Brexit

How to reboot Britain’s failing Brexit strategy

Not being prepared to walk away has left the UK in a dire position, says the former Brexit minister. But with compromises and swift action a better deal could be achieved.

BY George Bridges   /  26 June 2018

Are you bored of Brexit? I don’t blame you. The bad news is that the debate, confusion and uncertainty is likely to continue for years. Yes, years. That may depress you so much that you don’t want to read any more. Quite right too. Go and enjoy the weather and the World Cup.

If you are a glutton for punishment and are still reading, here’s why nothing much is going to change…

Let’s start by answering the question: “Why is it that, two years since the referendum, the UK Government’s approach appears chaotic and confused?”

Numerous reasons are given. The Conservative Party’s long running feud over Europe. The lack of contingency planning in the event of a vote to Leave. No clear strategic vision that answers the question of what country we want to be after Brexit. Triggering Article 50 without a clear plan. Agreeing to the EU’s approach to the negotiations. Failing to understand the importance of the Irish border. Agreeing to the principle of a backstop in December. The list is long, but one fact above all else has compounded the problem: last year’s general election.

By losing her majority, the Prime Minister returned to office but not to power. She has been unable to stamp her authority on her warring Cabinet, making it all but impossible to answer clearly in detail a key question: what matters more, Parliamentary sovereignty or free, frictionless trade with the EU? Two years after the referendum, debate still rages at the top of Government over its negotiating position, let alone a strategy to deliver it.

Sensing her Premiership rests on the support of those who demand a complete break from the EU at all costs, the Prime Minister has been unable to present honestly the choices before us, and the need for compromise. Instead, she has doubled down on her commitment to leave the EEA and the customs union, while clinging onto a vision of the UK enjoying free and frictionless trade with the EU – and the “exact same benefits” as EU membership affords it. If the Prime Minister were to commit the UK to permanent membership of a customs union – breaking a manifesto pledge – it would split the Conservatives and, in all likelihood, trigger a leadership challenge.

The result of this situation is a can kicking, cake eating Government. Can kicking: failing to make a choice – what matters more: Parliamentary sovereignty or access to EU markets? Cake eating: putting forward negotiating positions which, in the EU’s eyes, appear to ask for all the benefits of EU membership without being a member. So long as the can is kicked down the road, and ministers cannot decide what matters most, the government will continue to try to have its cake and eat it. (And the metaphors will remain mixed).

Worse than this, and arguably more damaging to the UK’s national interest, the Prime Minister’s weakness has resulted in the Government failing to make the case for, and to prepare for, a no deal outcome.

Make no mistake: if the UK were to leave without any deal, the shock could be immense. Note: could. The severity would depend on the extent of the UK (and EU’s) preparedness – both logistically and politically. But however ghastly that may be, when I was a Brexit Minister I considered the prospect of not being able to leave the negotiating table even worse. In a negotiation, if one side feels compelled to strike a deal any cost, the other side will always holds the whip hand.

And from the EU’s perspective, that is now the state of play. Although the Government defeated an attempt to give Parliament control of the negotiations in the event of no deal, the majority of MPs are still extremely windy about the prospect. As the Chairman of the House of Commons Foreign Affairs Select Committee Tom Tugendhat, and Brexiteer Jacob Rees-Mogg have pointed out, were the Government to fail in the negotiations, the House of Commons would be able to pass a vote of no confidence in the Government. Mr Tugendhat has correctly said that MPs would be “looking for a new government” if the current one failed to deliver a Brexit deal that could pass the Commons.

Meanwhile, plans to prepare for no deal have progressed at a snail’s pace – further eroding “no deal” as an option. Imagine there is no deal on March 29 2019. What will happen at our borders? Will EU imports be waved through at Dover? Will EU citizens be waved through checks at UK airports? What of cross border policies and obligations – the £26 trillion of derivatives and 36 million insurance policies: will these be honoured and grandfathered over? Do they need to be? And what is the answer to this “no deal” scenario from the aviation industry: “Without an agreed solution … supply chain disruption across Europe will occur, parts will be unable to be delivered, pilots and maintenance technicians will be unable to work, aerospace companies in the UK will lose foreign validations for their business, and aircraft will be grounded globally”?

