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The harsh facts that the leadership contenders need to face

July 5th, 2019

Lawyers are rarely regarded with affection.  Lawyers-turned-politicians even less so.  Nonetheless David Gauke’s speech at this week’s Lord Mayor’s banquet is worth a careful read, not least for its defence of the rule of law as a critical element underpinning democracy (a word never off the lips of some politicians wholly ignorant that something more than shouting “The people have voted” repeatedly is needed to sustain a democracy).  Gauke’s quiet praise for the unfashionable virtues of public service, intellectual rigour, a serious determination to grapple with complex problems, the wish to reach “a decision based on what is right and not necessarily what is superficially popular”, for the value of experience and evidence was doubtless welcomed by his audience.   But its applicability is wider, as he recognised.  He cannot be the only person who wishes that politicians would deal “with the world as we find it, not as we imagine or represent it to be.”

 “We must face facts.” he said, calling it his guiding political principle.  Wouldn’t it be refreshing if the two Tory leadership candidates also tried to do so, at least when they pause for air in between breathlessly promising more and more spending, tax cuts and all sorts of other goodies (Cheaper sugar! The freedom to hunt foxes!)? It’s like a political summer sale, each more desperate than the other to get voters to buy their offering.  Johnson channels his inner Labourite, insisting that there is plenty of money for his spending promises.  Hunt too promises more cash for favoured causes.  That is when he’s not saying that bankruptcies and unemployment are the necessary price others must pay for Brexit.  Perhaps he was repurposing Thorpe’s acid comment on Macmillan’s dismissal of Cabinet Ministers (“Greater love hath no man than this, that he lay down his business and job for a no-deal Brexit.”).  Each is delighted to be talking about something other than Brexit. This will be done, without question, they solemnly assert and, on 1 November, all will be for the best in the best of all EU-free worlds.

So here are some facts and one assumption for our leadership candidates.  Let’s assume that it is not possible to agree a different Withdrawal Agreement with the EU and get it passed by Parliament by the witching hour.  On Halloween, Britain’s treat will be to leave the EU without any sort of agreement with the hated colonial oppressor(© Miss Widdecombe MEP).

An end state?

A No Deal exit is not an end state.  The absence of an agreement does not mean that Britain reverts to its original Eden.  It means that Britain moves from what it has been used to (laws, regulations, cases, customs, assumptions about the future) to, well what, exactly?

WTO Rules

Ah yes, those fabled WTO rules. (Let’s set aside the delicious irony of escaping from EU-imposed rules to ones imposed by a world body.)  They too are not a clear option.  Choices have to be made.  Will Britain charge tariffs on imports and, if so, on what and at what level?  What are the consequences of these choices? Low or no tariffs will severely harm a number of sectors, make imports cheap for consumers but provide little incentive for countries to enter into FTAs.  What could Britain offer if access to its markets was already open?  High tariffs increase costs for businesses and consumers here.  How will these costs and trade-offs be explained to voters?  How will they be decided?  How long will Britain be in this WTO state?  Businesses, investors, consumers would like to know.  Plans do, after all, need to be made.  Not everyone has the luxury of making it up as they go along, surprising as this may seem to those used to doing their job at the last possible minute.  After an essay crisis Prime Minister  must we now endure one with the same lax and lazy approach to his columns?

Not Made in Britain

When WTO rules are discussed it is invariably in relation to goods.  And almost invariably tariffs are seen as the only real issue, at least by those keenest on a no deal Brexit.  (Certificates of Origin wave frantically trying to get attention.  Let’s ignore them.  Most Tory politicians have, after all.) But manufacturing is no longer the principal way Britain earns its living.  Services are and here Non-Tariff Barriers matter very much more and are much less amenable to WTO jurisdiction or resolution.  A country which sells services needs to think much harder than Britain has done about how to do so in a world where other countries are able and may – in order to increase their bargaining power vis-à-vis a Britain desperate for FTAs – be very willing to erect NTBs against Britain’s service sectors.

No special status

Being an ex-EU member confers no special status. We won’t get invited to family events for the sake of the children.  Britain will be a third country.  That is a new state, one very different to what we had before 1973.  Whatever the nostalgic impulses of some Brexiteers, there will be no return to the past. No-one aiming for power seems to have thought at all about what being a third country outside of all the agreements it has with the EU and, through it with others, will be like.  Canada’s politely brutal dismissal of Britain’s request to roll over its existing EU-negotiated trade deal is a portent of what trade negotiations will be like.  It would be foolish to assume that Britain will get any favours, whether from the EU or Commonwealth countries.

An FTA with the EU

The EU has often been accused of hiding its true intentions, of lying even.  And yet it has repeatedly made clear that if the Withdrawal Agreement is rejected, the same issues (citizens, money and NI) will need to be addressed before a FTA can be contemplated.  A hard Brexit does not remove these; it merely postpones them to a time and in circumstances considerably less favourable to Britain than now. The EU has also repeatedly said that any short-term agreements to mitigate the effects of a no deal departure will be less favourable to Britain than now.  Why wouldn’t that be so?  A no deal departure will cause disruption to the EU, considerably so in some countries.  Why wouldn’t this lead to annoyance and a desire to recoup the costs from the party causing these problems?

Why would the EU rush to start talks on an FTA or rush to conclude them? It has the luxury of time, a united front and expert knowledge about how to negotiate trade agreements.  Britain does not. 

The EU may even see an opportunity to weaken and take advantage of a country which is now a competitor.  The scoundrels!  As if Britain wouldn’t do exactly the same in the EU’s position.  As if it hasn’t done exactly that in the past.  Ask the Chinese.

There is a curious dissonance about No Deal Brexiteers.  Brexit without any sort of deal is deemed essential even if the costs to the economy are high.  These are costs that absolutely must be borne.  And yet at the same time both Hunt and Johnson blithely assume that Britain’s economy will continue much as now, even as the legal, regulatory and commercial basis on which much of it depends is torn up, and that even following a damaging no deal exit it will be able to support their tax and spending promises. Perhaps unshackled by EU rules Britain’s economy will boom. Perhaps. Just as likely – perhaps more so – is that the costs of change will place an additional burden as the country adjusts to new realities.  (See the early 1980’s for how difficult and divisive such adjustment can be.) It is certainly not safe to assume that tax generating sectors (finance, say) will continue to be as lucrative as before.

Even more curious is the way both candidates offer up their negotiating skills as a selling point as if it weren’t July 2019 but July 2016 or 2017 and there was still time to negotiate an agreement, as if red lines hadn’t been drawn, as if we were starting from scratch.  Maybe either might have been better negotiators than May, though if Johnson has such talents he kept them well hidden while in Cabinet. But we are not starting from scratch; the time provided by Article 50 is nearly at an end; an agreement is on offer; and it is unlikely to be changed in any meaningful way in the time available. It is not negotiating skills that are needed but those of a magician.

Or perhaps if the Lord Chancellor’s words are heeded – “Change comes with urgency sometimes, but must always be approached in a considered way to avoid negative unintended consequences.” we could have an “honest, respectful public debate that lays out all the options and all the consequences” and politicians who “relentlessly focus on reality”.

We could.  But we won’t.  We’re not yet ready to face facts.

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