ft post election 2

The UK’s top civil servant is set to stay in Downing Street and oversee a far-reaching shake-up of the government machine planned by Boris Johnson rather than move to the vacant ambassadorial job in Washington. Cabinet secretary Mark Sedwill had been tipped to move to the US, but friends said he was relishing the prospect of overhauling the Whitehall bureaucracy to help develop a post-Brexit economy — focused on boosting northern England — and to update UK foreign policy based on the concept of “global Britain”. Dominic Cummings, the prime minister’s chief adviser and a fierce critic of Whitehall, is driving the planned changes to the government machine, which will take place after Britain leaves the EU on the scheduled date of January 31. Mr Cummings is credited with devising the Conservatives’ “red wall” general election strategy that saw the party seize seats long held by Labour in northern England, the Midlands and Wales by using Brexit and pledges to improve public services to woo voters. Mr Johnson now wants to create a powerful new business department — absorbing the international trade department — to secure inward investment for the UK’s poorer regions and strike trade deals across the world, according to officials briefed on his proposals. Rishi Sunak, Treasury chief secretary, is seen in Whitehall as a potential head of the new economic super-ministry, which might also take responsibility for broadband and artificial intelligence from the Department for Digital, Culture, Media and Sport. No 10 will continue to hurtle from crisis to crisis with no priorities and no understanding of how to get things done, the civil service will fail repeatedly and waste billions, the media will continue obsessing about the new rather than the important, and the public will continue to fume with rage From Dominic Cummings blog post ‘The Hollow Men’ Officials confirmed that Mr Johnson was looking to recreate an energy and climate change department — as first reported in the Sunday Times — because of the political imperative of tackling global warming. The big Whitehall shake-up will also involve the Foreign Office absorbing the international development department — as revealed last week by the Financial Times — to align overseas aid with broader diplomatic goals. The Department for Exiting the EU is due to be wound up. Negotiations on a future UK-EU relationship are expected to be co-ordinated from the Cabinet Office, with Michael Gove, chancellor of the Duchy of Lancaster, expected to take charge. Given the scale of the Whitehall upheaval, Sir Mark is set to stay as cabinet secretary, rather than fill the Washington vacancy caused by the resignation last year of Kim Darroch, the ambassador who incurred the wrath of US president Donald Trump. “He looks full of energy and is relishing the very big job ahead,” said one senior government figure. A friend of Sir Mark, who took on his current role in October 2018, said: “He’s enjoying the job. Washington is always something he could do later.” Antonia Romeo, permanent secretary at the international trade department and formerly consul-general in New York overseeing trade matters, is seen as a potential successor to Sir Kim. Mr Cummings’ interest in overhauling the Whitehall machine — set out in a lacerating speech and blog in 2014 — could now be given full rein, given Mr Johnson’s big House of Commons majority. The mastermind of the Vote Leave campaign in the 2016 Brexit referendum outlined five years ago what he would do “if I ever get control of Number 10” — a scenario that seemed unlikely at the time. Mr Cummings complained that senior officials often took Fridays off and that a safety-first culture was more prevalent than a culture of original long-term thinking. “Almost no one is ever fired,” he said. “Failure is normal, it is not something to be avoided.” Mr Cummings also presaged the amalgamation of Whitehall departments in 2014 when he said: “The idea of a cabinet of over 30 people is a complete farce. It should be a maximum of probably six or seven people.” The prime minister’s chief adviser believes the whole British establishment needs reforming. “The system is stuck in a vicious circle,” he wrote in his blog, The Hollow Men, in 2014. “It is held in place by feedback loops between people, ideas and institutions.” He added: “No 10 will continue to hurtle from crisis to crisis with no priorities and no understanding of how to get things done, the civil service will fail repeatedly and waste billions, the media will continue obsessing about the new rather than the important, and the public will continue to fume with rage.” Recommended AnalysisThe Big Read Boris Johnson’s chance to forge a new role for Britain Mr Cummings is seen in Whitehall as a revolutionary who wants to upend the established order. “Some are worried, but others in the civil service see this as an opportunity,” said one official. Although Whitehall reform features high on the agenda of Mr Johnson’s government, it also has other institutions in its sights. The Tory election manifesto suggested the prime minister might try to clip the wings of the Supreme Court after it ruled against his suspension of parliament in September. “After Brexit we also need to look at the broader aspects of our constitution: the relationship between the government, parliament and the courts,” said the document. Mr Sunak told the BBC on Sunday: “We believe fully in the independence of the courts but of course we should look at all our institutions on a regular basis to make sure they’re functioning effectively.” He also confirmed the government could decriminalise the non-payment of the television licence fee, which funds the BBC. Tensions between Mr Johnson’s team and the BBC — notably over his refusal to agree to an interview with Andrew Neil, the broadcaster’s most feared inquisitor — flared during the election.