Questions, questions and more questions. There are answers to some of them, but the Government has done little to spell them out. Fingers crossed seem to be the strategy. Consequently, fear of “no deal” has filled the void.

‎Imagine this does not change. Fast forward to December or January. The Prime Minister, conscious she cannot return to Parliament without a deal, signs a withdrawal treaty that commits the UK to pay the divorce bill; to a backstop keeping at least Northern Ireland in a customs union; to a transition lasting until January 2021, during which period the future relationship with the EU will be negotiated; and to meaningless waffle as to the heads of terms of that relationship. This time next year, what will have changed? We will have legally left, but we will be in a state of limbo. Having agreed to the divorce bill, we will have lost much of our leverage in the negotiations. Parliament will still be insisting that the UK cannot end the next period of negotiations without a deal – but there will be no clarity as to what agreement we want.

The EU’s hand will be stronger as we enter the next phase of the negotiations. At that point the UK will have agreed to a backstop to prevent a “hard” Irish border if the negotiations collapse. This is likely to increase, not diminish, Parliament’s wish to avoid another “no deal” scenario when the transition ends, as the backstop could mean the break up of the UK.

Meanwhile, the negotiations will have to address critical issues for the UK: services and immigration. To date, 80 per cent of the debate has been about goods – but 80 per cent of our economy is services. Just wait for the fireworks when it comes to negotiating about them. Controlling immigration was the dominant issue for Leave voters. How would the Government react if the EU insists that freedom of movement must continue, unimpeded, if the UK is to enjoy free and frictionless trade?

Reading the above paragraphs, the immortal words from Private Frazer in Dad’s Army come to mind. “We’re doomed. Doomed!” (How timely the characters from that comedy classic are now gracing Royal Mail stamps). Well, we need not be doomed, if the Government were to do two things.

First, “no deal” must become a realistic course of action. The EU should be told that the UK expects the Withdrawal Treaty to set out clear and precise heads of terms of the future relationship, otherwise the UK will not sign the agreement. Meanwhile, contingency planning could be stepped up and explained. This will require a change in tone, style and pace which has been absent in Downing Street for months. The Prime Minister will need to make the simple case that if the UK is will do a deal with the EU, no matter what, we cannot protect our national interest. This will require the entire government to set out what happens if there is no deal, so as to assuage the legitimate concerns of British business – not to mention many Conservative MPs, and most of the House of the Commons.

Second, the Conservative Party – from the Cabinet down – needs to be honest without itself and the country about the compromises required to get an agreement, and wrest back control of the negotiating agenda. Otherwise we will spend the next 18 months cake eating and can kicking while the economy is gnawed by growing uncertainty.

To date, the Government’s answer to the exam question “what matters more, Parliamentary sovereignty or access to EU markets?” has met an ice cold reception in the EU. Repeating slogans is not going to break the logjam. Some here talk now about “being in the single market for goods,” without addressing issues such as freedom of movement, or the regulatory future of the City.

What we need is to reboot the UK’s overall negotiating strategy. That approach needs to tick many boxes, such as keeping trade free and frictionless in goods and agriculture; solving the Irish border issue; giving the UK the freedom to control immigration and to negotiate trade deals; being consistent with the Conservative Manifesto; ensuring the engine of our economy, services, can compete in Europe and globally; maintaining our security.

Above all, it needs to balance the political imperative (the need to say we have left the EU, and in particular taken control of our borders) with the economic one (the need for the UK’s economy – especially our service sector – to prosper in today’s digital, interconnected world).

So, as a starter for ten, here’s what a “reset” might look like.

The UK would commit to remain completely aligned to EU regulations and standards covering goods and (note) agricultural products. This – together with zero tariffs and trusted trade schemes (to deal with rules of origin) – would help minimise friction in trade. And, by covering agricultural products, it would help address the issue of the Irish border.

