'Chequers is the worst of both worlds... This is the approach that allows this country really to exploit the opportunities of Brexit'
As we come now to the final months of the Brexit negotiations we are arriving, at last, at the moment of truth. It is not just that we must decide what kind of relationship we want with the EU.
We must decide who we are – whether we really believe in the importance of our democratic institutions.
We must decide whether we have the guts to fulfil the instruction of the people – to leave the EU and truly take back control of our laws and our lives.
The next few weeks are critical. If we continue on the current path we will, I am afraid, betray centuries of progress.
From the development of parliamentary democracy to the industrial revolution the British have been first movers. They have been most willing to challenge received wisdom, to expose vested interests and to put their leaders to the test.
So in June 2016 it was no surprise that they voted to leave the EU - because they had a clear insight into the way that institution works and its manifest flaws.
They saw a body that has evolved far beyond the “Common Market” they were invited to join, a superstate with no real democratic control. The British were told that it was politically essential for them to stay in the EU; and yet they saw an institution that responds to every problem with a call for more integration – to the point where it now has five presidents and plans for at least one of them to be directly elected by the entire population of the EU, hardly any of whom will properly understand who that person is or what he or she is doing.
The British were warned it was economically essential for them to stay in the EU; and yet they observed that the EU’s signature economic project, the euro, had consigned millions of young people to the misery of unemployment across the Mediterranean, with 21 per cent of the Greek population still in a state of severe material deprivation according to Eurostat.
They noted that the one size fits all EU model of regulation – according to the Treasury itself - has probably cost about 7 per cent of GDP, that the EU is a zone of low growth and low innovation, and that the EU institutions themselves are colossal and extravagant wasters of taxpayers’ money.
In voting to leave, the British showed good judgment about the EU – but also about themselves. They instinctively understood the connection between British political liberty and economic progress, and they saw in a globalised economy how the UK might have a glorious future.
This was the chance, they decided, to take back control of their immigration system – so that the UK could attract the right mix of talent from abroad, and so that British business would no longer have an excuse not to invest either in the skills of young people or in capital equipment.
This was the moment to take back control of the enormous sums given every week to the EU, and to spend them on British priorities such as the NHS. It was the time to take back control above all of their democracy – to ensure that laws were not only made in the interests of UK people and business, and to support UK innovation, but that the British people would be able once again to remove their lawmakers from power in the normal democratic way.
The polls have shown that it was not immigration, but a concern about national self-determination, that was the single most important consideration that encouraged people to vote leave.
In short, they saw a choice between an outdated and sclerotic EU, and the chance to do things differently; between remaining inside – always protesting, and always being carried along by the federalising process – and seizing the opportunities of a changing economy and doing new free trade deals around the world.
They voted for freedom. It must be admitted, alas, that at this rate their hopes will not be fulfilled.
The failure of the negotiations so far
It is widely accepted that the UK is now in a weak position in the Brexit negotiations. The Chequers proposals are deservedly unpopular with the UK electorate and have at least formally been rejected by our EU friends. If we are to make a success of the talks, we must first understand how we have arrived at this position.
It was clear from the very beginning of Theresa May’s government that the UK was in the grip of a fatal uncertainty about whether or not to leave the customs union.
Ministers and officials were still very much influenced by the logic of Project Fear – which in many cases they had themselves promulgated in the course of the Referendum campaign. They had claimed that there would be huge disruption – and they found it difficult once in office to jettison those claims.
The result was that from the very beginning the British government exuded a conspicuous infirmity of purpose – a reluctance to take any kind of action to deliver the single most important requirement of Brexit.
This basic nervousness was soon detected by our partners, both in Brussels and most importantly in Dublin.
They realised that some of the most important voices in the UK government – notably the Treasury – retained their pre-referendum antipathy to a real Brexit. In particular they saw that the UK did not have the political will to devise and push hard for the technical solutions to deliver an unobtrusive soft customs border in Northern Ireland. Instead the EU negotiators realised that they had a path to eventual victory in the negotiations.