Boris Johnson will tell his newly elected MPs on Monday that the government plans to direct billions of pounds of investment into the midlands and north of England — areas whose support delivered last week’s crushing election victory. The prime minister will promise the 109 new Conservative MPs arriving in Westminster that the government will start pouring cash into parts of Britain that had never previously voted Tory, and push ahead with Brexit immediately. After securing an 80-seat Commons majority, Mr Johnson will on Friday introduce withdrawal legislation to take Britain out of the EU, in order to complete the process in time for the scheduled departure date of January 31. Once Britain has left the EU, Mr Johnson is planning a big shake-up of government, including creating a beefed-up business department that combines international trade, inward investment and a new regional agenda. That will be followed by a Budget in February or March. Sajid Javid, chancellor of the exchequer, will earmark tens of billions of pounds from a £100bn infrastructure fund — spread over a five-year parliament — for the midlands and north. The new generation of MPs that have resulted from Labour towns turning blue will help change our politics for the better Number 10 Mr Johnson’s plan for the first 100 days of his administration is intended to set the tone for what he hopes will be a two-term government, extending Tory dominion over Britain from 2010 into the late 2020s. The Labour opposition has descended into an acrimonious postmortem over its worst performance since 1935. Jeremy Corbyn, party leader, claimed Labour had “won the arguments” but many of his MPs want him to stand down immediately. The prime minister last week called the election “an earthquake” and Number 10 said: “The new generation of MPs that have resulted from Labour towns turning blue will help change our politics for the better.” The Conservative MPs gathering at Westminster on Monday will look and sound different to those in the previous parliament; a number of new Tory MPs are in their twenties, unexpectedly elected in previously rock-solid Labour seats in the north. Mr Johnson will attempt to hit the ground running, starting on Monday with a limited cabinet reshuffle to replace ministers who lost their seats or who stepped down: Nicky Morgan, culture secretary, Alun Cairns, Welsh secretary, and Zac Goldsmith, environment minister. Recommended News in Focus podcast10 min listen New UK government brings change and uncertainty On Thursday a pared-down Queen’s Speech will be given, in which the monarch will reiterate many of the legislative proposals she announced in October, before Mr Johnson called a snap election, although there will be new bills. Unusually legislation will be included requiring the government to meet its own promise to provide a £33.9bn a year increase in the NHS budget by 2023-24; health was one of the main issues in the election. New legislation will also be proposed on tougher sentencing for terrorists following the London Bridge attack and a bill to require unions and rail companies to guarantee a minimum level of service during strikes. On Friday Mr Johnson will introduce the EU Withdrawal bill, intended to pave the way for Britain to leave the EU on January 31; it includes the prime minister’s Northern Ireland protocol that puts a border in the Irish Sea. Recommended Brexit Britain says EU trade deal will be brokered by end of 2020 Meanwhile Mr Javid will use his Budget in the first quarter of 2020 to set out plans for a massive increase in infrastructure spending in parts of Britain that turned to the Conservatives in last week’s election. Mr Javid’s fiscal rules allow him to borrow £20bn-25bn a year for capital investment, or about £100bn over a parliament. So far he has only allocated £22bn, creating space for a big increase in spending in the midlands and north. The chancellor is looking to fund the £39bn “Northern Powerhouse rail” project, linking the big cities of the north, and the “Midlands Engine” project that aims to improve transport, skills and training in the country’s industrial heartland. The infrastructure fund may also have to pay for cost overruns on the HS2 high speed rail project — linking London to the midlands and north. The project is under review, after ministers admitted it could cost £78bn, compared with its original £55bn budget.

