Will the Windsor Framework get Brexit done?

Decision time

Getting Brexit Done has proved to be an elusive quest, now two years on from that spurious claim - and counting.

So, on 27 February in a display of carefully-planned choreography, the Prime Minister Rishi Sunak and the President of the European Commission Ursula von der Leyen co-presented the Windsor Framework.  Described by the PM as "a decisive breakthough" this is the UK/EU deal "to replace" Brexit's Northern Ireland Protocol. 

"Ditch," for the record, has always been the alternative verb of action demanded by the protocol's outspoken vilifiers. 

Apart from resolving the protocol's complications, some will say flaws, the PM's wider agenda is "to reset relations with Europe" avoiding potential for a trade war.  He hopes also that doing so will let Britain adjust to the exit by resuming collaboration with Europe.  This would include Brexit's fallout casualties such as scientific research.  The big prize would be the restoration of regional government at Stormont.

For added appeal the announcement was endorsed by the monarch when the EC President had tea with King Charles III and a warm welcome to Windsor Castle.  Criticism, paradoxically from prominent DUP leaders, greeted the happening of that meeting.  

Undeterred and to drive home the charm offensive, on 26 March "the Majesties" will begin a 6-day visit to France and Germany to attempt to strengthen the UK's relations with Europe post-Brexit (1).  Its economic rationale appears well-grounded given the limited impact of Britain in securing trade deals across the globe post-Brexit.

Forty-eight hours before the framework's launch, the journalist and former Conservative MP Matthew Parris supplied guidelines, like a list of home truths, to support the PM.  His article exhorted Mr Sunak to be "bold," to exploit his advantage "that no Conservative MP wants an election." Parris's argument (2) included this array:- 

• the ERG (European Research Group of Conservative MPs) and the DUP both know that even in Northern Ireland wrecking the Protocol is unpopular; 
• the DUP have almost no support over the water and little support in the Commons; 
• they know they are widely disliked; 
• they know their suspension of power-sharing is hurting their own voters; and
  
• they know that playing the wrecking card could only bring forward the day when a majority will vote to leave the Union altogether.

The day after after announcing the Framework, the PM visited Northern Ireland to promote the new plan.  Speaking to factory staff in the DUP leader's constituency, Mr Sunak enthused about Northern Ireland's unique benefits of having access both to the UK's internal market as well as to that of the EU.  Brexiteer eyebrows were raised as the PM, himself a Brexiteer, described Northern Ireland as being in "the world's most exciting economic zone."  

Let's reflect on the events that have preceeded the Windsor Framework.

Post-Brexit talks

Following the UK's June 2016 referendum, the first of the two phases of exit negotiations culminated in October 2019 with the Withdrawal Agreement.  It included no hard border in Ireland and protection of the Good Friday Agreement (3).  The second phase concluded on a significant date in British history.  24 December 2020 marks the announcement of the country's divorce from the EU with the proud PM Johnson proclaiming it as “a good deal for the whole of Europe.” 

The signing up to detailed arrangements, named the EU-UK Trade and Cooperation Agreement (4) took place on 30 December 2020.  That means that It took four and a half years following the referendum before the UK PM was in a position to sign the final deal.  At last Brexit had its painstakingly-negotiated agreement in the form of a hefty 1246-page document.   

By the by, European nations which did not ever seek a UK exit, as well as British places like London, Scotland and Northern Ireland which voted with majorities against Brexit might dispute the PM's good deal for all of Europe assertion.  For voters in Northern Ireland, for instance, who wanted to remain in the EU the only rationale for the protocol was and is the form of Brexit sought and agreed by the Conservative Government with DUP support; had Brexit not been mandated by Great Britain, there would have been no Brexit and no protocol.  

Whereas the protocol continues to be an existential bane for many, it is not so for many other Northern Ireland's voters.  If, however, the PM gets his way and the Windsor Framework is approved by Parliament, the new arrangement will continue Northern Ireland's mandate by retaining barrier-free access to the EU market for goods.

BrexitTrade deal

A maxim during the prolonged negotiation process repeated that "nothing is agreed until everything is agreed."  PM Johnson's claims to have got Brexit done as 2020 turned into 2021 started to unravel very soon after he signed the papers.  Heated rows began about the checking of goods coming from GB into Northern Ireland and the agreed trading arrangements across the century-old constitutional border between the UK and the EU in Ireland.  

One has wondered for over two years about the implication that may apply should agreement on the protocol and its implementation fail; and whether or not the EU/UK Brexit deal on trade could collapse as nothing will have been agreed, in theory at least, following the negotiating maxim.   In which case UK/EU relations would not be able to be reset.

The UK acceptance of the EU compromise to allow Northern Ireland continued access to its market for goods had also been accepted by the then DUP leader as giving Northern Ireland the best of both worlds. 

In the meantime, to reduce the reliance on using the UK as a landbridge for EU goods in transit to and from Ireland, substantial additional provision for direct EU connections between Irish French and Spanish ports was prioritised.  In addition, the EU extended grace periods to allow the UK time to implement arrangements for checking goods in transit within Northern Ireland.  

Reaction to protocol

Since January 2021 when it started operating, 2 years and 2 months ago, reaction has been both positive and negative.  Without dwelling on distressing scenes of street violence in Belfast in its early days, political criticism of the protocol emerged at the beginning of that year both from the Conservative Party's ERG and from the DUP.   In essence, these contended that it imposes a "border in the Irish Sea," that it separates Northern Ireland from Great Britain, that it involves jurisdiction by the European Court of Justice and that it has had ruinous impacts on Northern Ireland's economy.  

To emphasise their opposition, the DUP suspended Northern Ireland's regional assembly a full year later in early 2022.  Critics of that move query the impact of suspension itself on Northern Ireland's image and its economy.

Most of the running in the debate has been made by advocates of the protocol's threats to trade and sovereignty.  Given the continuing focus of the UK Government on the prospective conclusions of the ERG and DUP to the Windsor Framework, it is important to consider both sides of the case.