They offered a different solution: that regulations in Northern Ireland should remain the same as in Ireland, so that there was no need for checks of any kind. This of course evoked the spectre of a border in the Irish Sea, and a threat therefore to the Union between Great Britain and Northern Ireland. They knew that this would be unacceptable to any British Government, and that London would then instead have to push for the whole UK to remain in the customs union and large parts of the EU’s regulatory apparatus.
That is exactly what has happened. Such is the intellectual route by which we have stumbled and collapsed first into the Dec 8 Northern Irish backstop, and now into the Chequers proposals.
It was a further symptom of the utter lack of conviction with which the UK embarked on these talks that we so meekly accepted the sequencing proposed by the EU. This means that we have effectively agreed to pay £40 billion as an exit fee without any assurances as to the future relationship.
Then there was the election. It certainly did not help that the Government weakened itself greatly not just at home but in the eyes of our partners by this serious strategic mistake, that cost the Conservatives a majority.
But the single greatest failing has been the Government’s appalling and inexplicable delay in setting out a vision for what Brexit is. As Britain has run out of time, the initiative has been transferred to our counterparts on the other side of the table, and – disgracefully – no proper preparations have been made for leaving on WTO terms.
The net result of two years’ negotiation has been to guarantee EU citizens’ rights – which could and should have been done on day one unilaterally; to pay over £40bn for nothing in return; and to negotiate a transition period by which the UK would effectively remain in the EU for another two years and under the most humiliating terms, with no say on laws or taxes this country would have to obey. And if for some reason the negotiations on the future trade agreement break down altogether we have additionally agreed to remain in the customs union indefinitely, for the sake of the Irish border – so making Brexit meaningless.
That is a pretty invertebrate performance. There has been a collective failure of government, and a collapse of will by the British establishment, to deliver on the mandate of the people.
It is true that the EU has conducted the negotiations as though dealing with an adversary rather than a friendly country that simply wants to govern itself. But it is the UK’s supine posture that has enabled the EU to get away with it.
It is this failure either to see or to defend our own national interest that has led to the Chequers proposals and the current crisis.
Why the Chequers proposals are disastrous
As I set out in my resignation speech on July 18, these proposals would oblige the UK to continue to accept EU rules, regulations and taxes across a wide spectrum of government activity, but with absolutely no say on those laws.
Such enforced vassalage should be unacceptable to any democratic country, let alone a two trillion pound economy with a venerable parliamentary history. If we go ahead with Chequers, we will be exposing the entire UK economy to regulations that may be expressly designed – and at the behest of continental competitors – to make life difficult for UK entrepreneurs and innovators.
What are British politicians supposed to tell employees who lose their jobs in such firms, when it is this government that has deliberately abandoned the right to defend them?
Under the Chequers proposals free trade deals are made doubly difficult: first, because we abandon control of our regulatory framework for goods and agri-foods – especially important in trade negotiations; and next, because we fail miserably to take back control of our trade policy.
If we go ahead with Chequers and its Heath Robinson Facilitated Customs Arrangement, we will be agreeing to enforce EU tariffs and duties at our borders.
That means in a very practical sense that we will fail to take back control of our borders – and thus cheat the electorate of a major promise at the referendum. It is also unthinkable that the EU should allow such an arrangement to take place without EU supervision and ECJ jurisdiction. Why should they, after all?
We also face the manifest absurdity of requiring douaniers in Marseilles to collect the UK’s tariffs on goods that are destined – at least theoretically – for the UK.
It is already a ridiculous feature of the Chequers proposals that we would require all UK businesses importing goods that attract the UK-only tariffs to prove that such goods have been consumed in the UK. It is almost insane to imagine that the UK will be able to persuade the 27 to impose an extra and hitherto undreamt-of new bureaucratic burden on every customs officer in the EU.
If there is any magical thinking anywhere in this negotiation, it is surely here.
Indeed it is obvious to anyone with any understanding of trading arrangements that the customs aspects of Chequers could only work if Britain drops all pretence of an independent trade policy – and collapses back into the customs union.