Top City of London financiers are rallying behind Boris Johnson after his general election victory, but they are urging the prime minister to heal societal divides by pursuing “inclusive capitalism” policies and a softer Brexit agenda. “The election result gives Boris a once-in-a-generation chance to set the UK on a different path,” Nationwide Building Society chairman David Roberts told the FT City Network. “One that recognises the fundamental need to heal the divides in our society.” Anne Richards, who heads Fidelity International, added: “If Mr Johnson can use his clear electoral mandate to invest in the real economy and work with business in a way that delivers for all stakeholders, then there is much to hope for in the coming decade.” Many of those offering snap reactions to Thursday’s poll among the membership of the FT City Network — a forum of more than 50 senior City figures — expressed similar sentiments about softening the hard edges of capitalism, in part by delivering on public spending promises. Elizabeth Corley, vice-chair of Allianz Global Investors, described campaign pledges on NHS and education spending as “one of the most positive aspects” of the election process. “This is a good outcome,” said Douglas Flint, chairman of Standard Life Aberdeen. “[This is] a government with the majority necessary to drive the economy forward and address the social and demographic challenges we face.” The election result gives Boris a once-in-a-generation chance to set the UK on a different path David Roberts, Nationwide Building Society chairman The comments reflect a broader shift in the language used by business both in the UK and in the US over the course of 2019, as the establishment responds to the uncomfortable reality of creaking public services and widening wealth gaps. Over the summer, even the normally ultra-conservative US Business Roundtable, which represents American big business, altered its mission away from a pure focus on generating shareholder value towards a mission to look after “all stakeholders”. The Financial Times has itself called for a “reset” and marketed a more purpose-driven form of capitalism. At the same time, many of the respondents to the FT City Network debate, including Ann Cairns, vice-chairman of Mastercard, and Clare Woodman, who heads Morgan Stanley in Europe, urged Mr Johnson to run a “pro-business government”. Gerry Grimstone, the former Standard Life chairman, who is now a non-executive at the Ministry of Defence, said it was the City’s responsibility to “support the government to the fullest possible extent” in trade negotiations. That appeal linked to another key message to come from the Network: that Mr Johnson should use the opportunity of a big majority to move away from an extreme interpretation of Brexit, favoured by the likes of the Tories’ European Research Group wing, in order to minimise the economic disruption of the UK’s departure from the EU. Mike Rake, former president of the CBI, expressed confidence that “with the Tories now freed from the control of the ERG, Boris will be able to drive an agreement closer to the EU and with a sensible transition period”. That period should not be less than three years, he said. Mr Johnson has previously said a deal on the UK’s future relationship with the EU would be struck by the end of 2020 as part of his “Get Brexit Done” electoral campaign. Alison Carnwath, who until last year chaired Land Securities, wished for “a very close economic and security tie to the EU”. Several other contributors expressed similar sentiments. Catherine McGuinness, policy chief at the City of London Corporation, said it was vital that Mr Johnson’s Brexit strategy focused on services, especially financial services, given that they account for 80 per cent of the economy. “As he re-enters Number 10 with a new majority, let’s encourage him to remember this in his negotiations with the EU, so that ‘getting Brexit done’ doesn’t entail ‘getting our service sector done over’.” Mr Johnson’s government has established effective lines of communication with business, marking a welcome return to a traditional Tory approach after Theresa May’s often anti-business stance. But neither leader has paid much attention to services in Brexit policymaking, causing unease among City lobbyists. Miles Celic, who heads The CityUK lobby group said: “There’s no appetite for radical deregulation in the mainstream of industry”, given hopes that the UK will maintain EU market access by pursuing an “equivalence” deal of broadly similar regulatory standards. But Paul Manduca, who chairs Prudential, said there should be scope to “find some flexibility within an equivalent European regime”. 

