Daniel Hannan: Distracted and passive, the Government has yet to grasp the full advantages of Brexit

5 Jan

Lord Hannan of Kingsclere is a Conservative peer, writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.

Brexit, on its own, does not add or subtract a farthing from our national wealth. All it does is remove constraints, allowing us to make different choices. Those choices will determine our success. We can opt for the formula that always guarantees growth – lighter regulation, freer trade, lower, flatter and simpler taxes – or we can go the other way, rewarding politically-connected industries and giving into demands for higher spending.

A year has passed since the EU’s transition period came to an end, giving us the freedom to make these choices. Now seems as useful a time as any to assess which way we are going.

We should first note that 2021 was a worse year than almost anyone expected when it began. Remember the relief with which we greeted the end of 2020. After nine months of intermittent lockdowns, we finally had vaccines and with them, it seemed, a clear way out of the crisis. But a new lockdown was decreed on January 4 – supposedly until mid-February although, in the event, parts of it were left in place until July. So we should not infer too much from an atypical year. None the less, we can make a tentative early reckoning.

Some of the positives were listed by Boris Johnson last week:

“We’ve replaced free movement with a points-based immigration system. We’ve secured the fastest vaccine rollout anywhere in Europe last year by avoiding sluggish EU processes. And from Singapore to Switzerland, we’ve negotiated ambitious free trade deals to boost jobs and investment here at home. But that’s not all. From simplifying the EU’s mind-bogglingly complex beer and wine duties to proudly restoring the crown stamp on to the side of pint glasses, we’re cutting back on EU red tape and bureaucracy and restoring common sense to our rulebook.”

He’s plainly right about the vaccination programme. Had we still been in the EU, we would never have opted out of the cumbersome collective purchasing scheme which, let’s remember, almost every British Europhile clamoured to join.

As for trade, there have been gains, but they have so far been stunted. A combination of bureaucratic inertia, rent-seeking and general protectionism has limited our ambition – even with as close an ally as Australia. The resistance to free movement of labour, for example, was wholly on the British side, as was the foot-dragging on cheaper food.

Free-trade is counter-intuitive, running up against our hunter-gatherer instinct for self-sufficiency. Even so, ministers have so far not been radical enough. We need to think like New Zealanders, eliminating barriers regardless of lobbying by vested interests. We need to understand that unrestricted imports make our industries more efficient. We need to remember that “cheap” is not a dirty word: giving our consumers more spending power is what drives our economy.

The PM gets all this, at least in theory. Two years ago, in Greenwich, he offered the strongest and most eloquent defence of free trade yet put forward by a head of government. Invoking Adam Smith and David Ricardo and Richard Cobden, he went on to diagnose where the world was going wrong:

“The mercantilists are everywhere, the protectionists are gaining ground. From Brussels to China to Washington tariffs are being waved around like cudgels even in debates on foreign policy where frankly they have no place; and there is an ever-growing proliferation of non-tariff barriers and the resulting tensions are letting the air out of the tyres of the world economy.”

What was the solution? Why, for Britain to resume her historic role:

“There lies the port, the vessel puffs her sail, the wind sits in the mast. We are embarked now on a great voyage, a project that no one thought in the international community that this country would have the guts to undertake. But we commit to the logic of our mission: open, outward-looking, generous, welcoming, championing global free trade now when global free trade needs a global champion.”

Good stuff, no? Yet, in the very first test case – whether to retain the steel tariffs that the EU had imposed in retaliation against Donald Trump – Downing Street overruled the Trade Remedies Authority and kept the levies in place, largely so that a handful Conservative MPs could boast about standing up for local producers. We have thus sent a message to every politically-connected industry: if you want special favours at the expense of the general population, the door of Number 10 is open.

When it comes to deregulation, too, the rhetoric has been ahead of the reality. The Government was very warm in its language when, in June, Iain Duncan Smith, Theresa Villiers and George Freeman produced a well thought-out and serious plan to remove some of the more needless and expensive EU rules. And, to be fair, it has made some positive changes beyond those listed by the PM: restoring pint bottles of champagne, scrapping the tampon tax and so on.

But the most burdensome EU regulations have so far been left in place: the Clinical Trials Directive, the Ports Services Regulation, the Temporary Workers’ Directive, the End of Life Vehicles Directive, the droit de suite rules, the Alternative Investment Fund Managers Directive, MiFID II, the bonus cap.

Repeal is always difficult once an industry has had to assimilate compliance costs. Established actors don’t want new entrants avoiding those costs, and so become advocates for measures they originally opposed. For example, 15 years ago, the entire chemical sector was opposed to the EU’s REACH Directive, which replaced a risk-based approach to importing chemicals with a pricey and prescriptive list system.

Now, having gone through the hassle of implementing it, the industry wants to keep it. It is difficult, in such circumstances, for a minister to say, “I understand your position, but I have a responsibility to start-ups, innovators and, above all, consumers”. And so, again and again, we have taken the line of least resistance and left things as they are – or worse, as in the case of REACH, expensively recreated our own version of the EU’s regime.

For all these reasons, it is often easier to let regulations wither on the vine than to hack them back. Over time, many regulations cease to be relevant. Who cares, these days, what the rules are for fax machines or word processors? Britain could, in theory, acquire a cumulative competitive advantage simply by not adopting the new regulations that the EU does.

Again, though, this requires a conscious effort. If, for example, we decree unusually cumbersome carbon taxes, we shall fall behind more pragmatic countries.

Brexit could mean cheaper energy: we could cut prices by disapplying some EU rules or, if that is too much, by regulating more lightly in future. But we are choosing to do the opposite.

Brexit could mean cheaper food. Outside the Common Agricultural Policy, we could remove tariffs, quotas and other barriers. But we seem reluctant to do so.

Inflation is taking off, but we are not pulling any of the levers that might mitigate it. Instead of cutting taxes, and so giving people more disposable income, we are raising National Insurance, squeezing household budgets further.

Yes, a lot of this has to do with the epidemic – not just in the immediate sense that we are half a trillion pounds worse off, but in the wider sense that the crisis has made voters more illiberal and statist.

Has Covid-19 killed our appetite for reform entirely? We’ll know soon enough. The Government seems to have decided to try to keep things open rather than paying people to stay at home. The PM’s could now make some of the reforms arrested by the pandemic. If he doesn’t, we must conclude that he never will.

Sarah Ingham: Under Johnson, the Marie Antoinette of our times, a Labour government is no longer unimaginable

10 Dec

Sarah Ingham is author of The Military Covenant: its impact on civil-military relations in Britain.

For someone who aspired to being world king, Prime Minister Boris Johnson has turned out to be more like France’s Louis XV, who predicted ‘Après moi, le deluge’.

“After me, the flood” has nothing to do with the Government’s obsession with carbon net zero. Let’s hope this fixation reached its zenith at last month’s preening eco-fest, COP26, also known as Davos on the Clyde. Instead, the failures of the reign of King Louis (1710-1774) paved the way for the French Revolution of 1789. Whether the monarch was anticipating or was indifferent to the chaos which would follow him is usually only of academic concern.

Close to the second anniversary of the 2019 election victory which delivered a landslide majority of 80, the Prime Minister’s own seeming indifference to the plight of the people of this country is only rivalled by that of Louis’ granddaughter-in-law, Marie Antoinette, to her subjects. Let them eat cake? Let their children, like 13-year-old Ismail Mohamed Abdulwahab, die alone. Let their frail elderly be unvisited in care homes. Let their weddings be postponed. Let their churches, temples, synagogues and mosques be closed.

