Commentary on Political Economy

Thursday 24 December 2020



At long last we have a Brexit deal – and it's as bad as you thought | Tom Kibasi

Last modified on Thu 24 Dec 2020 15.34 GMT

Boris Johnson always expected news of a deal to be greeted with jubilation. It was to be his moment of triumph after three decades of climbing to the summit of British politics by railing against Brussels. The rightwing press dutifully rallied. Even Nigel Farage declared: “The war is over.”

But with Britain in a state of crisis because of the government’s botched response to the pandemic, most people will react with relief or perhaps indifference. For all the triumphalist claims of the Brexiters, the sunny uplands they told us to expect are no more than another cold, dark, wet winter’s day. The 11th-hour antics means there will be little scrutiny of a trade deal that could shape Britain’s economic destiny for a generation.

As a means to lower expectations and add drama, Johnson continued to perpetuate the “no-deal” hoax of his predecessor – that it was so plausible that he would pursue such a ruinous outcome is no credit to him. The notion that some of the world’s largest economies would go into meltdown over a few middle-aged men with outsized egos and puffed-up chests arguing about fish was always ludicrous. And embarrassing.

It is a sad indictment of our political and media class that so many played along. Brexit was always in part fuelled by the allure of destroying the present. The farce has been presented as a drama, when reversing more than 40 years of cooperation for peace and prosperity is truly a tragedy.

The Brexit deal itself is nothing but thin gruel. It will make it much harder for Britain to sell services to EU countries, where we were once advantaged. Britons will lose their right to freely travel, work and settle in other European countries. While there will be no tariffs or restrictions on the quantity of goods that can be sold, British exports will for the first time in decades face checks on their origins and compliance with EU regulations.

The government fought hard for regulatory autonomy that it imagines will allow Britain to achieve escape velocity from economic reality. It is a fantasy. Britain’s producers will need to meet EU regulations to sell into their most important export market, no matter what bureaucrats in Whitehall may say. A separate set of British regulations for companies to comply with harms rather than enhances our international competitiveness.

After nearly half a century of closer integration with the European economy, Britain is now locked into needlessly throwing up new barriers to trade with our closest neighbours. As the past few days has shown, the ports can quickly descend into chaos. Even if implementation of the deal is smooth – a big if – it will prove costly to the UK economy, with the Institute for Fiscal Studies estimating it will knock more than 2% off growth and see inflation climb to 3.5%. That means fewer good jobs, lower incomes and higher prices.

The dual impact of the pandemic and Brexit has pushed business investment – the engine of wealth creation – down by 30% from its long-term trend. With the deal seeing Britain now outside the world’s largest single market, it will make this country a less attractive place to invest. Britain has long been reliant on the “kindness of strangers”. They will not look kindly on this deal. No serious economist would ever recommend trashing your trading arrangements with your biggest trade partner.

This outcome was a choice of Johnson and the Conservative government, not an inevitable consequence of the vote to leave in 2016. People voted not to terminate our economic cooperation but to put it on a new and different political basis, with sovereignty more explicitly and firmly rooted in Westminster rather than pooled in Brussels. Instead, Britain will have the same trading arrangements as far and distant countries.

What’s more, this deal will see the poorest communities across Britain hit hardest – especially in the north and the Midlands, which are more reliant on manufacturing, set to be a significant loser. For all the talk of “nothing to lose”, analysis by IPPR shows that a Brexit deal like this will cause the most harm to those least resilient to it. Why would Labour support such a poor result for Britain?

Perhaps the limpest argument is that a vote against this deal is a vote for no deal. As the miserable years since the UK voted for Brexit have taught us, deadlines are imaginary lines drawn up by politicians that can change with sufficient political will. The main impediment to a better deal is not the EU but hardline Tory ideology. Besides, the Tories have a large majority so any parliamentary vote is about what the opposition parties believe rather than whether the deal will be implemented.

It was Labour’s abject failure to arrive at any coherent political position on Brexit in the last parliament that was one of the many reasons for its dire showing at the polls in December 2019. But the plan to vote for the deal shares the same political thinking as Labour’s disastrous embrace of austerity under Ed Miliband – where the same Westminster logic led it to follow polling rather than to show leadership. Do not expect the electorate to thank Labour for abandoning its principles and voting in favour of a deal that will damage Britain. They won’t.

Convictions in politics matter. Had the 2016 referendum gone the other way, does anyone seriously imagine that Tory Brexiters would say they had to accept the result and march through the lobbies in favour of the latest EU treaty? Voting in favour of a shoddy deal will surely dampen the enthusiasm of many of Labour’s supporters, the vast majority of whom have always been rightly hostile to the hard-right Brexit project.

Failing to oppose the Tory Brexit deal will leave Labour mute for years to come as the damage unfolds, unable to prosecute its central argument to sack the Tories. Forecasters already expect that Britain will have one of the slowest recoveries from the Covid crisis precisely because the economy faces Brexit disruption at the same time. If Labour votes with the government, shadow ministers will have any critique answered with: “Well, you voted for the deal.” Surely Labour wants to be able to argue that the Tories have bodged Brexit along with everything else – which is why the electorate should sack them and put Labour into power.

A thumping majority for the Brexit deal would hand Johnson precisely the “reset” moment that his rocky premiership so desperately needs. It would see the prime minister end a torrid year with endorsement not only of his deal but also the disgraceful tactics he employed to secure it. It will leave Johnson cock-a-hoop just as he is wallowing in failure over his handling of the pandemic.

This lousy deal is bad for Britain. That should be the only yardstick that matters. It is not complicated. Labour should oppose it.

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