Boris Johnson has promised to repay the trust of traditional Labour voters in the north-east of England who backed the Conservatives for the first time at Thursday’s general election, declaring they had “changed the political landscape”. On a highly symbolic visit to Tony Blair’s former constituency of Sedgefield in County Durham on Saturday, Mr Johnson said: “I can imagine people’s pencils hovering over the ballot paper and wavering before coming down for us and the Conservatives, and I know that people may have been breaking the voting habits of generations to vote for us. “I want the people of the north-east to know that we in the Conservative party, and I, will repay your trust. Everything I do as your prime minister will be devoted to repaying that trust.” Mr Johnson said: “Remember, we are not the masters. We are the servants now. And our job is to serve the people of this country and to deliver on our priorities.” Mr Johnson’s visit to Sedgefield follows a general election victory which saw the Conservatives blast a gaping hole in Labour’s “red wall” of once-safe seats in northern England, helping him to a Commons majority of 80. Sedgefield, so long associated with Mr Blair, the former Labour leader, returned a Conservative MP on Thursday for the first time in 84 years. Labour, meanwhile, lost a host of other red wall seats to the Tories, including Bassetlaw, Blyth Valley, Don Valley, Bishop Auckland, Workington, Leigh, Scunthorpe and Great Grimsby. Recommended UK general election How the Labour party’s ‘red wall’ turned blue The Conservatives’ victory in these seats is being hailed by political analysts as a monumental political achievement. It is also raising questions over how Mr Johnson will deliver economic security for the voters the Conservatives have won. Asked whether his promise to be a one nation government meant bringing back Conservative politicians such as Penny Mordaunt and Jeremy Hunt — who left the cabinet in July after Mr Johnson took over — the prime minister said he was “not going to speculate about personalities”. Mr Johnson said on Friday night that his stunning election victory would mark a moment of “closure” for the country after three years of Brexit agony, as he celebrated the biggest Conservative majority for more than 30 years. Recommended AnalysisUK general election Five things that top Boris Johnson’s to-do list “Let the healing begin,” he declared outside 10 Downing Street. Some cabinet ministers predicted Mr Johnson could use his 80-seat majority to adopt a softer approach to delivering Brexit, with some senior Tories speculating he could extend a transition period beyond December 2020. The prime minister now faces the task of negotiating a new relationship with the EU while trying to avert a schism in the UK. The pro-independence, anti-Brexit Scottish National party won a dramatic victory north of the border, winning 48 out of 59 seats. Mr Johnson’s victory prompted a euphoric market response, amid relief that a solid Tory majority would bring stability back to a country wracked by internal division and uncertainty since the 2016 EU referendum.

Boris Johnson insists he can broker a trade deal with the EU by the end of 2020 even as Brussels ramps up warnings that it may be impossible to complete the negotiations in time, creating the risk of an economic “cliff edge”. As both sides prepare for future relationship talks that will follow Brexit on January 31, Michael Gove, the UK cabinet minister, said on Sky News on Sunday that trade negotiations “will be concluded next year”. “We will have concluded our conversations with the EU about the new framework of free trade and friendly co-operation that we will have with them.” But Brussels has stressed that the 11-month window to negotiate a deal will force both sides to “prioritise” and potentially leave some issues unresolved until later.  EU officials privately say that the quality of the talks will benefit from more time, something that could happen only if Mr Johnson reversed his opposition to extending Britain’s post-Brexit transition period beyond the end of 2020.  “If the transition period is extended quickly it could take away some political drama in the UK and have a positive impact on negotiations”, one official said. “How much time there will be for negotiating the future relationship depends entirely on the UK.” The jousting over the timetable is part of the preamble to what EU capitals expect to be a gruelling negotiation over the relationship that will replace Britain’s 46-year membership of the union. At the heart of the talks — which will cover everything from security co-operation, to common defence and fishing — will be the negotiation of a trade deal that both sides hope will ensure tariff-free, duty-free trade in goods.  What Boris Johnson's election win means for the UK Mr Johnson has ruled out any extension of the transition period — in effect a standstill arrangement that temporarily preserves Britain’s EU market access — despite the fact that the deadline creates the risk of Britain losing preferential trading arrangements with the union at the end of next year.  Any extension would stoke the ire of many in Mr Johnson’s Conservative party, not least because it would require a further financial contribution to the EU. But senior EU officials have made clear that this means the negotiations must be sequenced in a way that focuses on bare essentials and core demands. This includes the union’s insistence that Britain agree to a “level playing field” of environmental, social and state-aid rules in exchange for a trade deal. Ursula von der Leyen, president of the European Commission, warned on Friday that “the timeframe ahead of us is very challenging”, and that “a specific focus” would be needed on avoiding an “economic cliff edge” at the end of the transition period. “There will be sequencing [of the talks],” she said. “There will be more emphasis on a certain ranking. This is being developed right now.”  