Benefits

A range of organisations including business and research bodies have cited statistical data as evidence of benefits accruing to Northern Ireland's economy from its access to the EU market.  The following examples are from 2022.

In May, the apolitical London-based National Institute of Economic and Social Research (NIESR) reported that the trade protocol helps growth and profitability in Northern Ireland because of its advantageous barrier-free exports to the entire 27-nation EU market (5).  NIESR's quarterly report on the UK's economy concluded that Northern Ireland's economic output "has slightly outperformed the UK average."

Agriculture is relatively a more important to the economy in Northern Ireland than it is in Great Britain.  Last June, the head of Northern Ireland's Dairy Council Dr Mike Johnston stated that the protocol is working for his sector allowing trade flows to continue (6).  He added the message - "do not do anything that will in any way interefere with the current working." 

Last July a report from the Central Statistics Office (CSO) in Dublin presented data on soaring trade for Northern Ireland post-protocol (7).  Its figures indicate that the value of goods from Northern Ireland into the Republic rose by 23% between January and May 2022 compared to the same period in 2021.  The increase was worth £303million bringing the total flow to £1.6billion. 

The CSO figure was higher for goods from the Republic into Northern Ireland with an increase of 42% bringing total trade to a value of £1.8billion. This represents a rise of £497million on the same period in 2021.  The report showed that GB imports into the Republic rose by £1.7billion compared to May 2021, while Irish exports to GB were £1.2billion.

In August, a further CSO report presented January to June 2022 datasets (8).  Imports for that 6-month period from Northern Ireland into the Republic grew from €413million to €2.3billion compared with 2021; and exports to Northern Ireland from the Republic in the same 6-month period in 2022 grew by €662million to €2.4billion when compared with 2021.  These are big numbers indicating substantial economic growth in the Northern Ireland economy.

In terms resonant with the PM Sunak's speech to workers in Lisburn eight months later, the Conservative Brexiteer and founder of Ballymena-based pharmaceuticals company CIGA Healthcare spoke last July about how the protocol could transform Northern Ireland into "the Singapore of Europe. (9)"  Irwin Armstrong's company exports to over 70 countries.  

Since the protocol began, CIGA has been "expanding very rapidly."  Sales to the Republic have doubled; in June he signed a €4.7million contract for new markets in Europe and the Middle East.  Wearing his political hat Mr Armstrong added - " if we get the economic situation in Northern Ireland sorted out people will not vote for a united Ireland if they are being offered a much better deal here."  Could this be a message for the ERG and for the DUP?

In August the American business news channel CNBC dug into the July CSO datasets about the surge in trade by consulting some Northern Ireland business chiefs (10).  Stephen Kelly CEO of Manufacturing NI explained that: "Irish buyers moved away from GB suppliers continuing their trade with the UK by buying from Belfast rather than from Birmingham."  This sounds like Conservative Party free markets philosophy and the market process of import substitution.   

CNBC also quote Ian Chambers, CEO of Chambers Ireland.  He said that there are no ports lying idle, no road idle,"trade is happening and in large numbers."   CNBC reported on the rapid increase since 2021 of cargo ships leaving Dublin and Rosslare ports for France and Spain "to avoid the red tape of crossing through Britain."  The channel also notes benefits for Belfast port whose "operating profits for 2021 rose by 13% to £34million and 25million shipping metric tons of cargo."

A contrasting report from August presents evidence of the detrimental impact of Brexit on GB where trade barriers with Britain's largest trading partner, the EU, now sit on top of constitutional borders. Again this arises from the exit negotiated by the Conservative/DUP partnership.  The National Farmers Union (NFU) reported (11) its concerns about British livestock exports to France ceasing due to no vet checking facilities.  

This is reminiscent of the DUP's argument that the protocol imposes a trade barrier in the Irish Sea between GB and Northern Ireland.  If the DUP apply consistency they could object to Brexit's imposition of trade barriers between the UK and Europe on top of constitutional borders - a double hit of a border superimposed with a trade barrier.

In September Northern Ireland's Statistics and Research Agency (NISRA) published post-protocol data showing that production by NI food and drinks companies grew by almost 15% in the second quarter of 2022 compared to 2021.  This follows growth of 6.2% between the first and second quarters of 2022 (12).  

Responding to NISRA's figures, the Ulster Bank's chief economist Richard Ramsey argued that the protocol explains the surge as "local firms have experienced increased sales to the Republic at the expense of GB producers.  Since the protocol came into effect in January 2021, food and beverage output by NI manufacturers has increased by 18.3% which is 2.5 times the comparable growth rate among UK firms." 

The NISRA report adds that Northern Ireland's manufacturing output in general was 5.5% above pre-pandemic levels of the final quarter in 2019, whereas the UK's performance showed a 0.1% drop.  This is an important lesson about Brexit's detrimental impact on Britain's economy

Windsor Framework reaction

Speaking in the House of Commons debate about the Framework,  the response of the former PM Johnson attracted top billing.  In trenchant criticism he claimed, among other things, that the Sunak deal would act as a "drag anchor" on post-Brexit freedoms and that he would find it "very difficult" to vote for it. 

Onlookers in Northern Ireland were incredulous that Mr Johnson had criticised improvements to a protocol which he had negotiated and agreed as PM.  And also one which had been roundly denounced by the DUP at the time as the "Betrayal Act" leading them to abandon devolution.

According to the Times (13), "Johnson's intervention galvanised the ERG of Eurosceptic Tory MPs who are awaiting the verdict of their own star-chamber of lawyers into the deal." 

A day or two later, however, the ERG saviour's momentum was dented by a return to the headlines of his Covid19 party wrongdoings.  Johnson and his allies ignored Westminster protocols by questioning the independent Commons privileges committee.  They accused it of "an outrageous level of bias" after finding significant evidence that the former PM may have misled Parliament (14).  Result - Conservative MPs turned against him.  One adopted the Johnson shipping metaphor saying that this distraction "risks undermining Sunak's progress if it turns into a Trumpian drag anchor."