Patterson, Peppa Pig, parties at No 10 and Plan B. During the past few weeks, Johnson has not so much crashed the car into a ditch as sent it over a cliff where it somersaults to the ground before exploding into a fireball. Never mind unforced, his errors appear so wilful, it has to be asked whether he is up to the job of being PM – or indeed even wants it.

“There is no Plan B” – you wish. On Wednesday, more Covid-related restrictions on daily life were unveiled. The timing was reminiscent of the United States’ 1998 bombing of a factory in Sudan, assumed to be Bill Clinton’s very own diversionary tactic to distract from the Monica Lewinsky scandal.

The Conservatives are supposed to be the party of business, enterprise and wise stewardship of the economy. The Institute of Economic Affairs suggests the latest Covid measures will cost Britain £4 billion a month. And the Government clearly views the hospitality sector as below the salt, despite contributing almost £60 billion in gross value added to the British economy in 2019. Hammering it in the run-up to Christmas for the second successive year could be the final straw for many weakened businesses. Let them go bust.

There should be no Plan B. Omicron might well be a live vaccine, bestowing natural immunity following a mild cold-like infection. Instead of viewing the variant as a possible blessing, we’re back to more masks, tests, vaccines passports and Working From Home. As ConservativeHome revealed earlier this week, WFH has turned out to be less than optimal for the Foreign Office or for desperate Afghans.

The Government’s response to Covid has been flawed from the get-go: disproportionate, panicked and heedless of collateral damage. It would have been better off consulting Mystic Meg than Professor Neil Ferguson and his ilk. SAGE should have been sacked long ago. Its advice has not only crashed the British economy but failed to prevent 146,000 Covid-related deaths.

The massive structural flaws within the state apparatus which the pandemic has revealed would have been a toxic inheritance for any leader. Post-Brexit Britain can no longer use Brussels as an excuse for mismanagement and burdensome red tape. The country needs a leader with the vision and drive to implement wholesale reform, not least of the Civil Service. We need another Thatcher to solve problems like the NHS: instead we get Johnson who ineffectively throws money at them, raising the tax burden to its highest and most unConservative level since the Second World War. Let them be poorer.

Anyone who has been out on the campaign trail with Johnson will testify to his charisma and the feel-good he conjures up among voters on the rainiest of days. However, his 2019 victory was not down to his celebrity or distinctive cartoon-like silhouette which fascinates small children or to his jokes.

Getting Brexit done was about more than Britain leaving the EU. By opting for Leave in 2016, voters signalled their demand for wholesale change within this country, only to be ignored and insulted by the Remainer political establishment – that includes you, Keir Starmer – who wanted to cling to the status quo. The Red Wall turned blue two years ago because Boris seemed to be on its voters’ side: instead of despising them, he got them.

Those voters are now asking where is Plan A. And whether it includes indulging the eco-loons of Insulate Britain, putting out the welcome mat for illegal migrants, ripping out gas boilers and imposing £1.4 trillion in costs to get the country to net zero. Where are Conservative principles in all this? Governing by focus group is not governing at all.

Blowing up voters’ goodwill, no Jeremy Corbyn to bash, Brexit done … MPs are surely weighing up whether Johnson is an asset or a liability. Next week’s result in North Shropshire should tell them.

The parties at No10 are the ultimate in toxic do-as-I-say-not-as-I-do hypocrisy. This is a different order of magnitude from Barnard Castle and the handsy Hancock trysts. Voters are not going to forget or forgive. For many, it’s too close to dancing on graves.

Johnson’s always shaky moral authority is ebbing away. There is already a suspicion that the PM and his wife stretched the rules (or was it the guidance?) last Christmas Day. Should they have stuck two fingers up at voters by going along to the knees-ups at the No10 frat house, it’s game over.

A three-week lockdown has turned into 21 months of state inference in our daily lives, with our hard-fought freedoms trashed by sub-prime officials and ministers. Liberty is the core Conservative value. It would be poetic justice if the Prime Minister were brought down by the statist rules he introduced.

The hubris, self-indulgence and lack of seriousness in Downing Street is typified by a melodrama over a makeover, involving the Electoral Commission in choices about wallpaper.

Thanks to the current chaotic regime, a Labour government is no longer unimaginable. Does Johnson care, or is he actually wanting to spend more time with his new family and with making Netflix documentaries? Après moi, le deluge.

Ryan Bourne: It’ll take decades, not years, to determine whether Brexit was a success

1 Dec

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

“What would need to happen for ‘Economists for Brexit’ to become ‘Economists Against Brexit’?” the FT’s Chris Giles asked us in July 2016.

It was a good question. And some economically-minded leavers seem near their switching threshold already. Fraser Nelson last week wrote of his disappointment that an ‘open’ leave of expansive free trade deals and deregulation isn’t being delivered by Boris Johnson.

Britain is failing the “testable thesis” of Global Britain, he argued, with the limited ambition of re-heated EU trade deals, modest trade liberalisation with allies such as Australia, and stasis on data and financial regulation leaving him asking: did I vote the wrong way?

For classical liberal Remainers, of course, a free-market Brexit was always a delusion. David Gauke argues it was an anti-Thatcherite endeavour by definition. By erecting new trade barriers with Europe and removing constraints against interventionist industrial policies, our EU exit repudiated the 1980s revolution. Those who supported Brexit for free-market reasons were misguided, as current events confirm.

Prospects for a classical liberal economic revival are undoubtedly bleak for the near future. Nevertheless, Nelson and Gauke’s conclusions seem to me startlingly premature about Brexit’s overall legacy. And the reason why relates to the answer I gave to Giles’s question five years’ ago: the substantive issue in the Brexit referendum was not “what will we do?” immediately after leaving but “who will decide what is done?”

As such, it’s a category error to think “oh, if Johnson does X or Y, then Brexit will have been a mistake/a roaring success.” Brexit is a major shift in our governing system that can only really be judged by looking at comparative outcomes between Britain and the EU over decades, not years.

Brexit, in other words, is a major constitutional change in where decisions are made and who makes them. It was not a simple policy question. Yes, these repatriated powers can be used for good or ill and how they are deployed will wax and wane depending on the zeitgeist at any given time. But Brexit’s success or failure hinges on whether, overall, the institutions of British Parliamentary democracy produce better outcomes over long periods than a Brussels bureaucracy would have.

As a major constitutional change, it’s just as erroneous to judge Brexit by a few initial trade policy decisions as it would be to judge American independence in, say, 1785, or post-communism reform in Eastern Europe in 1995, or UK EEC membership in 1978. As Johnson was a leading leaver, it’s natural to conflate his agenda with Brexit itself. But that is to mistake the current policy winds as immutable laws that will forever dominate our political economy.

Gauke’s take is particularly misguided, because it simply looks at the timeline of what has happened post-Brexit and ignores the broader context of trade policy around the world. The U.S. hasn’t Brexited, but adopted large tariff increases under President Trump anyway, which have been maintained by a Biden administration that is also beefing up “Buy American” rules.

The EU, likewise, is adopting an aggressive anti-American agenda against Big Tech, while Emmanuel Macron has been the driving force of a pan-European protectionism that uses the veil of environmental laws for keeping out poor countries’ agricultural products.

Now it would be churlish to imply that Brexit wasn’t supported by some on protectionist grounds, nor that the act of Brexit hasn’t facilitated some protectionism. But in the broader global context, the free trade rhetoric of the UK government, and Tory member support for vocal free-traders, is an anomaly. And even if the Government’s actions on trade don’t always live up to it, the long-term question is whether Britain will end up more open on trade than the relevant counterfactual where we remained within an EU, not some nirvana that doesn’t exist.