Brussels officials note that a “bare-bones” or “skinny” free trade agreement might be the most that is achievable for the economic relationship by the end-2020 deadline. But trade experts warn that such a deal will do little to help large parts of the UK economy, notably in the area of services, where the UK enjoys a trade surplus with the rest of the EU. It also leaves little time to negotiate the kinds of co-operation agreements that could help smooth border arrangements for trade in goods. “It will be bloody difficult to get a deal done and ratified in 11 months time,” said one EU diplomat “The sensible thing to do would probably be to extend the transition period. The EU would be ready to consider this if Number 10 were ready to countenance an extension and its consequences.”  But Mr Johnson has told government officials he is determined not to do that.  “The PM was absolutely adamant after the election that there will be no delay and no watering down of his plans for a comprehensive free trade agreement,” said one senior ally of Mr Johnson.  Recommended AnalysisUK general election Triumphant Boris Johnson must now turn Brexit slogan into reality Some ministers nonetheless privately claim there could be some slippage in the December 2020 deadline if it becomes obvious that more time is needed to secure a good trade deal alongside an agreement on a future partnership covering other issues such as security. Mr Johnson is likely to come under pressure from newly elected Tory MPs representing manufacturing seats in the Midlands and north to strike a deal that stays close to EU regulations to avoid friction at the border and disruption to supply chains. One cabinet minister said that Mr Johnson would also have more flexibility in negotiating a deal in Brussels without having to look over his shoulder at Eurosceptic hardliners at Westminster, thanks to his substantial new majority in parliament: “He won't be having to talk to two audiences at once.” EU leaders on Friday adopted guiding principles for the future relationship talks, saying that the bloc should agree a “comprehensive” negotiating mandate covering all the issues.  Diplomats said that this meant all aspects of the negotiations would be politically linked, so that the bloc could withhold concessions in some areas to secure key objectives in others — notably fishing rights, which would be covered in a separate treaty to the trade talks.  “Our focus is on having the negotiations as mature as possible, to close as many negotiation points at the end of the year as possible,” Ms von der Leyen said.

Parts of Labour’s heartlands had been threatening to turn blue for some time. But on Thursday night that threat became a reality. Seat after seat that Labour had held throughout the postwar period fell to the Conservatives. At the start of the campaign “Workington man” — the target voter in northern towns — seemed like a caricature, and there seemed little real chance that the seat would change hands. But in the end the Conservatives won it comfortably. There is no doubt that this was a terrible night for Labour. And as the losing side casts around for factors to explain it, Brexit and the party’s leadership are top of the list. It is also the case that in some of these seats much of the damage to Labour majorities had been done already, in the 2017 general election. But this is not the whole story. To focus only on the post-referendum period is to miss changes that had been occurring in Labour’s heartlands since the years of Tony Blair’s premiership. Analysis on election night highlighted that a factor related to falls in the Labour vote share was how “working-class” the constituency was (measured as the proportion of the electorate in routine or semi-routine occupations). This appears to predict more strongly Labour’s fortunes in a constituency in 2019 than age, education levels, ethnicity or the Leave share of the vote. A weakening of the link between social class and voting has already been well documented. Some suggest that age is the new class. But what remained of the working-class link to voting Labour appears to have broken still further apart in this election. Conservative leader Boris Johnson speaks from Downing Street Some hints that this was happening could be found in the pre-election polling, where the skilled working class were predicted to split more heavily for the Conservatives than ever before. It was also evident in other indicators of the disconnect between Labour and its traditional voter base. Asked which party looks after the interests of working people those in this skilled working-class group broke 35 per cent to 32 per cent in favour of the Conservatives. This is part of a wider disengagement from Labour of a group of voters who are broadly speaking supportive of the party’s economic position, comfortable with nationalisation and strong trade unions, but who increasingly find themselves out of step on other issues such as criminal justice and immigration. These voters backed Mr Blair in 1997 but by 2010 they were already moving towards the Conservatives. Critically, this group feels that the political parties do not represent them and that they have little voice in politics. More likely to be Leave voters in the EU referendum, this is a group who felt shut out: a sense made more acute at the election when more than three years later their decision had not been implemented. Recommended Camilla Cavendish Boris Johnson has reshaped the UK’s political landscape There is little evidence that this group of voters went enthusiastically to the Conservative party, and small reductions in turnout across these seats suggest that some simply stayed home. But the slogan “Get Brexit done” seemed to resonate and give these voters hope that their voices were being heard. Many were willing at least to lend Boris Johnson’s incarnation of the Conservative party their vote. A long time in the making perhaps, but there is no guarantee that these seismic changes will prove to be a long-lasting realignment of British politics. In the absence of an emotional attachment to a party, voters are much more likely to switch allegiance again at a later election. The effect of five years of a Johnson government on these communities — and the potential impact of whatever version of Brexit the prime minister is able to implement — is yet to be seen. But it may be premature to view the new “blue curtain” as a permanent feature.