Our legal servitude is exacerbated, under Chequers, by the commitment to non-regression clauses for the entire corpus of EU social, environmental and other related law, and to enforce the EU’s rulebook on state aids. No one would wish to see any reduction of standards or protections, or to waste public money in supporting unviable businesses, but it is deeply troubling that we would be signing away forever the right of Parliament to legislate in these areas in any way that the EU – not our own Parliament - deems to be regressive or unsatisfactory.
Overall, the Chequers proposals represent the intellectual error of believing that we can be half-in, half-out: that it is somehow safer and easier for large parts of our national life to remain governed by the EU even though we are no longer in the EU.
They are in that sense a democratic disaster. There is nothing safe or “pragmatic” in being bound by rules over which we have no say, interpreted by a federalist court .
The Chequers proposals are the worst of both worlds. They are a moral and intellectual humiliation for this country. It is almost incredible that after two years this should be the opening bid of the British government.
The right solution – a 'SuperCanada' free trade deal
It is all the more incredible when you consider that there has been an alternative solution, waiting to be developed, and which the Prime Minister indeed adumbrated in her earlier speeches, most notably at Lancaster House on 17 January 2017.
Britain should seek the same freedoms and opportunities in its relations with the EU as any other independent and democratic country. That means the right to make our own laws, in the interests of our own economy; the right to control our own trade policy; and the right to represent ourselves again in those international forums where we have increasingly been vacating our place for the EU.
There is nothing extreme about such an ambition. It is the international norm.
Of course we should not forget the reality that we have been EU members for 45 years, and that we are a spiritually and historically European country. The PM is right to say that Britain’s relationship with the EU does not have to be distant, and that it will be sui generis. But it must be one of legal equals.
That is why the heart of the new relationship should not be Chequers, but a free trade agreement at least as deep as the one the EU has recently concluded with Canada.
The outlines of such a deal are clear, and it has the huge advantage – over Chequers – that it is a deal our partners would understand and respect:
It would be only logical and to be expected that this would involve – as now – zero tariffs and zero quotas on all imports and exports between the UK and the 27.
In a spirit of trust and common sense we should agree that both UK and EU regulatory bodies are recognised as capable of ensuring conformity of goods with each other’s standards. And it should be easy to draw up Mutual Recognition Agreements covering UK and EU regulations now and in the future – since we all want high standards, and we will all insist on proper protections for consumers.
As we leave the customs union we should go with the grain of modern technology, bringing forward facilitations that will obviate paperwork and delay in the circulation of goods, above all allowing just-in-time supply chains to continue to operate with ever-growing smoothness and efficiency. There is plenty of evidence from around the world that complex supply chains can operate with high efficiency in spite of customs controls.
The SuperCanada deal should cover procurement (over and above the provisions of the WTO’s Government Procurement Agreement which the UK is currently seeking to join in its own right) – and allowing the UK to operate a more flexible arrangement than that currently required by the EU’s own procurement rules. It should also include provisions for close collaboration on competition and state aid rules, though these should not go as far as the Chequers proposal that we should enforce the EU rulebook on state aids.
The deal should include extensive provisions on services, based on the Canada-style negative list approach – in which the assumption is that all service sectors are opened up except those specifically listed. There should be the maximum possible mutual recognition of qualifications.
A SuperCanada deal will need to include specific provisions on data, where the UK will need recognition as “equivalent” by the EU (as of course we are now), and on aviation, where it should be relatively straightforward – given the vast UK market - to negotiate membership of the EU’s aviation area and to accept appropriate obligations.
As with any free trade deal between sovereign powers there should be a process for recognising each other’s rules as equivalent, where they are, and a dispute settlement mechanism for managing any regulatory divergence over time. That process of regulatory divergence – one of the key attractions of Brexit – should take place as between legal equals, so that neither side’s institutions have power over the other’s.
