Once again, there’s not a great deal to say. But, once again, for as long as there is no change to the Brexit timetable it is worth looking at what has been happening because, as things stand, we’re less than nine months away from the transition period ending with, potentially, no future terms deal in place.
The consequences of that will not only be economic, but in economic terms alone they will be considerable, since they will come on top of the grisly impact of the pandemic, as outlined by the Office for Budget Responsibility this week. The proposition is that, in addition to this spectacular short-term 35% fall in GDP, rise in unemployment, and destruction of public finances, it is the inviolable ‘will of the people’ to add the effects of Brexit with or without a deal. Why make a tough situation tougher, as the Managing Director of the IMF put it in advising extension? No sane government would do so, and there are really no rational arguments against extension.
An attempt to make such arguments came this week from Shanker Singham, the highly influential “Brexiteers’ brain”, primarily based upon the idea that it would mean delay to the UK making trade deals with other countries, especially the US. But the value of such deals is nugatory compared with trade with the EU. The current government estimate is that a deal with the US would be worth, at most, an increase of 0.16% of GDP over 15 years, whilst even securing a free trade deal with the EU would see UK GDP grow 6.7% less over the same period than it would have done but for Brexit, and 9.3% less with no deal at all.
In any case, as I’ve pointed out many times before, the issue is not just the already incredibly tight timetable for trade negotiations with the EU. It’s the time needed to create the domestic regulatory institutions which – given the Government’s scorched earth Brexit policy – will need to be created from scratch when the UK exits REACH, EASA etc., and also for businesses to adapt to whatever the new trading relationship is. No serious commentator believes this is possible, so further disruption and damage is inevitable in the absence of an extension.
The current situation
The formal situation is that the Chief Negotiators for the EU and the UK met by videoconference this week and issued a new timetable for negotiations (again, these will be by videoconference). This will entail far less negotiation time than had been originally envisaged before the transition extension decision has to be made. To the extent that anything of substance is happening in the latest negotiations, it lies in the (negative) news that whilst the sides continue to exchange proposals, the UK has held off doing so for fisheries (£).
As has long been predicted (see this prescient article by RTE’s Tony Connelly from last November), this economically trivial but symbolically potent industry is likely to be crucial. It’s worth recalling that had the UK sought a ‘Norway-style’ Brexit then it would have meant exiting the Common Fisheries Policy and could have been negotiated whilst still remaining in the single market. So if it’s really so crucial to leave the CFP (a doubtful proposition anyway), it could have been achieved by that route, as could an independent trade policy which is supposedly the other main economic benefit.
Conflicting accounts and predictions
There are widely conflicting accounts of UK thinking on an extension. The Sun has reported that the government want a ‘pay as you go’ arrangement, with extension on a month by month basis. It seems highly unlikely that the EU would agree to this, and it would cause endless agony to UK businesses (not that the government seems to care about them). By contrast, The Spectator is adamant that no extension will be requested. Note that both publications are heavily hooked in to the Conservative government’s political and media networks. It wouldn’t be too cynical to imagine that what is going in these reports it kite-flying with different parts of the media and electorate, to see what the reaction might be.
There’s a reason to think that such kite-flying would be necessary: the Brexiters are very split, now, about extension. Some of the most intransigent now accept its necessity, yet read any forum in social or online media and it’s clear there is massive opposition from others, and that opposition would certainly be exploited by Nigel Farage, opening up all the old Tory fears that led to the Referendum, and Brexit, in the first place.
As to whether extension will happen (from the UK side – it’s generally expected that the EU would agree if asked, depending on the exact details), astute and well-informed commentators reach very different conclusions. Denis MacShane, who amongst other things predicted Brexit in 2014, sees coronavirus as offering Boris Johnson a Brexit ‘get out of jail’ card to pause and soften Brexit. However, Brendan Donnelly, Director of the Federal Trust, who knows the Conservative Party intimately, argues persuasively that in its current incarnation it will almost certainly stop Johnson doing any such thing.
For what very little it is worth, I still tend on fine balance to think that MacShane is right – and it’s notable that some well-connected right-wing journalists are beginning to dismiss suggestions that extension is a non-starter for the Brexiters - but that may only reflect my residual and probably misplaced optimism that the UK isn’t doomed to call every single decision about Brexit stupidly. However, as I wrote a few weeks ago, the question isn’t just whether there is an extension but for how long? Given the likelihood of ongoing dislocation because of coronavirus a short extension will be scarcely better than no extension at all. In some ways it will be worse as further extension, should it be necessary, is precluded.
Beyond all understanding
On the other hand, do we still have a ‘sane government’ in the UK? Well-informed accounts give a disturbing picture of chaos and dysfunction which is unlikely to be ameliorated by the reports that Boris Johnson “will not be involved in decisions” whilst convalescing and that Dominic Cummings “is back in Number 10 and working”. The latter, one assumes, is the unnamed “spokesperson” for the Prime Minister who yesterday unequivocally insisted that the UK would neither seek nor agree to an extension.
Within this statement, it was claimed that extension would reduce the UK’s flexibility in responding the coronavirus crisis. What this could conceivably mean is totally mysterious, although one suggestion, from Katya Adler, the BBC’s sagacious Europe Editor, is that it is code for avoiding paying into EU-wide post-virus recovery schemes. That’s a plausible explanation of Brexiter thinking, but, if so, exhibits the same tedious dishonesty as in the Referendum campaign of looking solely at the budget in assessing the economic costs and benefits, and indeed looking at membership only in transactional terms. For, of course, even assuming the UK were obliged to pay into such schemes (which is far from clear), even assuming it were a net contributor to such schemes, and even assuming no humanitarian arguments, the UK would also benefit from its nearest trading partners recovering as quickly as possible from the economic effects of the pandemic.
Anyway, I think it’s equally likely that the idea is to try to blunt the argument that Brexit should be extended to focus on coronavirus by pretending that extending would hamper dealing with it. So, as from the start, the entire Brexit project remains steeped in spin and lies. Nor is it difficult to predict the next one, if indeed there is no extension – that all the damage caused in the New Year is nothing to do with Brexit, but all down to the virus.
Yet, equally, precisely because of the endless lies, the current unequivocal statements do not offer a sound basis for prediction. It was, after all, Boris Johnson who in his very first speech as Prime Minister, and repeatedly thereafter, insisted that the UK would “come out of the EU on 31 October, no ifs or buts”. So, really, who knows?
But, for now, we go on with every single aspect of life in Britain transformed, disrupted or on hold but a government still masochistically insisting that for Brexit, alone, it is ‘business as usual’. It’s beyond understanding, because it’s beyond all reason.
This is a companion discussion topic for the original entry at https://chrisgreybrexitblog.blogspot.com/feeds/6156315788267137895/comments/default