We would also pledge to remain convergent on data sharing; and recognise legal contracts and professional qualifications. Where appropriate, we would seek to remain party to EU bodies and agencies that underpin critical areas related to security, trade and infrastructure – such as pharmaceuticals and aviation – where necessary being under the jurisdiction of the ECJ.

Next, financial services. In this area – perhaps more than any other – the UK must retain the ability to compete globally in a digital age. As the Governor of the Bank of England remarked last week, we are on the cusp of the fourth industrial revolution, and “such profound changes demand a new finance”. And, one might add, a digital regulatory structure, which builds on the City’s strengths. As Mr Carney also pointed out, “more international banking activity is booked here than anywhere else”, and “the City is Europe’s investment banker”. Too true – and that should give us the confidence to be masters of our own destiny.

For many in the EU, the City of London’s loss is the EU’s gain. Any deal the EU strikes will be done at the last minute, for a high price and is likely to require the UK to remain almost completely aligned with future developments in EU regulation if we wish to retain EU market access. This would mean that, in years to come, we would face a different version of the choice we face today: do we accept an EU rule, made in Brussels, which might damage the City – or do we say “no” and lose market access? We can certainly try to negotiate a mutual recognition agreement, but there is next to no chance of it happening, so we should be ready to fall back on the existing equivalence regime. If ministers talk up the failings of that regime, once again no deal becomes no option.

Next, we should make it clear that, while this Government has no intention (and no Parliamentary majority) to lower standards governing employment or environmental legislation, we will not accept any restrictions that restrict UK politicians ability to determine tax, social and environmental measures and practices.

Few have noticed how many times Michel Barnier has said that the future agreement must be based on “common ground on competition and state aid, social and environmental standards, and guarantees against tax dumping”. If by “common ground” this were to mean being forced for the UK government to remain in lock step with the EU, clearly this could place unacceptable restrictions on the sovereignty of Parliament.

Finally, we will continue to allow people from EU members states to come here freely to travel, to study and to stay for short periods. We will be asking those who wish to work and settle here permanently to comply with new visa requirements. As a service based economy, we need to win the war for talent, and the new system will enable us to do that.

This approach would mean the UK is outside the – or “a” – customs union. Yes, alignment to the EU regulatory system for goods and agricultural products may make it harder to negotiate trade deals with other countries. The key word is “may”. If we value frictionless trade with the existing EU partners more than putative deals with countries some time in the future, this compromise would be a good starting point – and it would help address the issue of the Irish border. Yes, it will mean that the UK is a rule taker as regards goods – but how many UK businesses wish to make products just for the UK market?

Such a reset could – could – breathe life back into the negotiations. The Withdrawal Treaty might then contain the basic building blocks of a future agreement. The transition period would be a bridge to a fixed destination – not a gang plank into thin air – which would help lessen uncertainty and build confidence.

Many will balk at such a compromise. I would do too if it was not accompanied by a renewed resolve, willingness and preparedness to walk away. That is why compromise and “no deal” must go together. Otherwise the Prime Minister will find herself handcuffed to the negotiating table, forced to accept one demand after another.

So, there is a way to avoid the Brexit saga going on and on in a perpetual, never ending loop of the same arguments. But for a change in approach to happen it would require the Cabinet to agree on, invest in and make the case for a walk away option. It would require Parliament to support it. It would require the Prime Minister to broker a compromise between Leavers and Remainers. And it would require an end to the cake eating and the can kicking.

So, at this rate, it won’t happen. Instead, a Withdrawal Treaty will be signed that says nothing much about our future relationship with the EU, but commits us to paying the divorce bill and the Irish backstop. The transition will start. And this time next year, we will still be debating what our future relationship with the EU should look like – while the EU will have pocketed all our concessions, and will be back, asking for more.

You may think that things can’t go on for ever like this. Well, things that can’t go on forever, go on much longer than you think they will.

George Bridges (Lord Bridges of Headley) was Parliamentary Under Secretary of State in the Department for Exiting the European Union from July 2016 until he resigned in June 2017.

He writes in a personal capacity.


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