It goes without saying that a SuperCanada deal would also comprise extensive and intimate intergovernmental cooperation between the UK and our EU friends on many other matters of mutual interest: security, counter-terrorism, foreign policy and defence cooperation. These are areas where the UK brings much to the table, and with care they need not involve the legal subjugation, notably to the European Court of Justice, that is so damaging in the economic relationship proposed by Chequers.
The Irish border question
If a Canada or SuperCanada style deal has so much to commend it, then it may be asked why the UK and the EU have not simply agreed it. The answer – so we are constantly told – is that such a deal is impractical because it would impose a new customs border between Northern Ireland and Ireland or somehow be contrary to the Belfast Agreement.
It should be noted first of all that there already is a border. Many rules are different on either side of that border, whether we are talking of currencies, excise duties, VAT, personal taxation, consumer protection, and many others.
In so far as these differences set up opportunities for arbitrage or criminality, those problems are already managed by both jurisdictions – but away from the border.
There is simply no need for a hard border, and that is not just my view, or the view of Shanker Singham, who showed in his excellent Plan A+ paper on Monday how the small amount of trade across this border can be managed in practice. Jon Thompson, the head of HMRC, has been absolutely emphatic that there is no need for any new physical controls of any kind or under any circumstances at the border; a point that has been echoed by the head of the Irish Revenue.
Irish PM Leo Varadkar and European Council president Donald Tusk
Ireland and the EU changed tack on the question of the UK border in 2017 Credit: REUTERS/Clodagh Kilcoyne
The UK of course accepts that the EU will insist on ensuring the integrity of the Single Market, and that some extra procedures will of course be needed – but to the extent that these are unavoidable, they can be carried out away from the border; as they are, very largely, today. These processes can be strengthened by using the existing trusted trader schemes and by a sensible and pragmatic attitude to very local trade. They would be fully compatible with the Belfast Agreement.
Opponents of Brexit frequently try to paint such arrangements as complicated or highly unusual by international standards. They are not. Indeed it is well known that for a year or so after the referendum the UK and Irish Governments were beginning to negotiate a facilitated border on these lines, until the EU and Ireland changed their approach during 2017.
What is true is that this border will look different to other borders around the world. That is inevitable, given the history and the sensitivities involved. But arrangements that make it work are perfectly possible and practical, and the experience for businesses using the border can be smooth and hassle-free.
Is the EU really so dogmatic about the need for checks to take place at the Irish border – when those checks are simply not necessary - that they would throw away the chance of a giant free trade deal with Britain, in a lost opportunity that would damage Ireland more than any other EU country?
How do we get there now?
After two years of dither and delay the UK finds itself coming up hard against the deadline of March 29 next year, by which we must leave the EU. If we had started off with conviction and confidence we could certainly have negotiated a SuperCanada deal in the time available, but the abortive election and the endless disputations about the Irish backstop mean that we have blown that chance.
It will therefore be necessary to buy some time – at no cost to our ambitions for Brexit, and with no effective delay to independence – by making better use of the otherwise redundant and humiliating “Implementation Period” to the end of 2020. That means that we will need the Withdrawal Agreement, which contains it – but it cannot be the draft Agreement as we currently have it.
Here is what we should do.
First, chuck Chequers, and stop wasting time on a solution that can never be in the long term interests of this country.
Then, go back to our EU friends and tell them that the December 8 Irish “backstop” arrangement – which effectively gives Brussels the perpetual right to the economic annexation of Northern Ireland if it deems there is ever any regulatory divergence between NI and the rest of the EU – is no longer operative and no longer acceptable to this country. That means we will need a different Withdrawal Agreement, stating that the Irish border question will be settled as part of the deal on the future economic arrangements, and that both sides are committed to avoiding a hard border. I recognise that this would be a difficult step, given the diplomatic energy squandered on the backstop, but it cannot be acceptable that the constitution of the UK should be held to ransom in this way, or the Belfast Agreement subverted in the manner proposed by the EU.