At the time of the press conference, Giles interpreted my argument on this line of reasoning as a faith-based argument for Brexit. Economists for Brexit appear to think Brexit cannot be a bad move, he concluded, because it was merely the freedom to make decisions. Even if Brexit went wrong and led to a socialist Britain, it was the politicians to blame – not Brexit itself. “From that I conclude the group doesn’t really have much of an open mind,” Giles concluded.

But that’s not what this argument says. Some leavers are no doubt dewy-eyed for national democracy in all aspects of life. Giles Fraser has said he’d support Brexit on a point of principle, whatever the consequences. I remember talking to a senior Vote Leave staffer who similarly said he’d rather a long Corbyn premiership in a sovereign Britain than a Conservative government within the EU.

Yet that’s not why free-marketeers supported Brexit, nor the best liberal case for leave. No, the best case said that, over the long-term, Brexit would lead to better outcomes for openness, economic freedom, and liberty here than with Britain in the EU precisely because of the institutional differences between the two.

It would obviously be great if we were making inroads with a free-trading agenda and meaningful regulatory reform. The key question though is whether we were more likely to get that over time in or outside of an EU that itself will be changing.

Despite recent events, I would still take that long-term Brexit bet. The British Parliamentary system, for all its faults, has been shown to error-correct substantively when it’s clear major government mistakes are made, in a way the institutional stasis of the EU often prevents. The prospects for better governance reform here are only heightened by politicians no longer being able to hide behind blaming Brussels for what are usually domestic errors.

I still think Britons’ broad regulatory instincts are more permissive than seen collectively in Brussels (as evidenced by the faster vaccine approval and the more liberal approach to genetically modified foods). So even if active deregulation proves politically infeasible, more open regulatory frameworks on new issues, such as AI, driverless cars, and future service industries can leave us better off than if ensnared in Brussels’ orbit.

What’s more, global markets are more likely to discipline small countries towards attractive tax, trade, regulatory and migration systems – changes often hard to make when coordinating with 28 states first.

Of course, I could be wrong and so in 30 years’ time writing mea culpas admitting Brexit was a fundamental error. But it seems hasty for Brexiteers to want to write-off a major constitutional change less than two years in, or indeed for Remainers to be unable to contemplate a world where the EU is not the absolute pinnacle of economic dynamism forever.

Daniel Hannan: Lord Frost’s speech yesterday exposed the staggering petulance of Britain’s Euro-zealots

13 Oct

Lord Hannan of Kingsclere is a Conservative peer, writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.

“Well, you signed it!”

That, pretty much, is the entirety of the case against the Government over the Northern Ireland Protocol. Ministers and officials keep patiently proposing ways in which the EU’s stated objectives could be met without disrupting Ulster’s economy and unsettling her politics.

“Yeah, well you signed it!”

David Frost and his team point to the harms: the extra costs loaded onto businesses, the trade diversion, the scheduled banning even of medicines.

“Should’ve thought of that before!”

They explain that the application is disproportionate. That there is no way that the EU actually needs to carry out 20 per cent of its external checks on 0.5 per cent of its trade. That there is plainly more going on here than a desire to check what might enter Co Cavan. That Brussels’ insistence on rabies shots for pets was not, by any stretch of the imagination, necessary or proportionate.

“Didn’t you read it before you signed?”

They draw attention to the political implications. They recall that the peace settlement in Northern Ireland rests on two pillars: first, an understanding that nothing important will be done with the support of only one of the two communities; second, a promise that there will be no change in the constitutional status of the Province except by a vote of its own inhabitants.

Yet all three Unionist parties are campaigning against the Protocol, and the surviving author of the Belfast Agreement, David Trimble, says the Protocol breaches its terms.

“Bet they’re feeling silly about backing Brexit now, eh, Unionist numpties!”

Frost’s team asks whether the EU is acting in good faith when it is so obviously trying to make life difficult. Its aim – stated publicly and repeatedly – is to force Britain into accepting its agrifoods regulations, so that we can’t buy beef from Australia rather than France or Ireland. Is this really a reasonable position?

“Well, you signed it!”

This has been the response, not just of online #FBPE maniacs, but of Europhile columnists, Irish politicians, Labour and LibDem front-benchers and, not least, EU negotiators. The reaction to Lord Frost’s temperate well-reasoned speech in Lisbon yesterday was a case in point. Rather than disagreeing with anything he had said, his opponents fell back on their favourite yah-boo attack line.

“The same minister who, just months ago, was trumpeting the Government’s botched Brexit deal now says it’s intolerable and has to be changed,” said Alistair Carmichael for the Lib Dems.

Yup, agreed Labour’s Jenny Chapman, it was “the agreement he negotiated – and the prime minister signed – just two years ago.”

“The absolute state of David Frost trashing the deal he negotiated + hailed as a triumph,” Tweeted Gavin Barwell.

“It is a fact that Lord Frost negotiated the protocol, agreed to its terms and backed Boris Johnson’s campaign to sell it during the last general election,” said Matthew O’Toole for the SDLP, just in case we had missed the point.

OK, guys, we get it. But your argument is enormously telling in two ways.

First, it exposes a total lack of interest in addressing the problems. Even now, more than five years after the referendum, Eurocrats are chiefly interested in teaching us a lesson. They want there to be a visible price for Brexit, and if that price is an economic and political crisis in Northern Ireland, tant pis.

That much, perhaps, is not entirely surprising. There were always Euro-zealots for whom Brexit was an act of sacrilege that called for chastisement. What is surprising – or at least would have been five years ago – is that a section of the British commentariat was so unbalanced by the referendum result that it now automatically sides with the EU, however petulant, self-contradictory or unreasonable its position.

No one in Northern Ireland is pro-Protocol. My parliamentary select committee has been taking evidence for months. We have heard from Leavers and Remainers, Unionists and nationalists, Leftists and Rightists. Some oppose the Protocol on principle, some see it as the price of Brexit. But no one – no one – actively likes it.

Yet, while the British government is actively seeking to address local concerns in ways that will avoid a hard border and give the EU the guarantees it says it needs, its opponents are still playing games of the well-who’s-sorry-now kind.

That reaction is telling in another way. “You signed it” is a far weaker argument than its exponents seem to realise.

Most treaties are now defunct. Either they lapsed, or they were renounced by one party or the other, or they were overtaken by events. Where, now, is the Triple Alliance? Where is the 1914 Bryan-Chamorro Treaty, giving the United States first refusal on any canal built across Nicaragua? Where is the 1936 Anglo-Egyptian Treaty, guaranteeing a British military presence at the Suez Canal? Where is the Warsaw Pact?

Imagine a list of every international accord, going back to the Peace of Callias between the Delian League and Achaemenid Persia in the fifth century BC. How many of them are still in force? One per cent? Less?

Consider an example that seems apt given its subject matter, and given the fact of this being its centenary year. The Anglo-Irish Treaty of 1921, which recognised Irish independence, came with a number of conditions, including an oath of loyalty to the monarch, continuing British access to three ports and much else.

Once independence had been secured, successive Irish governments progressively dismantled those conditions, breaking their residual constitutional links with the UK, leaving the Commonwealth and declaring a republic.

Britain, for what it’s worth, reacted with equanimity. When the final rupture was made in 1949, George VI sent a warm message to the Irish President:

“I hold in most grateful memory the services and sacrifices of the men and women of your country who rendered gallant assistance to our cause in the recent war and who made a notable contribution to our victories. I pray that every blessing may be with you today and in the future.”

