Jeremy Hunt’s measures provide difficult backdrop to next round of UK-EU talks

The fallout from today’s Autumn Statement would test a strong prime minister, but even before announcing tax rises and spending cuts Rishi Sunak has been struggling to shake off the whiff of political decay that hangs over the Conservative parliamentary party.

There is disorder in the ranks. Many Tory MPs, including those loyal to former PM Boris Johnson, appear happier to prioritise personal score-settling over the collective discipline needed to win elections and take tough decisions.

First the assassination of Sir Gavin Williamson by forces loyal to the former chief whip Wendy Morton, next the constant rumble of bullying allegations against Dominic Raab, and this week the former Defra secretary George Eustice publicly trashing the post-Brexit trade deal with Australia — which was supposed to be one of the few actual “benefits of Brexit”.

Today’s Autumn Statement is unlikely to settle the muttering troops. It mixes tax rises hated by the Tory right, with a Whitehall spending squeeze and a reduction in support for household energy bills that should make any MP defending a marginal seat quiver.

What has any of this to do with Brexit? Well, because it’s the political backdrop against which Sunak is going to have to cut a deal over the Northern Ireland protocol at some point in the next six months in order to avoid a fresh confrontation with Brussels.

Ask anyone involved in the pre-talks process and they will tell you that the “mood music” is much improved. Officials and diplomats on both sides, including those scarred by many previous false dawns, will look you earnestly in the eye and say that it does feel different this time.

Sunak has sent out serious signals of intent, attending the British Irish Council summit (the first PM to do so since 2007) and meeting Taoiseach Micheál Martin. He also listened to advice and pushed out the date of new assembly elections in Northern Ireland to April next year to create a clear window for negotiations.

Of course, the Northern Ireland protocol bill, which threatens to unilaterally blow up Johnson’s agreement on post-Brexit trading arrangements, still looms. If it passes into law, the EU side has made it clear that it will detonate any chance of a solution and precipitate a trade war.

Unless the bill is delayed, that in theory gives Sunak about five or six months to get a deal that would obviate the need for the protocol bill (as happened in 2020 with the internal market bill, which similarly threatened to renege on UK treaty obligations) and open the door to a broader EU-UK reset.

The prize on offer is significant. It’s not just that the UK would get to participate in the €95bn Horizon science programme — the chair of the House of Lords European Affairs Committee said this week he had a list of more than 40 areas of EU-UK co-operation that had been stalled by this row.

But a deal on the protocol would also be a springboard to restoring the UK’s wider international reputation, which, Sunak admitted at the G20 in Bali this week, had taken a “knock” of late.

And not just in Brussels. Washington is also breathing down London’s neck on this. The Biden administration wants a deal before the 25th anniversary of the Good Friday Agreement.

Other parts of the UK international agenda are also being stalled. For example, the UK wants to join the transpacific trade group the CPTPP, but those talks are being delayed in part because members are reluctant to let the UK join the organisation if it’s still in cavalier, rule-breaking mode. 

That, they fear, sets a precedent that might later be used by China. It is a very unhappy thought, but the UK finds itself in a place where it can be used by Beijing (which has long ignored WTO commitments) to justify its own lawbreaking.

In short, there are many good reasons for Sunak to do a deal, but the still-unanswered question is, will he do it? Or more accurately, will he be politically strong enough to do it, given all the backbiting on the backbenches noted above?

In practice, the shape of a deal has been clear in Brussels for some time: first, significantly “de-dramatise” the checks on the Irish Sea border that so rile Northern Ireland’s Unionists. Here, the European Commission will need to go further than its October 2021 offer.

Second, find a face-saving formula to somewhat obscure the fact that the protocol requires the European Court of Justice writ to run in Northern Ireland — something the sovereignty-first wing of the Tory party deems unacceptable.

What that means is that even the best version of that deal is a very, very long way from what is envisaged in the protocol bill, which was cooked up by Lord David Frost and Liz Truss as a vehicle for the most extreme UK rewrite of the deal.

On the vexed question of the writ of the ECJ, Sunak well understands (and will have been told) that what is negotiable in Brussels is a long, long way short of what is demanded on the face of Truss’s bill — to which he remains nominally “committed”.

The PM said at the British Irish Council summit that “we need to protect Northern Ireland’s place in the United Kingdom”, but there is no clarity about what that actually means. 

But as the Autumn Statement sinks in, that moment for clarification is approaching. 

On the big questions, such as the ECJ, the UK side is going to have to accept that previously floated “fixes” by London, such as having a similar independent arbitration mechanism to that for the EU-UK Trade and Cooperation Agreement for the protocol, are not going to wash.

Because however much lipstick the EU puts on the protocol pig, Northern Ireland will remain part of the EU single market for goods, following EU law. And that means ECJ oversight. 

