who in their right minds would begin discussing trade with the UK without formal and definitive policy statements that it is ready to begin discussing trade agreements?  A quick perusal of Liam Fox's lonely diary will soon reveal the answer.

 ECJ

 

Where there was discord, let there be clarity.  The UK's position on the jurisdiction of the ECJ is crystal clear and easy to understand.  The timeline of that position, however, is harder to decypher so it's worth diving in to see how it all unfolded.

Theresa May was still grappling with the most basic issues of EU membership when she took to the stage at last October's Tory Conference to declare that the UK would leave the ECJ.  The clarity of the statement was entirely at odds with the rest of her speech. We need to remember this was a time when vague phrases like "non-binary decision",  "red, white and blue Brexit", "associate membership" and "a Brexit that works for all" were still being bandied around with abandon.  In the middle of all that vague sloganeering came a clarion call that was so unambiguous, so clear and so definitive that it stood out as rather odd.

Scarily, this is not as unbelievable as it sounds.
It's not clear that anyone in government understood the consequences of leaving the ECJ.  David Allen Green even speculated that May had confused ECJ with ECHR or that hard Brexiteers had pressured Theresa May into accepting this pledge without giving her the opportunity to analyse what it meant.  Whatever the reason, it is clear that the consequences were not understood at the time.  Anyone with a clear understanding of the consequences would have immediately invited representatives from the pharmaceutical industry to begin discussing a post-Brexit regulatory system.  They would have done the same with representatives from the UK airline industry, the Channel Tunnel, nuclear scientists and treasured jam makers. None of that happened.  Instead, the pledge was largely forgotten and barely mentioned again until January's Lancaster House speech.

The consequences of May's insistence on leaving the ECJ were spelled out for the first time a full 3 months after the initial pledge.  Those consequences, of  course, were that the UK would leave all EU regulatory bodies.  This is a huge undertaking.  Which Whitehall departments will take responsibility for the UK's replacement regulatory bodies?  Who will fund them?  What will it cost? What about legal enforcement of regulation?  Which courts will uphold regulations?  Which case law?  Which legislation?  What powers?  What about recognition of international agreements such as the Stockholm Convention? What about devolution?  Something as huge as this deserves at least a few words in the manifesto, right?  Wrong.  The Conservative Manifesto 2017 literally says nothing whatsoever about the consequences of leaving the ECJ.  There are some comforting words about the UK's legal system being the best in the world but that's your lot. 

It really does seem that a definitive pledge was made without first understanding its meaning.  Leaving all EU regulatory bodies is an unforeseen consequence of a rash decision made to placate a few press barons and a few thousand pensioners at Tory Conference.  Moreover, the decision was made in a way that leaves no wiggle room at all for a compromise solution.  Without any real ability to understand or tackle the unfolding problem, the UK is playing right into the EU's hands.  The A50 clock will just tick away like an unexploded bomb until David Davis has to plead with Michel Barnier to make it all go away.

Single Market


Here's a question if you ever find yourself bored on a long journey:  is the UK leaving the Single Market because it will be more prosperous outside the EEA or because it believes the political cost of membership outweighs the economic cost of leaving?  Stumped?  That's because it is a trick question.

Ending freedom of movement is another of Theresa May's red lines.  She has an unseemly obsession with reducing the immigration statistics no matter what that might cost.  It always strikes me as a personal battle, as though she can only prove to herself that she is a success as Prime Minister if she can turn around past failures as Home Secretary.   It doesn't ever seem to occur to her that immigration can be an indicator of a healthy economy or even be a contributing factor to the maintenance of a healthy economy.  Anyway, what about that trick question?  The policy to leave the Single Market is indeed a consequence of the red line on freedom of movement but it came long after the formulation of the red line.  For a significant period of time the UK government thought it could end freedom of movement but still retain all the benefits of the single market.   Brexit veterans will remember this as the fabled "cake and eat it" philosophy.

The basic idea of the "cake and eat it" philosophy is that the EU needs the UK more than the UK needs the EU and therefore will be prepared to trade its principles and rules for continued UK trade.  In this alternative universe German car manufacturers will be queuing up outside Angela Merkel's office to demand that the UK be given concessions on EU immigration rules so that they can carry on selling BMWs and Audis to boastful Brits.  David Davis even thought that the first port of call after a vote to leave the EU would be to Berlin to hammer out a deal with the German government.  In his own fevered imagination Brexit would be no more than a summer tour of European capitals making pleasant trade agreements based on national stereotypes. Literally nobody in the UK government understood that the EU is a political union that, like all unions, relies on unity.

