James Arnell is a partner at Charterhouse. He writes in a personal capacity.
A couple of weeks back, I decided to contact 50 of the CEOs, investors, asset managers, bankers and advisers with whom I have worked over the years. These individuals oversee many billions of euros and hundreds of thousands of employees. I asked them their views on the Brexit negotiations. I received very surprising feedback:
- 72 per cent believe that there will be no deal between the EU and the UK.
- 80 per cent believe that publication of a detailed plan for the no deal scenario would increase market certainty.
- 72 per cent believe that publication of such a plan would not cause financial market instability.
I am increasingly convinced that the Government’s failure to set out its detailed contingency plan is harming our economy (and that of the EU).
Steve Baker has now been nominated as the minister responsible for this fallback planning, and Ministers claim to have the work in hand, but I imagine that I am not alone in feeling sceptical about that assertion. My strong suspicion is that many in the government share the view of George Osborne, who believes that any contingency planning now is all much too late. (A bit rich coming from him, by the way, when he and David Cameron forbade any contingency planning back at the time of the referendum!)
It has been my view since before the referendum, expressed repeatedly in my articles for ConservativeHome, that the UK government needs to prepare, and be seen to prepare, for a no deal scenario. It is also my view that serious money should have been made available for this last July. I said as much at a Brexit conference at All Soul’s College, Oxford, during autumn last year, and was berated then even by ardent Brexiteers, who said then that to spend money on preparations for no deal would be akin to spending money on computer systems to head off “Y2K” issues back in 1999. It would be a waste of money.
They were wrong, but there is no point in crying over spilt milk. We now have just 17 months to get ready for a no deal Brexit and will just have to work with that constraint.
To help Baker, I have drawn up a “to do” list.
Here are the critical bullet points I think the government needs to work through in the preparation of a detailed “no deal” plan:
- What we are prepared to pay in the absence of an agreed FTA.
- What claims by the EU we have rejected.
- What claims by the UK the EU has rejected.
- A mechanism for the resolution of rejected claims.
- What we are prepared to pay if and when a satisfactory FTA is in place.
- The trade and regulatory arrangements the UK will adopt after Brexit.
- The tariff regime.
- Customs arrangements, including proposals for the Northern Irish border.
- Proposals to ensure a finding of regulatory equivalence between the UK and the EU in financial services.
- Arrangements for the takeover of functions currently undertaken by EU agencies.
- Prioritisation of FTA discussions with other states.
- Transition planning.
- Contingency plans for each department, to cover high impact transitional issues, such as nuclear materials, air travel, power interconnection, and so on.
- Immigration and employment, tax and competitiveness.
- The rights we intend to give to EU citizens in the UK and those we expect for UK citizens in the EU.
- Our immigration policy going forward.
- Tax policies to be applied from March 2019, focused on corporate taxation and the retention of wealthy taxpayers in the UK, with a view to making the UK the most attractive developed economy in which to do business.
- Challenging state aid and corruption and opening new markets.
I look forward to the thoughts of ConservativeHome readers on what is missing!
After the last European Council meeting, there was a brief outbreak of optimism, soon snuffed out by Emmanel Macron telling us that we were no more than halfway there on the money; Michel Barnier telling us that there was no chance that we would have a clear deal to which we would be heading during the “transition period” (and that the best we could expect in the end was a deal like that offered, for free, to Canada), and Donald Tusk telling us that the EU would not be “defeated” if it stood together against us. They flirted with being nice, and then reverted to type.
My own view is that our Government has been doing a good job in Brussels: the contrasting messages from ministers make it hard for the EU to read our position, the Brexit team has held a firm line on the exit bill, concessions – when made – have been made at the right level, by Theresa May to other EU leaders. She has seen the transition period trap for what it is, and insisted that it can only work if we know, by March 2019, exactly what it is that we are transitioning to. Boris Johnson has broken ranks again to say that we will unilaterally grant rights to EU citizens (as we should have done from the very start). Philip Hammond has gone quiet, thank goodness.
But the EU is still after our money, and we may still not be able to agree a deal. Our best chance of doing so remains as it has been all along: develop a solid, credible alternative plan, and show that we are prepared to implement it.
Over the next few days, I will be setting out my own suggestions on this site for the positions the Government should take on the separation issues identified above.
In summary, I argue for a fair but tough approach on the money, maximising the leverage we have now, which is much greater than many commentators seem to think.
I propose a fundamental change to tariffs, unilaterally eliminating many, whilst retaining those needed as trade-offs in future trade deals, to boost the UK’s competitiveness and to reduce prices for our consumers.
I propose a simple soft border solution for Northern Ireland, a plan to protect the City, continued involvement in some key cross-border agreements with the EU even if there is no wider deal (including a limited continued role for the ECJ).
And I suggest a matrix for prioritising future trade discussions with other states. I highlight some complex separation issues and suggest an approach the government might use to identify and fix others.
And, finally, I suggest a vision for the UK post-Brexit which will need to accompany the (inevitable, in my view) announcement early next year that we are moving onto the “no deal” path.
ConservativeHome readers will, no doubt, take the opportunity to add, via their comments, many more issues to the list for Baker and his team. He faces a daunting task, but one which can be managed if the urgency is there, and if he casts his net wide at the outset to identify all the problems and opportunities that a contingency plan will need to address. I hope that this series of articles, and particularly the comments added by readers, will be of help in this process.