Boris Johnson is fond of channelling Winston Churchill. So, in that spirit, let us state that his election victory last week (for which we include recommended readings below) will not “get Brexit done”, but it does herald the end of the beginning of Brexit. It now looks highly likely that the UK will leave the EU at the end of January.  To hazard a guess at what comes next, it is worth looking back and learning from how the Brexit process has transpired so far. It is also a good moment to take stock of Free Lunch’s coverage to date. I hope readers will agree that we have often been ahead of the curve. In December 2017, I wrote that Britain had “tied its Brexit hands” with the UK-EU joint report of that month, where it forswore any border infrastructure on the island of Ireland. That meant that if the UK wanted to leave the EU in an orderly way, it would have to accept an economic border in the Irish Sea — to manage its divergence in EU customs and regulatory rules — or limit that divergence to a minimum. The European Commission drew up the details of the former solution with a proposal for a Northern Ireland “backstop” (or fallback rules) in February 2019. The then prime minister, Theresa May, instead chose the latter: her withdrawal agreement, agreed with the EU in November, would have kept Great Britain in a thin customs union with the EU while aligning Northern Ireland fully with it in anything to do with agricultural and industrial goods. Johnson’s only alternative, short of crashing out, was always going to be to return to the first option and separate Northern Ireland economically from the rest of the country, betraying the unionist MPs whose parliamentary support he inherited from his predecessor. But didn’t everyone say that even that would be impossible, and that the EU would never reopen May’s deal — and yet Johnson managed it? Well, not everyone. Free Lunch readers will have read back in June that “the EU may just about be willing to change the withdrawal treaty” for a new prime minister to concede terms May had rejected. In the same column I also argued that it would be hard for the EU to deny a request for some democratic say for Northern Ireland over the chosen solution. (In contrast, May had secured something — a thin customs union for the whole of the UK, with only few strings attached — that the EU did not find easy to give. If we are to compare May and Johnson, therefore, May comes out as the better dealmaker of the two.) The question was how Johnson could square what he would have to concede to the EU with the reasons he gave the public for rejecting May’s deal — in particular wanting the UK “whole and entire” to leave the EU customs union to be free to strike new trade agreements with other countries. We anticipated the answer to that, too. In September I proposed that the UK could enforce the EU’s customs border in the Irish Sea but rebate any tariffs to goods that could be proved would not enter the EU (because they would be consumed in Northern Ireland). And within two weeks, precisely this sort of solution was being worked up by British and Irish officials. Johnson “got rid” of the Northern Ireland backstop version that May had negotiated by not just accepting but making a “frontstop” out of the EU’s first proposal, adorning it with the rebate policy and the role for the Northern Ireland assembly that Free Lunch had predicted. So we cannot be too disappointed with our Brexit analysis over the past year. Which leads to the question: what does it suggest may come next, after Britain formally leaves the EU at the end of January, which now seems likely? The EU-UK interaction will then shift to talks over their future relationship. The key fact about these talks is that many of the UK’s trade-offs are similar to those it faced in the withdrawal negotiations. The more it wants to be free to diverge from the EU legal system, the more barriers to trade it will face as the EU starts to enforce its laws against the UK at the new EU-UK border. The politics, too, looks similar: an enormous amount of weight is placed on the symbols of independence from the start, while the political fallout from the real consequences of divergence on the ground (in Northern Ireland this year, for UK businesses and jobs next year) sinks in over time. And, once again, a cliff-edge deadline looms, with high costs to pay if a deal is not agreed. In 2019, Johnson declared victory by conceding more than May while claiming he had not. If he does the same in 2020, what will that look like? Presumably something he can pass off as “taking back control” while avoiding the economic disruptions that will cost him politically. That means rejecting a formal extension of the transition period during which nothing changes, while still ensuring that in practice nothing much does change. Achieving this will require the same kind of creativity as the Northern Irish issue. Perhaps the answer is a trade treaty with two parts: a bare-bones trade agreement that avoids any tariffs or quotas, plus a “placeholder” agreement that says negotiations will continue on more ambitious trade relations and keeps everything (including the UK’s financial and legal obligations to the EU) more or less the same for as long as those talks continue. A distinction without a difference from extending the transition, in other words. This is, of course, pure speculation. But it seems safest to speculate, if speculate we must, that similar circumstances will lead to similar outcomes.