The EU is unlikely to be so affable. But the argument that Ireland used was a familiar one, namely that it had signed a treaty under duress, sought to make it work, found it intolerable, and so was abandoning it.

Obviously, Britain did not fight a war to get out of the EU. But there is no way that it would have agreed to the Northern Ireland Protocol had not a majority of MPs been working with Brussels to sabotage Brexit. The Protocol was the product of the Benn Act. Indeed, it was only after Theresa May lost the 2017 election that the EU proposed the outrageous idea that the UK should surrender jurisdiction over part of its territory.

As Frostie put it in Lisbon, it was agreed during “a moment of EU overreach when the UK’s negotiating hand was tied” – a point that no one has seriously disputed. Which makes it rather rich for those MPs who were doing the hand-tying in 2019 to complain now.

Could Britain simply annul parts of the Protocol, as Ireland did with the 1921 treaty? Yes – and it should. Triggering Article 16 is an inadequate solution, leaving many objectionable arrangements in place. It is a measure of the loopiness of Brussels negotiators and, even more, of their British cheerleaders, that making use of a treaty clause agreed to by the EU and intended for precisely such circumstances as now is howled down as a breach of faith.

If the EU is threatening retaliation over a measure foreseen in the Protocol – a measure invoked by the EU in February from no higher motive than pique at Britain’s vaccination programme – then we might as well be hanged for a sheep as for a lamb, abrogate the whole deal and replace it with something more workable.

Outright repudiation would allow us to put new arrangements in place, proving that there is no need for border infrastructure in Ireland and ensuring that future talks began from that fact. The sooner we act, the better.

Orban says he’s defending Christian civilisation. His opponents say he’s subverting Hungary’s democracy.

24 Sep

Will the European Union hold together? Or is Western Europe going one way and Central Europe another?

Viktor Orban, Prime Minister of Hungary, is perhaps the most eloquent exponent of, as he put it in a recent lecture, “a Central European cultural, intellectual and political entity that is growing more and more different from Western Europe”.

Orban has many critics, but his lecture was directed against one in particular, Timothy Garton Ash, Professor of European Studies at Oxford.

There was a time when they were on the same side, for as Orban says:

“The professor has an excellent knowledge of Central Europe and used to inspire many of us during our years of resistance against communism and the Soviet occupation, in the late 1980s.

“What’s more, members of the current Hungarian political leadership had the chance to personally attend his lectures, which took a stance for freedom, at the University of Oxford.”

Orban, born in 1963, sprang to fame in Hungary in June 1989 by giving a speech demanding the withdrawal of Soviet troops and the holding of free elections, after which he studied for a few months at Pembroke College, Oxford, on a scholarship awarded by the Soros Foundation.

He returned home in January 1990, was elected to the National Assembly, became the leader of Fidesz, which he led in a national conservative direction, and served as Prime Minister from 1998-2002 and again since 2010.

Garton Ash has become, as in this interview with Euronews on 8th September, an unsparing critic of Orban:

“we do have European Union values which are being massively violated in countries like Hungary and Poland, and I think we need to stand up for those values…

“Viktor Orban is having his cake and eating it. He’s winning elections by saying ‘Stop Brussels’, campaigning against the European Union, but taking billions of European taxpayers’ money.

“Therefore the key to an effective response is to establish a linkage between the Europe of values and the Europe of money. And that’s what the European Union has so far failed to do…

“It is absolutely outrageous that you have a member state of the European Union which in my view is no longer a democracy, which has destroyed media freedom, which doesn’t have fair elections, free but not fair elections, which has kicked out the best university in central Europe, which has indulged in outrageously xenophobic propaganda, the treatment of migrants and so on, which is still receiving billions of euros in the EU funds, that is an outrageous state of affairs.”

When asked whether Orban’s illiberalism is a real threat to the EU, Garton Ash replied:

“Without question… One has to go back a long way to find a period when a Hungarian leader was so important in European history…

“And that is because he has become the symbolic leader of the other Europe, the conservative, anti-liberal, ethnic nationalist, Christian, socially conservative Europe.

“And Matteo Salvini, Marine Le Pen, Nigel Farage, Geert Wilders, are all with him.

“So he represents not just one medium-sized member state of the European Union, he represents a very important tendency in the entire European Union.”

Orban maintains that on the contrary, his conservatism is “a blessing for the European Union and even Western Europe”, because the West, he contends in his lecture, has lost the convictions which lay behind its success:

“I understood that beyond and behind all the technical equipment, novel institutions and scientific discoveries, there was also the West’s sense of its exceptionalism and mission, which gave it inspiration and confidence. The conviction that Western man has a mission in the world and with the world, and must act in order to accomplish that mission.

“Naturally, we do know that the Western mission has intellectual and spiritual foundations that should be sought in Christianity. ‘Go, and make disciples of all nations’, Matthew says. This mentality, even if in a changed form, survived in the West also during the Enlightenment, the periods of the humanist ideal of man, human rights and the discoveries of modern science.

“During a period of unquestionable development and brilliant success – despite evident mistakes, blunders and grave shortcomings – the conviction that the overall balance of the mission of Western civilisation and the West was fundamentally positive held for a long time.

“However, something had changed by the beginning of the 21st century. And this happened just at a time when the West, led by America and Britain, had scored its most brilliant victory, having won the Cold War…

“It no longer seeks meaning in its own history; instead, it keeps saying that it will end soon. It re-interprets or deletes entire chapters of its history, finding them shameful and so to be cancelled, and in the meantime, it is unable to replace them with anything else. And those who are not paralysed, but in fact very much active, are such deconstructive, negative forces that they would be better off paralysed…

“the concept of open society has deprived the West of its faith in its own values and historical mission, and with this now – at the time of the Muslim flood and the rise of Asia – it is preventing the West from setting its own mission against the rising intellectual and political power centres…”

Orban contends that in Brussels, and the West generally, “a sense of mission shared by a political community, a nation is now unacceptable, even suspicious.” Hungary, on the other hand, still has that sense of mission: hence Budapest’s disputes with Brussels.

To Garton Ash, speaking on Tuesday to ConHome, Orban’s essay amounts to “a brilliant exercise in ideological distraction”: Orban says “let’s have a really interesting intellectual conversation about the future of western civilisation”, and the disreputable methods by which Orban stays in power are forgotten.

ConHome suggested two questions arise: one is whether Orban himself is a reputable person, the other is whether it is permissible for anyone, no matter how reputable, to hold Orban’s views.

Garton Ash replied:

“You can be a Conservative nationalist party continuing to govern in a country which is still an excellent liberal democracy – we live in one.”

Orban, he went on, has instead subverted liberal democracy, by gerrymandering, by pay-offs to friendly oligarchs, by getting the media under control: “That’s the problem, that’s why I’m so angry.”

And Orban then distracts attention from his destruction of liberal democracy by reframing the whole battle as an ideological clash, so that people say “maybe I agree with him about immigration” or “maybe I agree with him about Islam”.

Garton Ash went on to say that “characterising Muslims as invaders” (as Orban has done) “is in my view beyond the pale”, and that “some of the election propaganda against Soros is borderline anti-semitic”.

He urged British Conservatives to be cautious about embracing Orban: “It’s the difference between Farage and Johnson.”

And he pointed out that while Orban attacks Brussels, he also accepts very large sums from Brussels: “Viktor Orban is a master of cakeism.”