The EU has been united in upholding the four freedoms,  German car manufacturers have been united in upholding the four freedoms,  national governments have been united in upholding the four freedoms.  Time and time again, the EU has consistently stated that the four freedoms are indivisible and that long-term integrity of the Single Market takes priority over short-term losses in trade.  It's just a shame that nobody was listening because a policy to end freedom of movement and retain Single Market benefits has ended up being just a policy to end freedom of movement.  That journey took the UK government 12 months and even now there are a few stragglers still trying to make their way to the nearest all-night patisserie for a feeding frenzy.

Let's be clear here: leaving the Single Market is an unintended consequence of ending freedom of movement.  It is an unintended consequence that is even now not fully accepted by the key players in the unfolding drama.  Let's hope they get there before it's too late because it has an enormous cost.

I've yet to hear a single economic benefit that arises from leaving the Single Market.  Has anyone? After all, nobody involved actually wants to leave it but leave it they will because they laid down their conditions then stood with their fingers in the ears for the next 12 months shouting "blah blah can't hear you, can't hear you" as loudly as humanly possible. 

Sectoral Deals


When does tragedy become farce?  I'm no theatre critic but it's something to do with a circumstantial inability to change course leading to a farcical repetition of hilarious errors.   Is Brexit a farce?  Let's find out using the invincible myth of sectoral deals as a case study.

In the context of Brexit, a sectoral deal is an agreement that allows a specific industry to effectively remain in the Single Market or Customs Union or both.  For example, a deal might be struck so that everything coming in and out of the Sunderland Nissan car factory is treated as though the UK was still a member of the EU.  All those worries about delays, tariffs, regulatory harmonisation and country of origin certification would just magically vanish if only the UK had a system of sectoral deals in place with the EU.   The Germans would be crazy not to want this, right? Won't they also benefit from sectoral deals?  Wrong.


Since last July the EU has been utterly consistent in its refusal to accept sectoral deals.  Theresa May herself even ruled out sectoral deals by rejecting the Swiss model.  Despite a universal lack of enthusiasm for sectoral deals, the Prime Minister eventually decided it was a good course after all and started to deploy various euphemisms to make it all sound better than it really was.  I don't know what happened but the dream seemed to die quite quickly in the early New Year.  Was it Ivan Rogers relaying his impressions of the EU to furious politicians? Did a fresh wheeze take priority? Did they finally listen to the cacophony of EU communications on the topic?  We'll never know but it was barely mentioned again until Jeremy Hunt brought it back to life in the pages of the Financial Times.

 Hallelujah, sectoral deals are back on the UK's metaphorical table.  We thought they were dead but they live on in our own minds like cyphers from the past.  It turns out that Jeremy Hunt and Greg Clark were so worried about pharmaceutical regulation that they wrote to the Financial Times laying out their plans for a sectoral deal on medicines. It's worrying enough that Cabinet debate is now carried out in newspapers but it's much more terrifying to learn that the most senior politicians in the land spend their days on fantasy island.  Poor old Michel Barnier had to reject it one more time.

I almost feel sorry for Michel Barnier.  He must be sick of this already and there's years left to go.
The really sad part in all this is that the EU has already published its legally binding negotiating guidelines for Michel Barnier and his team. They do not include sectoral deals.  Nothing more needs to be said.

General Election


This barely needs to be said but it would have made more sense to have had the General Election before delivering the Article 50 letter than after.  There is really no point in seeking a mandate for something that you did three months ago and that you claim is irreversible.

Row Of The Summer 

 

The lack of planning puts the UK in a dreadfully weak situation in its negotiations with the EU.  For example, it is not in the UK's interests to strictly order the negotiations so that trade is tagged on at the end, as proposed by the EU. The UK, of course, wants to immediately start discussing trade in parallel with the divorce settlement.  David Davis said this would be the "row of the summer".  The problem is that he was unable to offer an alternative to the EU's detailed itinerary.  After all, if there is only cheese in the fridge then I know what I'll be having for dinner even if I don't fancy it much.

As it stands, the UK's only negotiating position is to agree or disagree with the EU's proposals because David Davis has failed to make credible counter proposals.  Even that description adds nuance that isn't there: David Davis can agree or disagree with the EU's proposals all he likes but he will have to go right ahead and accept them because they are a) the only proposal on offer and b) the only route to a trade deal due to a) the lack of credible UK proposal.

