Beyond Dangerous

Mar 11, 2019

Sunday Business Post, 10 March 2019
Almost all of the current Brexit diplomatic and negotiation efforts, at least as they are being reported, centre around the issue of the backstop and whether or not the UK will ever be able to finally cut its ties with the EU of its own volition. 

If only that were the only problem.

The preoccupation with the backstop has gone beyond dangerous.  Rather than selling the overall withdrawal agreement, all the political narrative has been all about securing a piece of paper from Brussels which will contradict the November advice of the UK attorney general Geoffrey Cox.  He raised the red flag that the backstop provisions in the Withdrawal Agreement might endure indefinitely.  Even if, in the alarmingly short period of time still available, that piece of paper can be obtained from Brussels, will it be sufficient to secure the passage of the withdrawal agreement?

This focus on the backstop which is an element of the withdrawal agreement that might never be implemented has deflected attention from the contents of the withdrawal agreement itself.  For the period of the withdrawal agreement, the UK will be signing up to what in effect is taxation without representation.  Britain will have to agree to the rules and tenets of the European Union just as before, except without any democratic say in the process of their continuance or creation.  That is a woeful position for any country to find itself in, even if it is only for a temporary time-limited period.  It is only viable for one reason, and that is that the alternative – to leave the EU without an agreement – is far worse.

While some Brexiteers regard the European Union as an enforcer of undemocratic control, it is equally valid to argue that the European Union is permissive.  It permits free movement of people, of goods, and of capital across borders.  It permits planes to land, professionals to practice in countries other than their own, and licenses for everything from busses to pharmaceuticals to be recognised across the boundaries of the EU countries.  Whether British politicians realise the extent of the disruption when these permissions cease is in large measure down to the work of their civil service.

On Tuesday last, the chief executive of the UK revenue authority HMRC told the Westminster Public Accounts Committee that he simply did not have enough staff to deal with a no deal Brexit.  With three weeks to go, that is a shocking admission because it is the work of the revenue authorities which largely keep the EU trade in goods flowing for all practical purposes. While HMRC have published plans aimed at keeping roll on roll off trade moving at three key ports (Holyhead, Dover and the Channel Tunnel) those plans rely on importers and exporters doing exactly the right thing at the right time. 

Those UK plans also rely on what can only be a temporary easing of some customs controls and restrictions with the goodwill of other EU member states.  This week, French customs officers showed us what happens if that goodwill is lacking.  A work to rule resulted in queues of lorries, some of up to 7km on both sides of the English Channel.  One customs officer on the continent with a bad attitude can quite literally stop the cross channel flow of goods.

Furthermore, nothing has been published which will cover how the UK revenue authority will police the border on this island.  One explanation for this is that there is an unwillingness to prejudice discussions and negotiations around the withdrawal agreement.  As the deputy head of HMRC Jim Harra observed, again to the Westminster Public Accounts Committee, the policy steer is lacking.  But another explanation is that they simply don't know how they can do it.

There were stark warnings from the head of the Civil Service in Northern Ireland, David Sterling who warned of increases in unemployment, serious risks to business and a disruption to civil society in the event of a no-deal Brexit.

Business is struggling with the issues too.  Wednesday’s Construction Industry Federation report suggests that more than two out of every three construction businesses have not undertaken any form of Brexit impact assessment or urgent preparation plan.  Because 29 March is imminent, the focus on short-term fixes and bridging solutions like temporary extensions to the Brexit deadline is understandable.  However the broader context has not gone away and is far more serious. 

The withdrawal agreement is itself designed to create breathing space for the negotiation of a stable future trading relationship between the UK and the remaining 27 by extending de facto British membership of the EU to 31 December 2021.  But if there are such difficulties with the withdrawal agreement with 21 days to go, how does that augur for a comprehensive future relationship being agreed in 21 months?

It seems that the British civil service is becoming as vocal as business in its warnings over the consequences of a no-deal.  We will know next week from the proposed Westminster votes if the politicians are on the same page. 

 

Brian Keegan is Director of Public Policy and Taxation at Chartered Accountants Ireland