For a long time Orban managed to keep Hungarian MEPs in the European People’s Party in Brussels, before at length they were eased out of it.

David Cameron, one may note, promised that British MEPs would leave the EPP, and at length kept that promise. British Euroscepticism, leading to Brexit, is in some ways more straightforward than Hungarian and Polish Euroscepticism.

In Hungary and Poland, with their recent history of Soviet occupation, there are still large majorities in favour of EU membership.

Orban wins elections by playing the nationalist card, but one should not imagine that this card does not exist in Western Europe. The EU is paralysed by the fear that taking the great leap to becoming a federal state comparable to the USA  would provoke a nationalist backlash in most if not all of the member states, including Germany and France.

The German Constitutional Court stands as the most reputable though so far reticent opponent of a federal Europe. Alternative for Germany, founded in 2013 by learned men opposed to the policies required to prop up the euro but soon degenerating into a xenophobic movement, is one of the least reputable opponents.

It is now 21 years since Larry Siedentop pointed out, in Democracy in Europe, that no Madison, Hamilton and Jay have stepped forward to compose Europe’s version of The Federalist Papers.

The euro remains a currency unbacked by a government. Perhaps under the pressure of some great crisis, surmounted by leaders who rise to the occasion, that government will be conjured into existence.

But in the meantime, one cannot help being struck by the persistence of the nation state as the fundamental political reality. Nations may be good or bad, reputable or disreputable, democratic or authoritarian.

Perhaps the ultimate function of the EU, towards which Garton Ash points the way, will be to keep its members democratic. But what an opportunity that offers to demagogues to blame the nation’s woes on Brussels.

Jon Moynihan and Christopher Howarth: In an age of global insecurity, Truss’s appointment could mark a watershed in foreign policy

23 Sep

Jon Moynihan was the CEO and Chairman of PA Consulting Group, as well as a member of the board of Vote Leave. Christopher Howarth is a former accountant, lawyer and TA soldier.

The promotion of Liz Truss to Foreign Secretary has the potential to mark a watershed in British foreign policy. Creative, iconoclastic, and bullet resistant, Truss has, as Trade Secretary, made multiple trade breakthroughs by combining pragmatism and optimism.

Recognising as she does the great geopolitical changes around the world during just this past decade, she has the opportunity to make her mark on our history by formulating, with the Prime Minister, a new foreign policy approach for the UK, one that cashes the Brexit Dividend while recognising the dramatic changes in the world that have occurred over the past decade.

There has never been a golden age of global peace and prosperity, but the world has definitely worsened recently. The EU, not yet reconciled to UK departure and torn between an anxiety to contain Russia and a desire for Russia’s energy, is an always unreliable partner, with the France/AUKUS row showing that the EU and its member countries often act in opposite directions.

The botched withdrawal from Afghanistan threatens to recreate a safe haven for arms and terrorism exports. Biden’s fumbles and abandonment of Trump’s Middle East gains give Iran a renewed chance to further its nuclear and regional ambitions within the Shiite Arc and beyond, destabilising states from Yemen to Iraq and threatening Israel.

In Africa, South Africa’s continued implosion has accelerated. Further north, the arena around east Congo contains Hieronymus Bosch-like scenes of civil and interregional war, rape, slavery, and economic exploitation. Across Africa, an old tradition, the military coup, has re-emerged; both military and civil autocrats bolster themselves with Russian mercenaries.

The Indian subcontinent is now a more dangerous place because of Afghanistan’s implosion. Myanmar has taken a huge step backward. Thailand is repressive. South and Central America are the least concerning areas, but only by comparison; democratisations that followed the Falkland Islands war in the 1980s have steadily drifted leftwards, with Venezuela a stark yet apparently unheeded warning.

This brings us, finally, to the two greatest problems: Russia and China. Russia, even in its position of weakness, creates instability, threatens invasion, in its near abroad – Ukraine and Baltics in particular. In further-away countries, the Wagner Group spearheads a new colonialism.

The group of thugs and oligarchs around Putin maintain a steely extractive grip on their own country. Russia has a formidable cyber hacking arm which makes money (through ransomware) and disrupts the West.

Russia opportunistically allies itself with the far stronger China, whose intelligent and to date successful long-term policy, starting with the Belt-and-Road initiative, is quite clearly that of world domination.

In its near abroad, China extends its reach bit by bit, building roads into Pakistan and Afghanistan and railways toward Europe; building illegal villages in Bhutan and pushing Indian soldiers off Himalayan precipices. It refuses to bring North Korea to heel even as that country becomes an ever-greater nuclear and cyber menace (even as large numbers of North Koreans starve to death).

Despite the West’s long-held concern, that led to Obama’s “pivot to Asia”, China continues with its long-term maritime strategy, building piece-by-piece what is eventually likely to become the most formidable Navy in the world.

It builds ports in Sri Lanka, Djibouti, Gwadar and on; it fortifies islands and atolls across the vast expanses of China’s 9-dash-line claim; it threatens Taiwan. In the meantime, China extracts every last ounce of the West’s technological capability via legal and illegal routes; buying, spying, hacking, sending its students in waves to the west so as to learn and return.

The spectacle of China building a F-35 clone 10 years before expected was a wakeup. It highlighted that the role of science – in weapons development, cyber defence and offence, intelligence, and industry – is key, yet in the UK, as in most of the West, we are falling behind and are increasingly unable to protect even what IP we have.

These are some of the strategic challenges facing the UK. What should the UK response be?

In short, our new foreign policy doctrine should first, realise the Brexit dividend, and second, respond to the new bifurcated hegemonic structure: The US (no longer the global hegemon) with its allies, versus China and Russia with their satrapies.

The Brexit Dividend: The UK has not been a super-power for 100 years, but it is a significant power, one with a unique ability to be at the centre of alliances addressing current and future threats. Now we’re a fully sovereign power, we can forge our own policy based on our own interests, with full control of defence, trade and development.

The EU, built around a single market and customs union, always lacked a coherent foreign policy. The UK as a member was saddled with a trade policy serving the interests of others, not us, and a foreign policy unaligned even with the EU’s own trade agreements – the German or Cypriot veto, for example, preventing any serious criticism of Russia or China.

The Bifurcated Hegemony: things are going to get tougher. We will have to tighten our uses of trade and subordinate it and Aid to new geopolitical imperatives; anticorruption and cementing new treaties will have to take precedence over softer fashionable favourites.

Our new ability to focus on our own (and global) security came good in the recent AUKUS negotiations. The UK played to its strengths; a trading partner, trusted and with unique technology (more Brexit dividend: as an EU member the UK could not have discussed trade policy; would have had to support French interests; and would have been pressured to be more accommodating to China).

Promoting specific UK interests becomes central; no more need to outsource our development money (and trade deficit) to Brussels. A sovereign UK can use its aid and trade policy as twin tools to improve stability and growth in Africa, helping countries trade their way out of poverty –win-win for the UK in prosperity and influence.

In the Middle East we can work better with historic partners on security and trade. Joining CPTPP (the pacific trade partnership), and the hinted deemphasis of Canada and NZ from the 5eyes network, points to a more complex future, awash with interlocking networks and relationships of different strength.

We can also now push our objectives in global councils – protecting intellectual property, combating cyber espionage and theft, resisting authoritarian states seeking to subvert international organisations and our values. The UK now has the opportunity to work flexibly with different models to meet differing and emerging threats and opportunities. It’s an exciting new chapter in UK foreign policy.

Such an approach has the makings of a distinctly Conservative foreign policy; pragmatic but optimistic, believing in Britain, British values and a global role; with loyalty to old allies and friends and an instinctive belief that global engagement is good for both us and the world.