Party interest - community interest

A friend asked how long will it take the DUP to say no.  Perhaps both the ERG and the DUP will vote to accept the Windsor Framework.  Who knows? 

Uncertainty about the DUP's reaction both to the Framework and also to their boycott of devolution remains.  They have set out 7 protocol tests (15).  And like the ERG they are taking legal counsel on the new framework. They have also established an eight-person panel that includes six party members to inform party thinking (16).  The panel's evidential sources and datasets will make interesting reading.

In the meantime, the electorate continues to endure life without its regional Assembly, apprehensive about the prospect of instability caused by a political vacuum; with business and the public concerned about the negative messages of a void for economic development.  

The pathos and irony of suspension are not lost on voters.  It appears that a pro-union party sees no problems with its abrogation of devolution; whereas the largest party at the last regional election, which advocates a policy to end British rule in Ireland, has been urging the DUP to resume power-sharing in Stormont.

Aware of the DUP's priority to keep Northern Ireland integral to the UK and to implement a hard Brexit, one returns to Matthew Parris's advice to PM Sunak.  His comment that they are disliked in Britain reminds us that loyalty works two ways.  And then there is Parris's final comment about the consequence of the DUP playing the wrecking card with its potential to "bring forward the day when a majority will vote to leave the Union altogether."  

At a time when Northern Ireland's constitutional status is protected by the Belfast Agreement signed 25 years ago on Good Friday, is the voice of unionism aware of the law of unintended consequences that could emerge, a la Parris, from strategic miscalculation?

Decision time beckons.  Will the DUP put party interest above public interest; will the national interest be elevated above all else?

 

©Michael McSorley 2023

 References

1. "Brandenburg Gate welcome for King"  Valentine Low Oliver Moody The Times 4 March 2023

2. "Sunak has his best chance to spike Tory crazies" Matthew Parris The Times 25 February 2023

3. https://commission.europa.eu/strategy-and-policy/relations-non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-agreement_en

4. https://commission.europa.eu/strategy-and-policy/relations-non-eu-countries/relations-united-kingdom/eu-uk-trade-and-cooperation-agreement_en

5"NI economy outperforming UK thanks to Brexit protocol: Experts" S Pogatchnik 11 May 2022 Politico  https://www.politico.eu/article/experts-brexit-protocol-is-boosting-northern-ireland-economy/

6. "NI Dairy Council chief insists protocol is working"  Allan Preston Belfast Telegraph 8 June 2022 https://www.belfasttelegraph.co.uk/business/agri/northern-ireland-dairy-council-chief-insists-protocol-is-working/41733987.html

7. "Cross-border trade in Ireland continues to soar 18 months on from NI Protocol introduction" Allan Preston Belfast Telegraph 18 July 2022 https://www.belfasttelegraph.co.uk/business/uk-world/cross-border-trade-in-ireland-continues-to-soar-18-months-on-from-ni-protocol-introduction-new-figures-show/41848136.html

8. "Cross border trade continues to soar in both directions, new figures show" Cate McCurry Irish News 15 August 2022 https://www.irishnews.com/news/republicofirelandnews/2022/08/15/news/cross-border_trade_continues_to_soar_in_both_directions_new_figures_show-2799179/?param=ds441rif44W

9. "Could protocol make Northern Ireland the Singapore of Europe" Freya McClements Brian Hutton Irish Times 16 July 2022 https://www.irishtimes.com/ireland/2022/07/16/could-protocol-make-northern-ireland-the-singapore-of-europe/

10. "There's no port lying idle:Brexit tumult is rapidly changing the face of trade on the island of Ireland" Jonathan Keane CNBC 1 August 2022 https://www.cnbc.com/2022/08/01/brexit-tumult-is-radically-reshaping-trade-on-the-island-of-ireland.html

11. "British farmers face paying for border checkpoints in EU after Brexit halts exports" James Tapper The Guardian 6 August 2022 https://www.theguardian.com/politics/2022/aug/06/british-farmers-face-paying-for-border-checkpoints-in-eu-after-brexit-halts-exports

12. "Protocol arguably behind biggest ever surge in annual output by NI food and drink firms" Margaret Canning Belfast Telegraph 15 September 2022 https://www.belfasttelegraph.co.uk/business/northern-ireland/protocol-arguably-behind-biggest-ever-annual-surge-in-output-for-ni-food-and-drink-firms/41992232.html

13. "Sunak calls for unity, then Johnson steps up" Steven Swinford Henry Zeffman Chris Smyth The Times 4 March 2023

14. "He's gone full Trump: Tories turn on Johnson over Partygate" Toby Helm Observer 5 March 2023

15. https://mydup.com/news/dup-leader-announces-seven-tests-for-hmg-plans-on-ni-protocol 15 July 2021

16. "Windsor Framework: former leaders join talks panel" BBC NI News 6 March 2023 https://www.bbc.co.uk/news/uk-northern-ireland-64860448

 

This series consists of the following 20 articles to date

Brexit 25 July 2016

Global Populism 27 Feb 2017

Brexit 14 Months On 30 August 2017

Our Precious Union 29 August 2018

Arguments for/against Brexit as Parliament debates UK/EU Deal  7 December 2018

Brexit Briefings to DUP MP Jan/Feb 2019 5 March 2019

Brexit lampooned 27 April 2019

How can the UK’s new PM resolve the Brexit conundrum?  23 July 2019

Omnes ad Unum Conservatives and DUP 24 September 2019

Election Communication 8 December 2019

Leaving Britain Undone 31 January 2020

Brexit Trade Deal: What Price Sovereignty? 30 December 2020

Just how good is the UK’s trade deal with the EU?  22 January 2021

Politics failing the people 28 April 2021

Brexit and empty shelves 27 August 2021 

Winning friends and influencing people 15 October 2021

The business of politics 11 May 2022 

An Ode to prudence 28 September 2022

Alarm bells in Westminster 24 October 2022 

The Windsor Framework 7 March 2023

 

Budgeting for a shrinking UK economy

Retrieving a reputation

The tasks of addressing the U.K.'s economic woes and the reputational hit to the party of Government was placed in the sharpest of focus by the adverse reaction of global markets to September 23rd's mis-named "mini-budget."   It may only have happened some 8 weeks ago, but let's remind ourselves of some of the bad consequences.