The EU played an indirect but critical part in last week’s electoral triumph for UK prime minister Boris Johnson — and in Brexit. It was a historic error of judgment by some of the EU’s leaders to collude with Remainers in the UK. Instead, they should have gone out of their way to help Mr Johnson’s predecessor Theresa May pass her withdrawal agreement. The EU leadership not only overplayed its hand during the negotiations. It committed the critical error of refusing to rule out a Brexit extension from the outset. They contributed to the ensuing uncertainty and the change in the Tory leadership. The rest is history. As a direct consequence of these errors, the EU will end up with a more distant relationship with the UK than it could have had. Mrs May’s withdrawal deal, while far from ideal, would have been consistent with a future association agreement. By betting the house on an elusive second Brexit referendum, a coalition of EU leaders and the Remain campaign have ended up forfeiting that opportunity. If EU leaders had any strategic sense, they would now pause for a minute to decide exactly what they want from a new bilateral relationship with the UK. The signs of that happening are not promising. I am marginally encouraged by Angela Merkel’s comments right after the UK election, looking forward to “friendship and close co-operation between our nations”. But Mette Frederiksen, the Danish prime minister, immediately raised the issue of fishing rights — an issue with the potential to kill any trade deal. Ursula von der Leyen, the European Commission president, set out a sequence with a first phase of talks to include only goods and fishing. This is exactly the same approach the EU took in the negotiations over the withdrawal agreement. The UK would be mad to accept this. It would be complacent to think that Mr Johnson will be a pushover in the second phase, the upcoming trade negotiations. What would happen if the EU were to play hardball and only offer a minimal deal, perhaps spiced with demands for EU access to UK fishing waters, or that the UK follow EU labour market rules? If Brussels were to make such demands, it would give Mr Johnson a rational reason to walk away from talks entirely. The Brexit transition period is scheduled to expire at the end of 2020. At that point, Mr Johnson will still have four more years in office ahead of him, longer than any other EU leader. There would also be significant economic consequences for the EU’s leaders if no trade deal is struck and the two sides end up in a trading relationship based on World Trade Organization rules. That would put at risk a substantial portion of the EU’s £94bn bilateral trade surplus in goods. Sceptics argue that a trade deal cannot be concluded quickly. But speed is a political variable. If the EU decided to prioritise a deal with the UK, it could choose to fast-track the negotiations. It is true that the EU would not be able to ratify a trade deal by the end of next year. But if negotiations were far enough along by late 2020, the two sides could find a way to extend the transition period. The history of the EU’s free trade agreement with Canada offers another model. It has been provisionally applied since 2017, while awaiting final approval by the member states. When somebody tells you that a trade deal takes many years to negotiate, they are really saying that they do not want events to move faster. Another important consideration for the EU is that the UK is likely to start parallel trade talks with the US. If such a deal were to be concluded first, it might contain passages that could interfere with a not-yet-concluded EU trade deal. For example, American negotiators might insist on access for their chlorinated chicken and genetically modified organisms. If the EU really wants a strategic partnership with the UK, it is in its interest to conclude that agreement before the US does. If it is the strategic goal of US president Donald Trump to drive a wedge between Britain and the EU, this would be an ideal opportunity. A full, balanced and fair trade agreement is possible, but that would require the EU to drop its Versailles treaty, victor’s justice mentality. I realise that the European Council does not undertake negotiations itself. But this time it should become more closely involved. We will know that this process is veering off track if we see the two sides reverting to the usual briefing hostilities. The EU was wrong to treat Brexit as a threat, rather than grasping it as an opportunity to forge a strategic bilateral relationship with the UK. Britain’s departure is also an invitation to forge further integration among the remaining members. It is a sad reflection on the state of the EU that I have no idea how it proposes to solve the apparent conflict between its geopolitical interests and fish.