At the start of July BfB outlined six ways we could be sure that Boris Johnson, as Prime Minister, was serious about pushing through a genuine Brexit. Johnson has now been in charge for just over a week, so what do the early signs show? Below, we assess progress – or the lack of it – against our six tests.
Test 1: Disown entirely the Treasury’s doom-laden reports of 2016-18 and totally overhaul the Treasury
Unfortunately, there has been no sign so far that the government intends to disown the Treasury’s doom-laden and skewed analyses of Brexit, several of which have been produced since 2016 and which continue to exercise a negative and unjustified influence on public discourse about Brexit and on financial markets. So far, there has been no news about changes to key personnel at the Treasury, which are essential. In addition, since Johnson’s appointment as PM, many familiar scare stories and exaggerated estimates of economic damage from these reports have been reheated once again. It is dispiriting to see yet another recent ‘leak’ of a Whitehall document on no-deal preparations which is full of scare stories, some of them absurd and others out of date.
An early denunciation of previous Treasury analyses is essential. The government also badly needs to make some upbeat announcements of possible future policies that will boost the UK’s economic performance. Examples might be a commitment to reduce corporation tax to Irish levels, or to removing some of the more onerous regulatory burdens resulting from EU membership (reform of the hated MIFID regulations would cheer the City, for example).
Test 2 – make the right appointments to key positions
Johnson gets positive ratings for clearing out much dead wood in the cabinet and injecting some renewed energy. The balance of the cabinet between Leavers and Remainers has also shifted towards Leavers, with Leavers occupying three of the four top government posts.
The replacement of Philip Hammond at the Treasury is unambiguously a good thing. Not only was Hammond an arch-Remainer, but he was also painfully lacking in the imagination necessary for navigating Brexit. We nevertheless have our doubts about his replacement, Sajid Javid. Javid also supported Remain in the 2016 referendum but claims now to be a convert to Leave. He has a financial background, but we are unsure he is either forceful or imaginative enough to give the Treasury the overhaul it desperately needs and put forward bold new policies to take advantage of Brexit. The new Chief Secretary to the Treasury, Rishi Sunak, may be a better choice. He has been a strong supporter of free ports, for example.
Liz Truss at International Trade is something of an unknown quantity. Another Remainer turned Leaver, she has made positive early noises about trade deals with the US and Australia. But there is no real substance as yet. Kicking off real negotiations with these trade partners – which the UK can legally do, despite the previous government’s claims to the contrary ¬– would be a good sign.
Michael Gove’s appointment as head of ‘no-deal’ preparations concerns me. While Gove is talented and intelligent, he has proved untrustworthy on Brexit over the last two years, strongly supporting Theresa May’s withdrawal agreement. It would have been much better for this appointment to have gone to a well-briefed Brexit supporting such as Steve Baker – who instead was offered a powerless and minor role. The retention of Steve Barclay at Dexeu is also disappointing.
In terms of officials, the big story is the appointment as Johnson’s advisor of Dominic Cummings, former leading light of Vote Leave. Cummings is intelligent and radical and is keen to shake up the civil service – all good. However, he has also floated dangerous notions in the recent past, including that the UK could sign up to the Withdrawal Agreement and then simply ignore it later if necessary. Among key civil servants, the replacement of Olly Robbins as key negotiator with the EU by David Frost is a positive step, but there needs to be much wider-ranging change than this including the departure of Remain-supporting officials such as Mark Sedwill.
Test 3 – No deal preparations must be accelerated and broadened.
So far, the government has talked a good game in this area but not made any key concrete moves that would persuade us – or, more importantly, the EU – that they are serious about going ahead with a WTO-based Brexit if necessary. We get the impression, unfortunately, that the government is trying to bluff its way to a new deal which is a tactic almost certainly doomed to failure.
The ‘extra’ £2 billion announced for no-deal preparations looks largely to be PR. Some of the money has already been announced and so isn’t new, and there is a notable lack of specifics on which this money will be spent. We need to hear about new customs officers taking up their posts, contracts being issued for infrastructure upgrades etc. It is also worrying that there is little evidence of increased activity in key civil service departments – if anything, the opposite.
The government has announced a large-scale advertising and information campaign on Brexit, which we will watch with interest. Will it be designed to spur individuals and businesses to take the necessary steps to prepare for Brexit, or will it be shallow and still tinged with Project Fear elements?
Test 4 – Categorically state that May’s Withdrawal Agreement (WA) will not be revived under any circumstances.
The government has not been consistent in this area so far. Johnson has said that the WA is ‘dead’ but has also hinted at other times that elements of it might be revived. Other ministers have concentrated largely on the Irish backstop, implying that the WA without the backstop might be acceptable. This concerns us greatly as the backstop is very far from being the only problem with the WA: the WA has rightly been described by leading lawyers as ‘a legally binding death-trap for Brexit’ and as a ‘political Chernobyl disaster’.
Johnson also recently muddied the waters further by suggesting the UK might stay in the EU customs union and single market for another two years – i.e. the ‘transition’ period envisaged in the WA. This would be a very bad idea – two years as a powerless rule-taker from the EU would leave the UK open to a plethora of regulatory and legal attacks by the EU. Some of these are already occurring, such as the EU’s attempts to force the UK to impose VAT on commodity derivatives trading – an apparently obscure issue but one which could cost the UK many billions. The EU would use these attacks to try to force the UK into a suboptimal final deal and the UK would have no way to respond.
The only ‘transition’ that would work for the UK would be a simple zero-tariff temporary free trade deal under GATT/WTO Article XXIV, as outlined in previous publications for Briefings for Brexit. Anything involving rule taking means a return to supplicant status for the UK and is a recipe for disaster.
Test 5 – End ‘mission creep’ over the Irish border issue.
The rhetoric in this area is again, so far, positive. As we hoped, Johnson has broken with the May government’s approach of allowing the border issue to expand from avoiding checks at the border to avoiding almost any changes at all with regard to the border. He has clearly hinted that the government would now accept checks and controls on trade away from the border, using modern customs processes.
But Johnson needs to go further. Drawing on the work of new commissions set up to look at the border issue, the government should draw up a set of concrete proposals for managing the border from the UK side, to be put in place unilaterally if necessary. These proposals could go a long way to defusing some of the scare stories associated with the border.
Test 6- End the stealthy ceding of UK defence and security autonomy to the EU.
A number of interlocking defence provisions have been agreed with the EU since November 2016, almost entirely under the radar, which if ratified by treaty would lead to the UK ceding huge areas of defence autonomy to the EU and risk the UK’s vital security cooperation with its ‘Five Eyes’ partners.
There has been little noise in this area so far. The departure of Sir Alan Duncan from the FCO is welcome but the new ministerial team at the FCO and at Defence have yet to take a public stance on the defence giveaways noted above. Nor have we yet seen the essential changes in key officials.
Overall Rating 5/10
It is very early days and it would be wrong to pre-judge the new government. Some early indications are positive, at least rhetorically. But we have concerns about the lack of concrete actions that would convince us the government is serious about pushing ahead with a genuine Brexit, of the WTO type if necessary. The government has rightly conceded that many preparations needed for a WTO Brexit are also needed for one based on a free trade deal with the EU. But if that is so, there is no excuse for not engaging in these preparations immediately. And if the government fails to follow through on its rhetoric in these areas, the EU will soon cotton on and any hope of a new negotiated exit will vanish.
We await further developments with interest.