• Interest rates on Government's spiralling debt, for example, soared with detrimental knock-on impacts on everyday lives including those of house owners and buyers; 
• prospects for the pension schemes of millions of working Britons were put in jeopardy; and 
• sterling fell close to parity with the US dollar ($1.03), an all-time low, affecting trade and making imports more expensive. 

The replacement budget of 17 November would have to perform a balancing act to avoid pushing the U.K. into a deeper recession than it is already in, at the same time as placating the global markets its predecessor so spooked. The Government would also have to change tack and base policy on evidence. In so having to do, its campaign pledge that post-Brexit independent Britain would be able to act with impunity is exposed as erroneous.

Four wise economists speak

In the aftermath of global markets' reaction to the "minibudget" (since renamed with terms like "mess" "chaos" "catastrophe" and "disaster"), the most recent post in this series (1) quoted two world authorities on economics to explain the reason for Britain's declining economy. 

Nouriel Roubini referred to the problems that are affecting all nations including the U.K.  Except that it also has to cope with additional "self-inflicted" problems.  Chief among those, he argued, is Brexit which has reduced growth.  In similar vein, Mark Carney the former Bank of England Governor pointed to the shock of Brexit both to trade and to labour access.  The outcome, he added, is reflected in the shrinking size of Britain's economy over the last six years from 10% smaller than Germany's and down to minus 30% today.  

More recently Mr Carney has re-emphasised his theme of Brexit as being bad for Britain (2) and the raising of interest rates by the Bank of England.  Likewise Michael Saunders the former Bank of England policy-maker has explained how Brexit has permanently damaged the U.K's economy and is one of the reasons why it is entering a period of spending cuts and tax rises (3).

Fifty-five days on from the infamous "minibudget" and on the morning of the new Chancellor's budget statement the economist Mohammed El Erian, President of Queens College Cambridge, suggested (4) that the key question for Government is the scale of the "black hole" or deficit to be made up.  He said that a sum of around £20-30 billion could suffice in economic terms rather than the £50 billion being referred to by Government.  The extra amount, he said, may be being included for political reasons as post-General Election measures. In other words, a partial postponement of the pain.

Context

Meanwhile, it's important to place the U.K's travails in context.  A recent report from the European Commission provides an interesting contrast to the U.K's position.  It says that most member states will experience a "technical recession" this winter before growth returns in the spring 2023.  EU Gross Domestic Product is expected to contract by 0.5% in the final quarter of 2022 and by 0.1% in the first quarter of next year (5).  

Ireland's overall growth for 2022 is forecast to be 7.9% before slowing to 3.2% in 2023 and 3.1% in 2024.  And consumer price inflation (CPI) in Ireland is expected to be lower than the EU average at 8.3% in 2022 and 2.8% in 2023. The U.K., by contrast, reports its highest inflation rate since October 1981 with figures of 11.1% for the year to October, up from 10.2% the previous month (6).  

Expert backing

One of the unforgivable mistakes made by the Government in its September "minibudget" was that it attemped to introduce economic plans by ignoring both the Bank of England and the Office for Budget Responsibility.  Let's look at their background reports that accompany the new November budget.

The Bank of England's latest monetary policy committee report (7) paints a bleak picture.  It predicts that 

• CPI will take two years to fall below its 2% target, depending on interest rate levels; 
• it also predicts that the U.K.'s GDP will continue to shrink during 2023 and 2024 with the impacts of energy prices and financial restrictions on spending; and 
• it predicts that U.K unemployment will continue "to increase significantly" to 6.5% in three years time.
  

Further bleakness in outlook comes from Britain's spending watchdog, the Office for Budget Responsibility.  It says that (8) 

• the country is already in recession that will last just over a year, 
• unemployment will rise by 505,000 by the second half of 2024, 
• households will face their biggest fall in living standards since records began in 1956, 
• inflation and interest rates rises have driven the cost of Government debt close to post-war levels,
  
• the drop in household income will wipe out 8 years of growth as wages fail to keep pace with inflation and interest rates rise; and 
• that the taxation will peak in 2024/25 to reach its highest level since 1948, the year before I was born.

Impacts

As normal people listen and try to absorb the experts' predictions, to fathom which of the above bullets is the most wounding, one wonders about the human costs and sacrifices that are going to follow.  

Before the U.K. electorate was persuaded to leave the EU, new public policies required assessments to be made of their environmental and other impacts.  

 

The National Health Service seems like a fitting metaphor for the ailing strength of the U.K's economy.  Going forward it seems likely to have its work cut out to cope with the toll that this early seasonal present will exact on its population.

 

©Michael McSorley 2022 

 

References:-

1.https://michaelmcsorleyeconomy.blogspot.com/2022/10/alarm-bells-in-westminster.html

2. Bloomberg.com 4 November 2022 Liza Tetley. Mark Carney blames Brexit for rising BoE rates

3. Bloomberg.com 14 November 2022 Liza Tetley & Lizzy Burden. Brexit "permanently damaged" UK economy, Michael Saunders says

4. BBC Radio 4 Today 17 November 2022 Mohammed El Erian, Interview with Nick Robinson

5. Irish Times 12 November 2022 Naomi O'Leary. EU to enter recession in coming months, commission forecasts 

6. BBC News 16 November 2022 Rising food and energy bills push inflation to 41 year high

7 Bank of England Monetary Policy Report November 2022  https://www.bankofengland.co.uk/monetary-policy-report/2022/november-2022

8. The Guardian 17 Nov 2022 Anna Isaac. Worst fall in UK living standards since records began, says OBR https://www.theguardian.com/business/2022/nov/17/obr-confirms-uk-enters-year-long-recession-with-half-a-million-job-losses-likely

