First steps to a deeper relationship

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With just thirty one days before Britain exits the single market and customs union, negotiations on the UK’s retreat to, at best, a vastly inferior trade deal with the EU appear deadlocked.   Resolution of the three sticking points – access for EU fishing fleets to British waters, ‘level playing field’ guarantees for businesses and a mechanism for enforcing any deal – await Mr Johnson’s acceptance of reality.   Indeed, the shape of a deal has been clear for months though Mr Johnson knows it will necessitate yet more U-turns.   But, if he rejects an agreement, it will come to be viewed as a gargantuan political failure.  

Contrary to his many vacuous promises regarding Brexit, at this late stage all Mr Johnson has to offer is the economic chaos of a hard Brexit – deal or no-deal.   According to the OBR, Brexit with a deal will lower GDP by almost 5 per cent over the following 15 years compared to a reduction of 7.7 per cent without a deal.   Deal or no deal businesses will face the costs of form filling and port checks resulting – as demonstrated by last week’s trial run – in miles of queuing lorries and chaos.   Perhaps in the heady days between the election and the arrival of Covid-19, the No 10 Brexit zealots, cowering under the irascible Dominic Cummings, believed that the difference in lost GDP between a deal and no-deal could be politically glossed-over – the more so if it could be blamed on an intransigent EU.   Now, however, a Brexit failure could be fatal for Mr Johnson.  

Over the last nine months the Johnson government has been tarred with the stench of incompetence, the whiff of corruption and the odour of distain for Parliament.   The unconscionable withdrawal from an international treaty solemnly entered into less than a year ago has removed the adulatory mist from the eyes of many.   Mr Johnson’s weaknesses – lack of integrity, irrational optimism and excessive delegation i.e. an inability to focus – were never hidden, rather those blinded by an inexplicable obsession with Brexit chose not to see.   But as Brexit is increasingly revealed in all its paucity few expect those who previously hailed ‘good old Boris’ to remain loyal.    

Hoist by his own petard, there are three reasons why Mr Johnson has little choice but to accept the deal on offer.   The first is the economic cost of Covid-19.   The OBR expects GDP to fall 11 per cent this year and not return to its pre-pandemic level before the end of 2022 – and nearer the end of 2024 in the event of no-deal.   With government borrowing this year spiralling towards an unprecedented peace time level of £350bn (17 per cent of GDP) and a current account deficit forecast to remain at a record 5 per cent of GDP for several years, the longer term damage of ‘no-deal’ cannot be exaggerated – according to the governor of the Bank of England it would be greater than Covid-19.    

The second is the election of President Biden who has wasted little time to deliver a warning to the prime minister not to let Brexit destabilise the Northern Ireland peace process.   In so doing he has brought a dose of reality to the much vaunted ‘special relationship’ and hopefully removed the imperial nostalgia fog from Mr Johnson’s ‘global Britain’ vision – a fantasy encouraged by Trumpian nonsense.   Without a seat in Brussels and in the absence of Trump, UK global leverage will decline.   Attempting to mimic a global military power by dispatching the UK’s only operational aircraft carrier to the Far East – despite being short of costly F35 aircraft and vital support ships – will pose little threat to the looming Sino superpower and a resurgent Russia.   Reality has for many years required a focus on the soft power embodied in our universities, creative industries and cultural connections; but the decision post-Brexit to leave Erasmus and to cut overseas aid from 0.7 to 0.5 per cent of GDP will only serve to diminish these sources of influence.

The third reason is the departure from No 10 of the Brexit zealots.   Having dishonestly campaigned to take Britain out of the EU, then orchestrated a successful prime ministerial campaign for a willing and pliable Mr Johnson and finally secured for him a Commons majority, they appeared to have a dangerous hold over the prime minister – none more so the iconoclastic Svengali, Dominic Cummings.   While the precise reason for the zealots ousting remains unclear, it has removed those who would have urged the prime minister to walk away from a deal.   Indeed, it is entirely possible that Mr Johnson realised they had to go before he could make the compromises necessary to secure a trade deal with the EU. 

Doubtless Mr Johnson will attempt to present the deal as a victory in the hope that the small print will not merit close attention.   But a deal will not be the end of Brexit – the issue will continue to dog Mr Johnson and his successors’ premierships.   A deal will see the transition morph into an implementation period.   The EU will give a bit on fishing rights and in return the government will commit to a level playing field and some form of independent arbitration – in effect a European Court of Justice by another name – to enforce the agreement.   Finally, the zealots’ economic fantasy for Brexit – a low-tax, low-regulation haven – has foundered in the cold light of reality.   Post Brexit the economy can look forward to tax rises and levels of government borrowing that match or exceed the highest in the EU.   Deal or no-deal Brexit grievance seems likely to fuel Scottish independence and with Northern Ireland remaining within the customs union it is only a matter of time before the logic of a united Ireland becomes a reality.   Brexiters might have dreamt of distancing the UK from the EU but a deal will mark the first step in England and Wales seeking a deeper relationship with the EU.

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