As Margaret Thatcher always clearly said: a decrease in British (and American) global influence would be very bad for the world. Fortunately, Truss, being a Thatcherite, recognises the opportunities the UK has. She brings to the Foreign Office unique insights into how to further UK interests and global stability. A new Johnson/Truss doctrine can put them into action.

Stephen Booth: Both sides must accept the trade deal for Northern Ireland has to change

29 Jul

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

Following months of simmering disagreement between London and Brussels over the Northern Ireland Protocol, the scale of the gulf between the UK and EU positions has been laid bare over the past week.

On Monday, the European Commission published its proposals for solutions to ease trade friction between Great Britain and Northern Ireland, covering medicines and some animal and food safety checks. However, these proposals had already been shared privately with the UK in June.

A Government spokesperson quickly dismissed them as representing “only a small subset of the many difficulties caused by the way the protocol is operating,” adding, “We need comprehensive and durable solutions if we are to avoid further disruption to everyday lives in Northern Ireland.”

Last week, the Government published its own proposals for reform of the Protocol in a new command paper. In contrast to the EU’s proposed technocratic tweaks, the UK is seeking reforms that would fundamentally alter the operation of the Protocol. As Lord Frost notes in the foreword to the document, “They will require significant change to the current Protocol. But they will not dispense with many of its concepts.”

A key feature of the UK proposal is to build on the concept that only goods moving from Great Britain to Northern Ireland, which are “at risk” of entering the EU, should face tariffs.

The UK is suggesting that where a trader has declared that products moving to Northern Ireland are not intended for onward distribution or use in the EU, no customs processes and checks should apply. Risk-based and intelligence-led checks would be conducted to ensure compliance, but this approach would establish that the default is that goods can circulate freely within the UK’s customs territory, which, as the Protocol makes clear, includes Northern Ireland.

The same principle would apply to most agri-food trade, except for live animals. Agri-food products going to the Republic of Ireland would still be subject to the full range of EU mandated checks, but “there would be no need for certificates and checks for individual items that are only ever intended to be consumed in Northern Ireland”.

In addition, the UK remains open to a bespoke agri-food agreement based on the principle of equivalence (as opposed to the EU’s desire for alignment with EU rules) that would provide for managed regulatory divergence, and a mutual basis for assessing where risk-based checks were most necessary.

The UK has also proposed the introduction of “a full dual regulatory regime” that would allow goods to circulate freely in Northern Ireland provided they comply with either UK or EU standards. Labelling would denote those products that are only for the Northern Ireland market and, again, goods destined for the EU market would have to meet all EU rules and customs formalities.

Overall, these arrangements would remove most of the practical impact that the Protocol has had on businesses trading between Northern Ireland and the rest of the UK. Instead, traders would be subject to a light-touch regime, whereby they would self-declare their trade and agree to inspections of their supply chains.

Therefore, the arrangements the UK is proposing require a higher degree of mutual trust than we have seen to date. When viewed from Brussels, perhaps the most ambitious of the UK proposals is to remove the role of the EU Court of Justice in overseeing the Protocol.

However, as the command paper points out, the practical risk of illicit trade to the EU is extremely low, since trade from Northern Ireland to Ireland is less than 0.5% of all imports into the EU. Nevertheless, the UK sensibly acknowledges the EU’s concern for the integrity of its Single Market. To address the EU’s concerns, the UK has committed to put in place legislation to provide for penalties for traders seeking to place non-compliant goods on the EU market, which could be supported by deeper data-sharing arrangements and greater cooperation between UK, Irish, and EU enforcement authorities.

The UK proposals are bold, but they would maintain the promise of no land border on the island of Ireland and provide for a more balanced arrangement, which could therefore command greater public support in Northern Ireland.

The timetable for agreeing any changes to the Protocol is extremely tight due to the looming expiration of several grace periods, including for supermarket supplies, in the autumn. The UK has therefore suggested both sides agree a “standstill”, both on grace periods and the EU’s legal actions against the UK, to enable negotiations to take place without cliff edges, and a further escalation of political tensions.

Curiously, the UK’s proposals have met with a muted response from the EU. Yesterday, the EU chose to pause its legal action, and there have been small hints of compromise, particularly from some close to the Irish government. Previously, the UK’s public negotiating positions have often prompted instant and aggressive counter-briefing from senior EU figures. Think of the way Theresa May was treated when seeking a far closer EU relationship than the current government.

European Commission President Ursula von der Leyen simply stated that the EU would not “renegotiate” the Protocol, but would “continue to be creative and flexible within the Protocol framework”. Time will tell whether this is a semantic or substantial distinction. It is worth noting that Article 13(8) of the Protocol provides for its amendment through mutual agreement.

It is significant that the document also sets out the Government’s view that the current scale of trade diversion, negative economic and societal impact, and political instability caused by the Protocol would justify the use of unilateral action under Article 16. The Government says it will not exercise this right “for the time being”, but it remains an option if the EU refuses to engage in the coming weeks.

The EU may choose to hang tough and to retaliate against such a move. Clearly, there is a risk that the UK-EU politics get ugly. In the end, both sides need a solution, and the command paper demonstrates that the UK is prepared to play a long game.

Much of the criticism levelled at the Government following the publication of the command paper is for wanting to fundamentally amend a treaty it agreed less than two years ago. The Government makes the case that the Protocol was agreed under the extraordinary political circumstances of 2019, and that the EU rejected the opportunity to find flexible solutions to resolving these issues in the UK-EU trade negotiations of 2020.

Against those accusing the UK of not understanding the full implications of the Protocol, it should be remembered that in agreeing the Protocol, the EU pledged to protect the Belfast/Good Friday Agreement “in all its dimensions”, including the East-West strand. The UK is within its rights to hold the EU to this essential part of the bargain.

Few would argue the situation is ideal, and these political arguments are likely to be informed by one’s pre-existing Brexit prejudices. But there is a wider point that few observers now seem to disagree with. The negative economic and political real-world consequences of implementing the Protocol cannot be what either side intended. Therefore, substantive change is necessary.

Lee Rotherham: Europe’s new radical alliance is brittle, but offers the EU an important warning

15 Jul

Dr Lee Rotherham is a member of the advisory board of Kids Count.

In a recent piece on this site, Garvan Walshe pondered the development of a new continental Eurosceptic coalition. This “rassemblement des patriotes” brings together the parties of Marine Le Pen, Viktor Orban, and Jaroslaw Kaczynski among others. The phenomenon serves as a marker not only of the EU’s past mistakes, but also its future ones.

As the piece noted, it is not a simple alliance nor a very deep one. It excludes a number of Eurosceptic players, most notably the Czech ODS and some key Scandinavians. The definition of “Euroscepticism” among signatories is elastic: in addition to the Italian contingent navigating a coalition government, Le Pen’s own Rassemblement National accepts the Euro and rejects Frexit. The fact that Orban, having been forced out of the EPP, is now jumping into a new grouping he originally turned down in 2019 certainly demonstrates an element of instability.

Yet the simple fact of this arrangement is a milestone. It reminds one of the quote attributed to a continental diplomat at the time of Maastricht that, “If the British did not exist, we would have to invent them.” After Brexit, that is precisely what is happening.

To explain why, we need to first understand where the impetus to generate a group comes from. It is an institutional response to an institutional problem.

European bodies in recent years have increasingly formalised political alliances for administrative purposes. Even within the Council of Europe, you may recall several years back how United Russia formally sitting alongside the Conservatives suddenly became an issue.