This series consists of the following 20 articles to date

Brexit 25 July 2016

Global Populism 27 Feb 2017

Brexit 14 Months On 30 August 2017

Our Precious Union 29 August 2018

Arguments for/against Brexit as Parliament debates UK/EU Deal  7 December 2018

Brexit Briefings to DUP MP Jan/Feb 2019 5 March 2019

Brexit lampooned 27 April 2019

How can the UK’s new PM resolve the Brexit conundrum?  23 July 2019

Omnes ad Unum Conservatives and DUP 24 September 2019

Election Communication 8 December 2019

Leaving Britain Undone 31 January 2020

Brexit Trade Deal: What Price Sovereignty? 30 December 2020

Just how good is the UK’s trade deal with the EU?  22 January 2021

Politics failing the people 28 April 2021

Brexit and empty shelves 27 August 2021 

Winning friends and influencing people 15 October 2021

The business of politics 11 May 2022 

An Ode to prudence 28 September 2022

Alarm bells in Westminster 24 October 2022 

 

Budgeting for a shrinking UK economy 18 November 2022

Alarm bells in Westminster

Background

Asked why he was not standing to be leader of the Conservative Party to replace the deposed Boris Johnson, the then bookies favourite and Defence Secretary Ben Wallace replied with this line.  The Conservative Party is brimful of talent.  

What?  Americans have a better phrase - excuse me?

Fast forward from early July to late October as another Conservative MP, Charles Walker, changed the tune, lamenting in exasperation (1).  "I've had enough of talentless people."

The MP's comments came in the wake of his new Government's evidence-free mini-budget, financial markets revolting, and the resignation of Suella Braverman, the U.K's shortest serving Home Secretary since World War 2.  

Twenty-four chaotic hours later and Boris Johnson's successor as PM Liz Truss followed suit announcing her resignation.  This was after being elected by the party membership and a brief 44 days in office.  Her widely expected departure set a record for the shortest term ever served by a PM in U.K. history.  And now the Conservative Party is set to crown a candidate it rejected last month, Rishi Sunak.  He will become the U.K's third Prime Minister this year.  That is also probably some kind of a record.

• Is Parliamentary democracy in safe hands in the U.K. at a worrying time on the world stage?  
• Does Westminster deserve to retain its self-styled title as the "Mother of Parliaments?"  
• Could the U.K. without a written Constitution be heading towards a Constitutional crisis? 
• What about the impact of the economic woes on the cohesion of "the precious union?"  
• What can be done to halt the slide in the national economy?  
• Is the Conservative Party the friend and ally of business - and vice versa?
  

Regardless of political parties, what have Britain's public policies of recent times been doing for the nation's reputation both domestically and globally?   

Terms like "Laughing stock" "Death Spiral" and "Soap Opera" are among the more printable of those expressed by politicians in the U.K.  

Another was "Beyond Parody."  Oh no it's not - so here goes.

Where has it all gone wrong?

Following the election of her discredited predecessor Boris Johnson what does another flawed premiership, that of Liz Truss, say about the judgement of the Conservative Party's members and MPs?  Her selection process exceeded her time as PM.  Can a political party be trusted anymore with the task of picking the PM for "the world's fifth biggest economy?" 

Boris Johnson resigned on 7 July following scandals including "Partygate" and that of Chris Pincher MP.  And not forgetting the slew of resignations of more than 50 Government Ministers and advisors from his team. Allegations of his misleading of Parliament remain a subject for a House of Commons Privileges Committee Inquiry.  And yet it took two months of tortuous scrutiny and hustings for the same Conservatives to whittle down the 8 candidates before selecting Liz Truss as their best leader with Mr Sunak deemed rude and second rate.  

Impacts

One impact of the protracted interregnum (excluding the passing of Queen Elizabeth) between the Johnson and Truss premierships was that no initiative was taken in July or August to address the growing clamour for action over price inflation in gas, electricity and food.  

Another was that the Conservative government exposed the fallacy of its mantra about "independent" Britain taking back control.  In addition, prolonged rounds of electioneering and the markets' turbulent reactions to the new régime's economic plans distracted the Government from task of governing in key sectors such as the health service, climate, the north-south divide and national security.

Liz Truss made economic growth her top priority without consulting the Office for Budget Responsibility or the Bank of England.  It took Mark Carney, previously the Bank's Governor (2013-2020), to point out the serious consequences of "undercutting" the nation's economic institutions (2).  

The world looked on in disbelief as Britain presented unfunded tax-cutting at a time of inflation and soaring national debt; dictated by a new PM introducing policy with no evidential basis and doing so precipitately.  That act replicated the Brexit tactic of making policy dismissive of facts.

Brexit

Following the resignation of her Chancellor of the Exchequer Kwasi Kwartang and his replacement by Jeremy Hunt, the economist Nouriel Roubini (3) listed the global threats as well as "self-inflicted" problems that beset the U.K's economy.  Top among the latter issues in his analysis was Brexit which, he argues, has reduced economic growth and raised the costs of production.  

One asks - how would growth not be affected by the turning of the U.K's back on its largest trading partner?  

Mr Carney has more recently spoken about Brexit's economic impact. He says that in 2016 the British economy was 90% the size of Germany's; now, he adds, it is less than 70% (4).  Liz Truss and her backers  - take note, even from the sidelines.

Brexit, he added, was treated by the Bank of England as a "supply shock to the U.K's trade access, to labour supply -  growth slows, inflation goes up, the pound falls - ultimately we will end up in a worse place."  From this advice, one deduces that it's little wonder why the markets were so spooked by the "mini-budget" and the spectre of a return to supply-side economics. 

Britain's current account national deficit is 8% of GDP, which necessitates more borrowing and austerity to maintain living standards (5).  Professor McWilliams's (6) analysis traces the current  policy to the 1980's when London "morphed" from being a provider of capital to brilliant engineers into "the financialisation of the entire economy" featuring venture capitalism, asset-stripping and short-term speculating.  