The "row of the summer" is an artifact of a much deeper problem.  The issue is not just that the government have failed to plan for Brexit but that they are still arguing among themselves about what they want to achieve.  Philip Hammond and Liam Fox are arguing about Customs Union membership;  Jeremy Hunt and Greg Clark are arguing in vain about sectoral deals;  Davis and Hammond are arguing about the need for transitional phases; Boris Johnson still thinks he can have his cake and eat it. They are doing this in public view despite the accepted protocol of collective Cabinet responsibility. 

The UK truly is the laughing stock of Europe so I suppose Brexit has at long last turned from tragedy to farce.

Conclusion


Brexit strategy is a mix of unintended consequences, lies that spun out of control,  misunderstandings, stupidity, an inability to listen, an inability to comprehend detail, knee-jerk reaction to media pressure, a refusal to discuss trade-offs lest it upset the "will of the people".  What else can go wrong?  I'll do another report card in 12 months time.  See you all then.

This can all be avoided by voting Yes in a second independence referendum,

Terry

PS The Labour Party don't fare much better.  They didn't make the ECJ mistake but they are definitely still in the "cake and eat it" bakery. Just listen to their "jobs-first Brexit" and "Brexit for the many, not the few" and you soon get the idea.

PPS I'd like to make clear that today's mess is not an inevitability:  there certainly is a path out of the EU for any member nation.  It is guaranteed to be a long process of no less than 10 years with significant economic and political risk attached.  Maintaining political and public will to complete the process is a herculean task but it is achievable.  It almost certainly requires a callibre of political leadership lacking in UK politics today.

PPPS I didn't even mention Scotland. The way that Scotland has been treated in all of this is nothing short of a scandal.  Remember the Brexit hotline that nobody answered?  The lie that devolved parliaments would be involved? The complete lack of attention given to the Scottish Parliament's White Paper?  I didn't mention any of that because the average reader of this blog knows much more about it than I do.

6 comments:

  1. The shambles of UK governance is mind blowing. I would say that it has gone past tragedy into farce, but the outcomes of said farce are still likely to be tragic.

    What puzzles me most right know is that the people of Scotland seem to be apathetic and increasingly reluctant to consider independence as an alternative. The committed are still here, but we seem to have lost the attention of the less committed, while the determined pensioners, Orange loyalists and self serving unionist elite (and their media) have increasingly got themselves together.

    It doesn't seem to matter what the facts are.

    I'm off to lie down in a darkened room, and contemplate something Mark Twain said-
    "It's no wonder that truth is stranger than fiction. fiction has to make sense."

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    1. It is still early days for Brexit. It is still the case that literally nothing has happened. Incredible, isn't it? One year on and nothing has happened. I totally understand that most people just get on with their lives because nothing is stopping them doing that right now. Things will change but even the beginnings of that are some months away. Brexit is more of an endurance race than a sprint.

      I'm not an independent observer but it seems to me that the media is slowly shifting. Nobody is trumpeting Brexit as the beginning of a new and glorious trading era for the UK. The "cake and eat it" mindset is almost gone now, too. There are a lot of stories about what the government must do to preserve the status quo, to take action to limit the negatives of Brexit. I've even seen an uptick in articles dealing with the scary technical aspects that nobody in government is addressing. We're going to see more and more of that as the issues become more immediate.

      The remaining argument now is that Brexit must go ahead or there will be civil unrest. Meanwhile, the EU has got its act together. First the Canada FTA and now the EU-Japan deal. The tide is definitely turning but I'm not yet convinced it is fast enough or early enough to help.

      It is a bit gloomy that Scottish independence seems to have hit a plateau. I'm not convinced that the EU is the best vehicle to convince No people to switch to Yes. If it is it will only work when Brexit really starts to bite. That is some time away in the future and transitional deals with the EU will give the independence movement even more breathing room.

      That is a fantastic quote. The Brexit story would make a terrible political thriller because its basic premise is impossible to believe.

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  2. Sometimes, quite honestly, I wake up thinking... this was all a dream, a nightmare.

    There isn't really a lying, ignorant, orange faced lunatic in charge of America, and Britain didn't go into Brexit knowing absolutely nothing about the consequences except that we would have £350 million a week to spend on health and that all the foreigners would be sent home.