Within the EU this has become very developed. Political groups have a composite budget and employ staff (on healthy wages) for policy drafting, committee work, negotiations with counterparts, and generating the whip.

Group size determines budget share, speaking time, share of posts and committee places, PR money for MEP freebies, and the very significant think tank money for the likes of the Wilfried Martens Centre. It also guarantees a seat at the Conference of Presidents running EP business. Being able to generate a group is therefore important, and the bigger the better, though the dynamic limits are evident if we remember Conservative membership of the EPP.

There is a threshold for setting up a group. Currently, 23 MEPs are needed, and at least one-quarter of the member states must be represented. Look back to my 1998 edition of the Vademecum though, and it’s 29 from one member state, 23 from two, 18 from three or 14 from four or more.

Why this jump to get members from at least seven countries? In large part, it was ruthless cynicism. It was assumed by the main groups that it would difficult for Eurosceptic groups to reach that threshold given both ideological differences and the lack of pan-Europeanism. They weren’t wrong.

The net result was four Eurosceptic blocs. There was a “soft Eurosceptic” element in the ED subsumed in the EPP, emerging again to become the ECR. There was the “hard Eurosceptic” group (variously EdN, EDD, Ind/Dem), dependent on small MEP delegations and ever hovering on dissolution.

Then there were the small group of Left/Green “Europe is a capitalist plot” Eurosceptics, counterpoised with their fellow Left/Greens who saw the EU as a mechanism to smash big industry. That left the “political untouchables” often sitting as the ragtag leftover Non-Inscrits (an attempt to formalise this as a group was defeated in the courts).

This then generated an EU political scene dominated by ideologically-overlapping Centre Left and Centre Right groups, largely operating in a state of formalised compromise; and on the edges a marginalised and divided Eurosceptic opposition, obliged to make its appeal directly to the electorate.

With Brexit though the group maths has changed, and I would suggest it is generating contradictory imperatives. Strategically, it encourages radical parties to soften in order to cooperate internationally; but there is also a competing domestic pull to harden their positions more, to secure support among increasingly alienated social conservatives at home. It is not yet clear which force will win out; following how Estonia’s new EKRE party plays out will perhaps be an early pointer.

Set in the context of group politics, the arrival of this new “rassemblement des patriotes” correspondingly suggests three significant conclusions.

First, it is significant that the named trigger was the Conference on the Future of Europe – basically a second Convention on the Future of Europe, which last time round offered up an EU Constitution. The EU is already repeating the same mistakes it made before, anticipating more integration rather than questioning assumptions and remembering lost referenda.

So far the ECR Eurosceptics around veteran MEP Jan Zahradil have been doing the running in the fightback. This new group though is now giving notice that it intends a massive organised pile-on as well. Expect the Conference to heat up and its findings to generate a political crisis next year, and quite possibly several.

Second, it’s clear there are enduring splits among Eurosceptics about who is and who isn’t an appropriate partner. Sharing a broad opposition to EU integration is still not enough. It is nevertheless a fact that parts of “New Europe” are very socially conservative and reject the EU’s direction both conceptually and emotionally.

This social conservatism also happens to be shared with large parts of Russian society. It is hardly surprising in that context if Putin’s domestic politics give him a certain specific appeal, not as a border revanchist but as someone who dares push back against a Western “policy consensus gone wrong”.

Third, we can predict that EU politicians will botch their response. Brussels players too lazily conflate extremism with populism, and populism with popularity. Experience suggests that this is often down to a combination of a lack of intellectual curiosity plus short-term political advantage.

But attempts to marginalise, delegitimise and humiliate only serve to polarise by disenfranchising. Even a more tempered approach that ignores the core grievances still produces asymmetric and anti-establishment figures in response, from Beppe Grillo to now Slavi Trifonov in Bulgaria.

This is certainly not an endorsement of any political party’s stance: it is simply a warning that serious EU policy failures especially over immigration and Eurozone management need to be fixed and not rendered taboo. Liberal campaigners also need to recognise that the European Courts are a counterproductive mechanism for pursuing major social change by lawfare.

This new radical alliance (for want of a better term) is indeed brittle. It is uncemented, frangible, and perhaps ephemeral. But if Brussels commuters physically need to see an early warning sign that any move to grab more EU powers next year is going to end badly, then this is it, plastered all over a billboard.

Daniel Hannan: London was always going to be fine post-Brexit. But now we must cut EU rules and allow it to prosper.

7 Jul

Lord Hannan of Kingsclere is a Conservative peer, writer and columnist. He was a Conservative MEP from 1999 to 2020, and is now President of the Initiative for Free Trade.

Brexit was never going to kill the City. It is a measure of how demented our culture war became after 2016 that that notion was ever seriously entertained. London gained the top spot through strong property rights, incorruptible courts, secure contracts, light-touch regulation and low taxes. Everyone understood that the system was impartial, that the rules would not be rigged against foreign companies, that all were equal under the law.

Those features allowed London to retain its pre-eminence despite the decline of sterling as a global currency, despite the Second World War, and despite the economic collapse of the 1970s. Companies from around the world recognised that the best and cheapest money markets were disproportionately concentrated in the Square Mile. EEC membership had little to do with it.

Eurocrats never saw things that way, of course. In their eyes, London was a parasite, moving money around while honest Europeans did the more “real” work of making cars, producing chemicals and ploughing fields. Brexit, they believed, was an opportunity to shift jobs to Paris, Frankfurt and Milan, and to divert the accompanying tax revenues to their own coffers.

Emmanuel Macron came to London and pitched directly for companies to relocate. His ministers set up offices to advise on the transition. Frankfurt expanded its English-language schools.

Meanwhile, Brussels set out to be as bellicose as possible. UK-based firms found that the letter of the law was suddenly being forced on them with a perversity that their Japanese or American rivals were spared. At the same time, the EU refused to grant equivalence to British financial services providers.

Equivalence – essentially an agreement to trust each other’s regulators – is a normal courtesy among advanced economies. The EU offers it to Brazilian, Chinese and Mexican companies. Britain, naturally, offers it to the EU. But the EU evidently believed that refusing to reciprocate might somehow asphyxiate London.

It didn’t work. This would have been obvious had it not been for the hysterical tone of Britain’s Europhile broadcasters, determined as they were to show that Brexit had been a catastrophe.

Every relocation of a UK job to the Continent was drooled over with a kind of excited despair, while almost no attention was paid to jobs moving the other way – or, indeed, new jobs being created. When, as a result of EU restrictions, Amsterdam briefly overtook London in the volume of shares being traded, there was terrific excitement; when London reclaimed its place last week, coverage was muted.

The EU’s strategy is self-harming. Protectionism always makes the state applying it poorer. Making it harder for continental firms to access London finance does more damage to the continental firms than to London. It also signals to the world that Brussels discriminates on the basis of nationality, subordinating prosperity to prejudice.

Had the EU been more adroit, it might have sought to make itself more attractive. Instead of denying Britain equivalence, it would have looked for ways to lower its own taxes and to reassure the world that it would not tilt the scales against foreign companies. But, for whatever reason, it cannot bring itself to think that way.

Don’t imagine for a moment, though, that London’s dominance is guaranteed. The City has no automatic right to the top slot. It must earn that place anew every day. Brexit doesn’t just allow the City to make its regulatory regime more competitive; it obliges it to do so.

As Andrew Bailey, the Governor of the Bank of England, put it earlier this year: “I’m afraid a world in which the EU dictates and determines what rules and standards we have in the UK is not going to work”.