One consequence which he notes is that the European norm of a 3-times gap in earnings between top and bottom earners is a 6-times gap in the U.K.  He concludes by stating that current levels of inequality in the U.K. are inconsistent with democracy such that it needs an entirely new economic and political model.

Economists also remind us that economic growth comes from capital investment and from innovation.  The punishing rise in interest rates, unseen by the tax-lowering of "Trussonomics," not only disrupts family lives by making mortgages more expensive.  For hard-pressed taxpayers it also drives up the cost to the U.K.'s economy of servicing its soaring burden of national debt.  

The future

What sort of a legacy is Westminster handing down to the upcoming generation?  Britain's citizens - including our grandchildren - deserve better treatment.

©Michael McSorley 2022 

 

References:-

1. BBC TV News 19 Oct 2022  "I've had enough of talentless people" 

2.  The Guardian 29 Sept 2022 https://www.theguardian.com/business/2022/sep/29/mark-carney-accuses-truss-government-of-undermining-bank-of-england-governor-financial-crisis-pound

3. Channel 4 News 19 Oct 2022  https://www.channel4.com/news/nouriel-roubini-on-the-dangerous-economic-trends-putting-the-future-at-risk

4. Financial Times 14 Oct 2022 Edward Luce "Doubling down on inequality was a surprising choice"   https://www.ft.com/content/f1f0a66a-fa2c-4d70-9874-8003bdb3fb53

5. Irish Times 22 October 2022 David McWilliams "It is tragic how far the UK has fallen - and hard to see how it will get back up"

6.  http://davidmcwilliams.ie/about-3/

 

This series consists of the following 19 articles to date

Brexit 25 July 2016

Global Populism 27 Feb 2017

Brexit 14 Months On 30 August 2017

Our Precious Union 29 August 2018

Arguments for/against Brexit as Parliament debates UK/EU Deal  7 December 2018

Brexit Briefings to DUP MP Jan/Feb 2019 5 March 2019

Brexit lampooned 27 April 2019

How can the UK’s new PM resolve the Brexit conundrum?  23 July 2019

Omnes ad Unum Conservatives and DUP 24 September 2019

Election Communication 8 December 2019

Leaving Britain Undone 31 January 2020

Brexit Trade Deal: What Price Sovereignty? 30 December 2020

Just how good is the UK’s trade deal with the EU?  22 January 2021

Politics failing the people 28 April 2021

Brexit and empty shelves 27 August 2021 

Winning friends and influencing people 15 October 2021

The business of politics 11 May 2022 

An Ode to prudence 28 September 2022

Alarm bells in Westminster 24 October 2022

 

An Ode to Prudence

 Background

Gone are the days when sterling was worth something, the symbol of a prosperous nation.  

After World War 2, £1 could buy just over $4.  In 1949 it was devalued from $4.03 by 30% to $2.80, a rate which stood until November 1967.  

I recall the time well, it being early in my first year as an economics undergraduate and the Labour Government devalued the currency by 15% to £2.40.  Weeks later and in the face of righteous indignation from Conservative leaders, the Chancellor of the Exchequer resigned in ignominy.  To complicate matters, the U.K's application to join the EEC was blocked.

 

The Here and Now

Fast forward to 2022 and the worsening impact of Russia's invasion of Ukraine on energy prices everywhere.  This growing crisis had to queue for attention because of domestic hiatuses to accomodate the tortuous process of electing a new Prime Minister and the mourning of the revered Queen Elizabeth II.  Eventually the Government acted with an emphatic pledge to pursue "faster economic growth."  Its implementation has, however, seen sterling slide precipitously on international markets. 

 

The new Chancellor's "mini-budget" for a "new era" was quickly followed by a 3% slump in sterling's value to a 37 year low of $1.09, falling a further 6 cents closer to parity with the dollar. 

How could this unthinkable scenario be happening?   Given the facts of 12 years in power by the avowedly business-friendly Conservatives and ample time since signing the Withdrawal Agreement to demonstrate that Brexit would allow the U.K. the sovereign independence to "take back control," the question arises where did it and where is it all going wrong?

What about the funding needs of the National Health Service; what about the needs of the many other public services across the U.K. which steered the nation through the pandemic; how will the Government deliver on its election pledge to "level up" the north with the south of England; what about defense spending and the war in Ukraine; how will the U.K. afford to tackle the climate emergency and repair broken infrastructure; what about the U.K's international responsibilities, its place in the world and the combined impacts of recession and inflation on its neighbours (1); and where sits prudence and fiscal responsibility?

The Chancellor explained himself on Friday 23 September thus.  It is, he said, "a plan to solve the riddle of growth.(2)"  It is based on an estimated budget deficit (borrowing on a scale to make eyes water) of £200 billion per year.  Its twin pillars are £45 billion of tax cuts (with the promise or threat of more to come); and £60 billion of spending to cap energy prices as inflation grips.  

One commentator (3) observes that the cost of 10-year borrowing for the U.K. government exceeds 4% with markets betting that Bank of England interest rates could rise above 6% by next spring compared to 2.25% now.  He adds that investors fear that Britain's national debt could be on an unsustainable path as government borrowing soars, with the outlook dimmed by a large deficit on the balance of payments.

Remember that in selecting its new PM, the Conservative Party rejected a candidate who had warned against tax cuts as being inflationary.  In so acting they provided a party mandate for the new radical (and reckless) policy.  Is one speechless?  What did we do to deserve this treatment?

 

If prose and satirical imagery fail to emphasise the message, exasperation prompts resort to the abstract - alliterative verse (4).

Tracking the Descent

There is no Magic Money Tree

No Maidenhead MP/PM Magic Money Tree

Theresa May modernizer's mantra.

Meaningful meandering with votes

"Weak and wobbly." 

Johnson Jouster journalist, fired for fabrication  

Brexit 31 January 2020. Deal done?  

Unilateral law, abandon Protocol (5).

"Failures of leadership" Partygate scandal

Excessive boozing.  Gray day.