    Of course that's not the only fantastical stuff about today's world, but, with the exception of the possibility that Kin Jong Un will start a nuclear war and blow Japan or Alaska to kingdom come, Trump and Brexit are the two most pressing ones for us.

    I realise that in the run up to the Brexit referendum David Cameron point blank refused permission for the civil service to do any work relating to the possibility of Brexit. He knew that Eton Boys never lose anything.

    So, when the impossible happened and an Eton Boy lost miserably, nothing at all had been prepared.

    But then, you might have thought, the government, first under Cameron, and then under May, would have scoured the country for experts. They brag about how big and important Britain is. The country MUST surely have a massive number of intelligent, educated, knowledgeable academics from a wide range of disciplines who could have been drafted in to advise them, even on a part time basis, possibly on the cheap with knighthoods and other silly stuff offered as compensation.

    But seemingly, no one would countenance anyone who held an opinion that differed in any way from Brexit Means Brexit; it's red white and blue and it is the will of the British people.

    People heading in to see Davis were reputedly warned in the outer office that if they raised any objections, or proposed any notion of possible problems, they would leave the office much more rapidly than they entered.

    Where was the intellectual rigour? It was washed out by the egos of rather uncertain people who dared not be questioned, lest they too faltered.

    Davis once had a reputation for a sharp mind. I don't know what happened to it. Ego, I suspect. Fox never had a reputation for anything other that right wing nuttery. Boris is clever. But he's a fool too. He can afford to be. He doesn't need the job, doesn't need the money. It's all a joke to him, like it has been since Eton. He's really 17 and a bit. That he is the UK's Foreign Secretary and Chief Diplomat is as fantastical as Trump being POTUS.

    May is pathetic. I have no idea what she stands for; whether she believes in what she is doing or not. But she has taken, on every occasion, the wrong route, frmn refusing to actually deal with the devolved administrations, to calling her ridiculous farce of an election and teaming up with troglodytes. And once you get a reputation for that, you're finished. Everything she does from now on will be a catastrophe.

    It seems hard to believe that they didn't know any of what you lay out above (in what is a comprehensive and compelling read). No, not hard to believe. Impossible. Unless you take on board this reputation that they have for simply refusing to listen to facts. Not unlike Trump, who still maintains he had a bigger crowd at his inauguration, and has done more in his first three months than anyone else in the history of the USA.

    Delusional.

    They seem to think that because they are Britain all will be well. The foreigners will fall into line if they know what is good for them.

    In a few years time, instead of being a rather past it power reflecting on its glory days, and retaining the outward appearance of still being important, the Uk will have become a third rate laughing stock.

    Hopefully Scotland, by that time, will have emerged as a new recruit to the Nordic Council. Utterly unimportant in the world but giving good sensible governance to its relatively contented population.

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    1. You've picked up on a really important point: something is broken at the heart of the UK government. It used to be the case that ministers sought impartial advice and then had the option to make partial decisions driven by their politics. That's just how democracy works. It works because failed political decisions can eventually be superceded by ones based on evidence. Good advice, after all, has a habit of lingering in conversations and taking root in people's brains. Iraq and now Brexit hint at a new regime where ministers seek only partial advice. They ask the civil service to look for evidence that supports their claim and then act on that. Anyone that gets in the way knows what will happen if they don't comply. Ivan Rogers springs to mind. This is terrible for democracy because it is almost impossible to disentangle impartial advice from cherry-picked snippets of evidence without doing all the homework required. Neither politicians nor public can judge the efficacy of a political stance when all evidence considered is driven by the political stance. Brexit makes this worse as each day passes. All that happens is that the public trust nothing and nobody.

      I honestly don't think May foresees any real trouble ahead. Same for Johnson, Fox and Davis. I think they actually believe their own rhetoric because they don't listen to anything else because nothing else is presented to them. They are living in a bubble that they have artfully constructed for the last twelve months. The stories about Theresa May's sacked advisors paints a picture of them acting as nightclub bouncers whose main job was to stop bad news reaching May's ears. That is no way to run a government embarking on a hugely technical process with consequences for the next 50 years.

      I can't wait to join the Nordic Council.

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    2. Yes, Ivan Rodgers is a good case in point as his letter to his staff upon is "resignation" shows:

      http://www.bbc.co.uk/news/uk-politics-38503504

      David Kelly also appeared to be at odds with what the government of the day wanted to do. That ended badly.

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    3. And they sacked David Nutt on drugs policy.

      I wonder what it's like working in Whitehall. It must be an absolutely terrible place to work.

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