We should agree a political declaration by early 2019, in parallel with the Withdrawal Agreement, which sets out the intention of both sides to use the implementation period to negotiate and bring into force a SuperCanada-type free trade agreement. This is a vital part of the package. It makes no sense whatever to embark on a so-called Blind Brexit, whereby we sign a withdrawal agreement, but without specifying (yet again) what kind of future economic relationship we want. There is no way MPs could or should vote to hand over £40bn to the EU without any agreement about the future of the relationship. We would be abandoning our principal leverage in the talks.
We should follow the logic of our own negotiating position and launch what we should have begun two years ago – practical preparations to operate our own trade and immigration policy and to leave the customs union. That will mean investing in the requisite technology, people and infrastructure, and we should get on with it and stop pussy-footing around. Of course such preparations should also be taking place among the rest of the EU, but we cannot expect them to have any sense of urgency when they see no activity on this side of the Channel.
We should face the possibility – remote though I believe it to be – that we will not be able to conclude a Withdrawal Agreement and political declaration on this basis in the next few months, or to agree the new SuperCanada FTA by 2020. We need therefore to accelerate the work now belatedly being done across government to prepare for a breakdown in the talks. Rather than peddling endless propaganda about the chaos of “no deal”, the government should learn from the failure of Project Fear. People do not on the whole like to be panicked by their governments. What they want are practical ways sorting out what are – after all – basically banal questions of bureaucratic procedure about which most people have been in ignorance until they were turned into seemingly insuperable and existential challenges to the safety of the nation. Britain seems to trade very smoothly and effectively with countries not in the EU; we used to trade smoothly with France and Germany before we joined the EU. We can easily do so now.
We should demonstrate that we are not just psychologically reconciled but indeed energised by the prospect of leaving. There could be no more vivid symbol of the ambition of Global Britain than to begin negotiations on Free Trade Agreements as soon as possible after March next year. It is critical that those negotiations are ready to start with a bang in April, and that the UK’s representative at the WTO moves immediately to assert an independent policy for Britain.
It will be objected that this ambitious and self-confident version of Brexit would not carry Parliamentary support. I do not agree. On that argument, there is currently no model of Brexit that could pass the Commons.
It is clear that Labour will be whipped to vote against any agreement that the government produces – whether it is Norway, Canada, Chequers or anything else.
But it is also clear that there is, rightly, far greater Conservative hostility to Chequers than there is to this model – and above all it is this model that commends itself to the voters of this country.
This is not only what they voted for at the referendum. Never forget that BOTH main parties have committed at various times to leave both the customs union and the single market. Chequers makes a mockery of those promises.
That is the consideration that should motivate MPs on either side of the House.
This is what people voted for. It is only by pursuing this plan – or something very like it - that we can really say we are delivering on the mandate of the people.
This Brexit takes back control of our democracy; Chequers – absurdly – abandons control.
This is the time to get it right
It is idle to pretend, finally, that we can go for Chequers now – or indeed any other so-called interim model – and hope to fix it later. It is hard to see why the EU should wish to embark so soon on a fresh negotiation.
And after so long in which the UK public and business have been subjected to such a ghastly cocktail of uncertainty, fear and, let’s face it, grinding tedium, it is hard to see any British PM who would really want to devote yet more government time to this issue.
This is the time to get it right. This is the approach that allows this country really to exploit the opportunities of Brexit, to diverge and legislate effectively for the new technologies and businesses in which the UK has such a lead.
Yes, this is an opportunity for the UK to become more dynamic and more successful, and we should not be shy of saying that – and we should recognise that it is exactly this potential our EU partners seek to constrain.
It is only by following this approach that we will be able once again to be independent economic actors, able to campaign for global free trade that has lifted so many billions out of poverty, and to do free trade deals ourselves.
The world is watching the UK, and it would be fair to say that our audience has been mystified and dismayed. Our partners around the world want us to take advantage of Brexit. They want a UK that is rich and strong and free. They cannot understand why we would want – after Brexit - to stay locked in the orbit of the EU.
This is the moment to change the course of the negotiations and do justice to the ambitions and potential of Brexit.
We have the chance to get it right, and I am afraid that future generations will not lightly forgive us if we fail.