Sexual scandal, support sinks, "resignation in disgrace"

Alexander Boris de Pfeffel piffle.

 

Truss, noun, support framework for a roof

Example Kwasi Kwarteng Chancellor on the hoof

Sterling slides, interest rates rise

Quesy Kwarteng quantitative easing 

Public support?  Not courted by Liz and Kwasi 

They must've found that magic money tree.

 

 ©Michael McSorley 2022

References:-

1. BBC News 28 September 2022 IMF openly criticises UK govt tax plans https://www.blogger.com/blog/post/edit/5930599165673754705/1608992424988987206

2. The Times 24 September 2022 "Top earners the big winners as Truss reverses Tory strategy" Oliver Qright, Chris Smyth, Geraldine Scott 

3. Irish Times 26 September 2022 "UK mini-budget drama is threatening to turn into a crisis" Cliff Taylor

4. Acknowledgement Britannica biographies (May & Johnson)

5. NIESR "Summer Economic Outlook - A Risky Present" 3 August 2022

The business of politics

Historical perspective again dominates the thoughts of business leaders following the elections to Northern Ireland's Assembly.

Hot on the heels of the "historic" changing of the guard at Stormont come appeals from business leaders urging politicians to get on with the work of government (1) "as companies face their most challenging period in recent history." 

In the aftermath of the Democratic Unionist Party's fall from its place as the region's biggest party, its leader warned the Secretary of State and also the Westminster Parliament that he will not nominate ministers to the devolved Assembly's Executive without "decisive action" on the Northern Ireland Protocol.  Without definition, his intended meaning of the action demanded is unclear and ambiguous.  The potential ranges from its "ditching" through to unspecified reform.  

As the diplomat and former U.K.Prime Ministerial chief of staff Jonathan Powell repeats, there is no alternative to the protocol.  And none has ever been suggested by the DUP to it, nor to its predecessor backstop.

The protocol's significance is that it was a key element of the U.K.'s Withdrawal Agreement with the EU which the PM signed in December 2020 giving it the status of an international treaty.  Any unilateral action to amend or to scrap it would cause considerable repercussions such as a trade war with the EU.

In the continued absence of an Executive, the devolved administration cannot make or execute new policy.  Crucially also, it can't make financial plans at a time of growing economic tumult and uncertainty at home and abroad.  Questions arise about the region's viability as a political entity.

Whereas the former largest party continues to ignore pleas from business leaders and from the other principal parties to return to government, perhaps we could look to qualified experts for advice.  Professor Peter Shirlow (2) from the University of Liverpool, for example, is reported as calling on Sinn Fein (newly installed with the mantle of largest party) to join the DUP "to provide an evidence-base upon which to respond to the protocol."  

At first sight that might seem like a forlorn task given that empirical evidence was regularly dismissed by the Vote Leave side as "project fear" during the Brexit referendum campaign.  A rare post-Brexit attempt, however, to produce evidence in support of its case against the protocol came as a surprise (and welcome) change of tactic from the DUP leader a couple of days before this month's elections.  In a televised debate, he quoted research by a (not widely known) consultancy firm, Kantar, which he cited as corroborating his economic case for the alleged damage being done to the regional economy (3).   "Increased food costs in Northern Ireland," he argued "are direct results of the NI Protocol."  Sounds uniquivocal.

Given that the report has not been published, not been examined by independent economic experts and not been peer-reviewed, scepticism about the statistical veracity and analysis of this evidence remains.  The potential for connection of the alleged economic damage directly and solely to the protocol requires investigation.  The party's initiative to produce evidence, nevertheless, provides hope - something on which to build, following Prof Shirlow's urging.

Other evidence, however, particularly about the constitutional impacts of the protocol is already on the public record having been published in recently.  Whereas the DUP has cast no aspersions on the new trade borders that Brexit has created between the UK and Europe, its biggest trading partner, the party's hostility to the protocol is asserted as being the major threat to Northern Ireland's constitutional status within the U.K.  The British union rather than the one with Europe being the party's raison d'etre explains why the DUP's election litterature always lists the former as its overriding priority.

The implacable opposition of the DUP to the protocol comes under stiff legal challenge in a new book "The Law and Practice of the Ireland-Northern Ireland Protocol."  According to a review by a University of Pennsylvania law professor, these 25 essays (4) show that "the DUP's biggest lie is that the protocol violates the principle of consent embedded in the 1998 Belfast Good Friday Agreement."  The collection provides insights from practitioners in each of the areas of legal practice that the protocol affects, examining all of its legal dimensions while drawing on international law, EU law, as well as domestic constitutional and public law.  Empirical evidence writ large.

 

Extract from Irish Times 19 March 2022 review of "The Law and Practice of the Ireland/Northern Ireland Protocol"

Arising from the protocol's status as an international treaty, diplomats in Europe have warned the U.K. PM that any international leadership capital built up by Britain since Russia's invasion of Ukraine will be destroyed if he scraps the protocol and overrides the post-Brexit trade arrangements in Northern Ireland (5).  Perhaps this explains why plans for legislation to axe the protocol to be listed in the Queens Speech on May 10 were cancelled - allegedly (6). Might Westminster yet scrap it (or parts of it) despite its late omission from the Queens Speech?

Two closing points deserve a mention.  

Firstly, it has been reported both on BBC and RTE (7) that the Stormont Executive lead official (Andrew McCormick) in the UK/EU negotiations on the Withdrawal Agreement has said that the UK Government knew exactly what the protocol entailed and that it was chiefly responsible for what was agreed with the EU in October 2019.  He also dismissed any notion that the protocol was undemocratic in saying that "responsibility for the Withdrawal Agreement and the Protocol lies squarely with the UK Government."  The Government, he added, fought and won a General Election whose manifesto contained both at its very centre.

Secondly and allied to Mr McCormick's democratic legitimacy argument, one of many salient points made by Professor Katy Hayward in her comprehensive analysis (8) of the Stormont Assembly election results was that the majority of the new Members, MLAs, were elected as supportive of the protocol and keen to see it remain - 54 out of the 90.  That sounds like a solid mandate.  Is Westminster listening, paying any attention to that voice?