There was an argument – a weak argument, in my view, but an argument – for matching some EU standards for the sake of equivalence. But when Brussels won’t recognise even our current rules, which are identical to its own, there is no argument whatever for holding back.

We should begin by repealing those EU rules which were opposed by the industry when they were brought in, even if, having now assimilated the compliance costs, some established actors have lost interest in repeal. We need to think of future businesses as well as existing ones. We should undo the parts of the EU’s MiFID 2 and Solvency 2 regimes that we opposed at the time, and scrap the Alternative Investment Fund Managers Directive and the short-selling ban.

More broadly, we need lighter-touch regulation. Many of our rules are still aimed at preventing the 2008 crash, rather than at facilitating future growth in fintech, green investment and digital trade. At the very least, we should make competitiveness an explicit part of the regulators’ mandate – certainly no less than stability, confidence or consumer protection. Other regulators, such as Singapore’s, take it for granted that boosting competitiveness is part of their role.

And let’s not be shy about cutting taxes in ways that will attract investment and so, over time, increase revenue. It is hard, on Laffer curve grounds, to justify the bank corporation tax surcharge or stamp duty on share trading. We also need to end the absurd rule which limits bonuses – thus whacking up bankers’ basic salaries and reducing the link between performance and pay.

Some of these reforms might be unpopular. But, with our public finances in the state they are in, we can’t afford to subordinate our recovery to the prejudices of focus groups. Financial services are, to Britain, what tourism is to the Maldives. As our mediaeval wealth rested on wool, so our modern wealth rests on banking, insurance and investment. I’m not asking you to like bankers and hedgies; I’m just asking you to recognise that they pay 10 per cent of Britain’s taxes.

The PM wants to show that Brexit has tangible benefits, and commissioned Iain Duncan Smith, George Freeman and Theresa Villiers to look at ways to raise our competitiveness. Their report in May set out a measured and realistic plan to do precisely this.

But, as anyone who has worked in politics will tell you, the real challenge is turning your vision into hard policies over the head of an often change-averse civil service. “Between the idea and the reality,” wrote T S Eliot, “Between the motion and the act falls the Shadow”. Between the speech and the implementation, between the report and the legislation, between the ambition and the deregulation – falls the Shadow.

Stephen Booth: Switzerland’s painstaking negotiations with the EU tell us a lot about our future relationship with Brussels

3 Jun

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

Is the EU making a habit of alienating its neighbours? Last week, the Swiss government informed Brussels that after seven years of painstaking negotiations it was unwilling to sign a proposed “Institutional Framework Agreement” designed to consolidate and govern the Swiss-EU relationship. The breakdown between Bern and Brussels has obvious parallels with Brexit and has to some extent become intertwined with it.

Switzerland’s bespoke and often fraught relationship with the EU has developed more by accident than by design. In a referendum in 1992, Swiss voters rejected joining Norway, Iceland, and Liechtenstein in the European Economic Area (EEA). At the time, the Swiss government saw EEA membership as a precursor to joining the EU – a Swiss application for full EU membership remained dormant and was only officially withdrawn in 2016.

In the meantime, Switzerland and the EU concluded a patchwork of around 120 bilateral treaties, resulting in a high degree of Swiss integration into the Single Market – a bit less than those countries that joined the EEA but more than under the UK-EU agreement reached last year. Generally, while EEA countries are obliged to dynamically align their legislation to the evolving EU acquis, Switzerland’s arrangements have given it more autonomy over whether to adopt EU law, or equivalent standards, in order to access the Single Market.

The EU has long seen the Swiss arrangement as a problem, since it requires permanent political negotiation and, in Brussels’s words, “leads to a lack of legal homogeneity and uncertainty and ultimately to an unequal treatment of economic operators.”

Switzerland’s prized national independence and system of direct democracy notably clashed with the EU in 2014, when Swiss voters narrowly backed a referendum initiative to impose quotas on EU immigration, in violation of the Swiss-EU agreement on free movement. The Swiss government managed to implement the 2014 vote without too much collateral damage to the EU relationship (critics argued the referendum instruction was watered down), and a subsequent 2020 referendum backed free movement.

However, the 2014 episode spurred the EU into pushing for an overhaul of the Swiss relationship. The Brexit referendum and its aftermath probably encouraged the EU to be even more hard-nosed in its negotiations with the Swiss, particularly since Theresa May’s “Chequers plan” proposed a package of pick-and-choose alignment with the Single Market comparable to the “Swiss model”.

In 2018, after four years of talks, the EU informed Switzerland that it considered negotiations to have concluded. The proposed deal would see Swiss laws change in line with EU legislation, while an arbitration panel would resolve Swiss-EU disputes and, crucially, include a role for the European Court of Justice (ECJ) for the first time.

Mindful that the agreement would likely need public approval in a referendum, the Swiss government asked for more time to consult domestically, which resulted in additional demands, including exemptions from EU state aid and freedom of movement rules.

During the sporadic talks that followed, the EU sought to put pressure on Switzerland to ratify the deal by, for example, letting the “equivalence” status granted to Switzerland’s stock exchanges expire. Guy Parmelin, the Swiss President, said last week, however, that the Swiss government had concluded that the “necessary solutions” could not be reached, which is why it “decided to terminate the negotiations.”

What happens next is unclear. The Swiss say they wish to continue and develop the bilateral approach, even without an institutional agreement, which seems unlikely, since the EU appears confident it can exert further pressure to bring the Swiss back to the table. Brussels has said, that without the deal, new access to the Single Market would be impossible to negotiate and existing access agreements will “erode” over time as the body of EU law develops.

The conclusion of the UK-EU trade agreement has also changed the landscape. The UK does not have the same level of market access as Switzerland, but the UK-EU deal, with the important exception of Northern Ireland, sees no role for the ECJ or dynamic alignment with EU rules. If the post-Brexit UK is seen to be a success, Switzerland may ultimately judge that the “UK model” is better than accepting the EU’s current terms.

What lessons should post-Brexit Britain draw from the Swiss experience? Some Brexiters will feel vindicated in their view that the EU is ideological, uncompromising, and bullying. Some Remainers will no doubt say they always warned that the UK wouldn’t be able to pick and choose its access to EU markets. Ultimately, whatever one’s emotions, the effect is the same.

Unless there is a sea change in Brussels, the EU has demonstrated via its actions that the political bar for substantially closer UK-EU economic cooperation is likely to be a high one for any future UK government to pass. Now that Brexit is fact, few in the UK appear confident to make the political argument that the UK should submit to UK-EU arbitration arrangements involving the ECJ to remove some of the new trade barriers that have arisen.

Therefore, greater divergence with the EU is likely in the future, whether we like it or not. EU law will continue to change without the UK. The UK can seek to coordinate with Brussels but its agreement cannot be guaranteed. The UK should focus on exploiting the levers it can now control, be it using its own subsidy regime to encourage inward investment or to ensure the City is a leading non-EU financial centre (the UK has already reversed the EU ban on trading Swiss stocks).

Meanwhile, the UK must continue to cultivate its diplomatic relationships outside the EU. Among other things, this means implementing the Indo-Pacific tilt by developing the relationship with India and concluding trade deals with Australia, New Zealand, and acceding to the CPTPP. Yesterday, the CPTPP nations agreed to the UK’s bid to begin the formal accession process.

The UK might also find common cause closer to home with the Swiss. Not least in trying to convince EU nations that the European continent would be better served by a less short-sighted policy towards countries that have chosen a different path, but nevertheless should be some of their closest partners.