Previous articles in this series have highlighted the protocol's business benefits such as soaring north/south trade, the attractiveness for Invest Northern Ireland (the business development agency) of being able to use the carrot of access to both the EU and UK markets to attract new business to the region (9).  Why is one party threatening to deprive Northern Ireland of these opportunities?

It's not just business interests which want the region's Executive to get back to work; the community has only just voted for it; and people are pleading for nothing less in the interests of  economic necessity and, not least, in the promotion of community cohesion.  

 

©Michael McSorley 2022

Postscript:- 

Following publication yesterday 11 May of the above article, two additional sets of economic analysis and datasets need to be added today 12 May.

The first is a new report by the long-established British think-tank, the National Institute of Economic and Social Research (10).  It shows that the protocol is helping not hurting Northern Ireland's growth and profitability because of its advantageous access to EU markets.  This contradicts DUP assertions that the protocol's requirement for EU checks on British goods arriving in Northern Ireland has undermined business opportunities.

The second is the late (post-debate) publication on 10 May by Northern Ireland's Department of the Economy of the Kantar Report.  It consists ot two pages (11). Whereas it shows that in December 2021 the average price of dairy products in NI was 8% higher than in GB, the average grocery price in GB was 8% higher than in NI.  The consultants warn that because the category definitions for GB and NI differ, caution is needed in comparing average prices in GB and in NI. Nowhere does the report appear to attribute the variations to the NI Protocol, as was argued by the DUP leader in the BBC TV debate.

  

This series consists of the following 17 articles to date

Brexit 25 July 2016

Global Populism 27 Feb 2017

Brexit 14 Months On 30 August 2017

Our Precious Union 29 August 2018

Arguments for/against Brexit as Parliament debates UK/EU Deal  7 December 2018

Brexit Briefings to DUP MP Jan/Feb 2019 5 March 2019

Brexit lampooned 27 April 2019

How can the UK’s new PM resolve the Brexit conundrum?  23 July 2019

Omnes ad Unum Conservatives and DUP 24 September 2019

Election Communication 8 December 2019

Leaving Britain Undone 31 January 2020

Brexit Trade Deal: What Price Sovereignty? 30 December 2020

Just how good is the UK’s trade deal with the EU?  22 January 2021

Politics failing the people 28 April 2021

Brexit and empty shelves 27 August 2021 

Winning friends and influencing people 15 October 2021

The business of politics 11 May 2022

 

References:-

1. Belfast Telegraph Weekly Business Digest 10 May 2022 Emma Deighan "Stormont Executive is needed now as businesses seek certainty, warn NI Commerce Chiefs" https://www.belfasttelegraph.co.uk/business/northern-ireland/stormont-executive-is-needed-now-as-businesses-seek-certainty-warn-ni-commerce-chiefs-41632128.html?ed

2.  Professor Shirlow, Director of Liverpool University's Institute of Irish Studies, has undertaken conflict transformation work in Northern Ireland and has used that knowledge in exchanges with governments, former combatants and NGOs in the former Yugoslavia, Moldova, Bahrain and Iraq.  He has also presented talks to members of the US Senate and House of Representatives and is a regular media contributor

3. Belfast Telegraph 4 May 2022 Niamh Campbell "Sir Jeffrey Donaldson uses data commissioned by DUP-led department to support claims made about NI Protocol during debate https://www.belfasttelegraph.co.uk/news/politics/northern-ireland-assembly-election-2022/sir-jeffrey-donaldson-uses-data-commissioned-by-dup-led-department-to-support-claims-about-ni-protocol-during-debate-41615112.html" 

4. "The Law and Practice of the Northern Ireland Protocol" Prof Christopher McCrudden (human rights barrister)  Cambridge University Press Feb 2022                                                    https://www.irishtimes.com/culture/books/want-to-understand-the-northern-ireland-protocol-just-read-these-25-essays-1.4817662?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fculture%2Fbooks%2Fwant-to-understand-the-northern-ireland-protocol-just-read-these-25-essays-1.4817662

5. The Times 23 April 2022 "Ditching the NI Protocol plays into Putin's hands, PM warned." Bruno Waterfield, Oliver Wright 

6. Belfast Telegraph 10 May 2022 Amy Cochrane "PM indicates situation surrounding NI Protocol now serious as politicians hit out at stupid move to scrap it" https://www.belfasttelegraph.co.uk/news/politics/pm-indicates-situation-surrounding-ni-protocol-now-serious-as-politicians-hit-out-at-stupid-move-to-scrap-agreement-41633931.html?utm_source=newsletter&utm_medium=email&utm_campaign=BT:DailyNews&hConversionEventId=AQEAAZQF2gAmdjQwMDAwMDE4MC1hZWQ0LWMwMjUtOGRlYi0zYjQzNjkwN2UwNjHaACRlNDgxMjlmOS0yYWUyLTQ3NTYtMDAwMC0wMjFlZjNhMGJjYzXaACRkM2EyZWU3MC1jZjYxLTQwZTUtYjYxZi1hMGY4NTA2NTNlYmEvqbA94SWPTOOhjFapvqrwaLpuzSRBwQIHVYnyG9eZzQ

7. https://twitter.com/tconnellyrte/status/1519390294634029056?s=21&t=Kqd0tFdRyVA_n02M6LxUrQ 

8.  UK in a Changing Europe "What just happened in Northern Ireland and what does it mean?" Professor Katy Hayward 

9.  https://michaelmcsorleyeconomy.blogspot.com/2021/08/brexit-and-empty-shelves.html

10.  11 May 2022 "Northern Ireland economy outperforming UK thanks to Brexit protocol: experts" https://www.politico.eu/article/experts-brexit-protocol-is-boosting-northern-ireland-economy/

11.  https://www.economy-ni.gov.uk/sites/default/files/publications/economy/Kantar-Price-Data-for-Northern-Ireland-and-Great%20Britain-December-2021.pdf