This fact could be obscured by agreeing to a Swiss-style talking shop that seeks to resolve disputes before the court gets involved, but the ECJ will remain at the apex of that system — and not all European Commission lawyers are sanguine about this idea.

This is where talks have always become tricky in the past, because essentially any deal on the ECJ that’s legally acceptable in Brussels, cements Northern Ireland’s halfway house status in the UK — governed by EU law for goods trade, with all the enforcement elements that follow. 

As University of Cambridge EU law professor Catherine Barnard explains, article 12.4 of the protocol — while drafted in a deliberately obfuscatory fashion — is very clear on this point, and the EU isn’t going to budge on it. It can’t, because that’s the very nature of the deal Johnson agreed. 

As she says: “While the EU might be prepared to add a declaration which says that the commission will not rush to start enforcement proceedings against the UK and will try other ways of resolving disputes first, it is unlikely to be willing to take a blue pencil to this key provision of the protocol.” 

This isn’t to say a deal can’t be done. As noted above, in many ways the political stars are aligning. The question, as Andrew McCormick, the senior former Northern Ireland Office civil servant posed at an IIEA event on the Protocol this week in Cambridge, is: “do the politicians really want to do it?” 

I don’t know. Because when you listen to politicians like foreign secretary James Cleverly, who is the UK’s lead negotiator on the protocol, it still sounds like the ECJ remains a dangerously emotional, rather than legal-technical question. 

As he told Anand Menon (listen here from 31.40) at the Tory party conference — under a different prime minister, of course — the UK is insistent that Northern Ireland’s place in the UK “has got to be resolved” either by negotiation or via the protocol bill. 

“We’ve been very clear there are areas that we feel are integral to the integrity of the UK as a single market. And a constant reminder that Northern Ireland is part of the United Kingdom. It’s there on the front of the box. It’s the ‘United Kingdom of Great Britain and Northern Ireland’, and we are not going to put that last bit in parenthesis,” Cleverly said.

To be clear, I’m not arguing that the protocol necessarily does leave the region “in parenthesis”, I’m just observing that the premise of the protocol bill is that it does, and that this needs to be “addressed” by removing ECJ oversight of the deal. It’s on the face of that bill.

If Sunak does the deal that’s outlined above — and claims some wins on border control while accepting a little on the ECJ — will that wash with the party? With Cleverly and with Eurosceptic ministers such as Steve Baker? We shall see.

Then there is Johnson. Will Sunak also have to contend with the former prime minister on the sidelines, murmuring to his many acolytes that Rishi is “selling out”? (I realise it will take some chutzpah for Johnson to attack Sunak for simply cementing a lower-fat version of the deal Johnson himself signed, but that doesn’t mean it can’t happen.)

All this remains to be seen. As the outgoing EU ambassador João Vale de Almeida memorably put it in a valedictory interview with my colleague George Parker: “The mood music has changed, the melody is nicer but we still don’t have the words of a new British song.”

With the Autumn Statement finally out of the way, however, the stage is set for the next round of Northern Ireland protocol drama. Let’s all pray it’s the final instalment. 

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Brexit in numbers

This week’s chart comes via the Tourism Alliance, an umbrella group for a host of UK tourism interests, which has conducted a survey of the impact of Brexit on the numbers of EU children coming to the UK on school trips.

Last November the FT covered this emotive subject, lamenting that the real loss was not just the £1bn that the estimated 1.2mn EU students spent in the UK on school trips before Brexit, but the permanent loss in contacts and relationships.

We never live the counterfactual, but it’s the interests that were never kindled . . . the relationships that were never formed . . . the passions for each others’ countries that were never seeded, perhaps to bloom in later life.

Because of Covid-19 and the system of forward bookings, the data was somewhat incomplete in November 2021, but a survey in October this year of 82 big EU operators in the school trip business shows bookings to August 2022 were down 83 per cent on 2019.

Part of this was caused by pandemic impacts, but when asked about the number of bookings for 2023, those operators said their bookings amounted to just 42 per cent of 2019 totals. By contrast, trips among EU school kids to Ireland or other EU destinations were back to 90-95 per cent of pre-pandemic levels.

The Brexit effect is clear. It is caused by the UK government withdrawing the group passport “list of travellers” scheme that, pre-Brexit, enabled EU kids without passports, or children with non-EU passports (an Afghan or Iranian asylum-seeking family, say) to travel to the UK together using their national passports or ID cards.

If they want to come to the UK now, the same students have to spend hundreds of euros to get passports and/or visas. That means many schools are not bothering because it’s too expensive and divisive. The poorest students and schools are hardest hit.

As I said, the human loss far exceeds the financial one, but for the record, Tourism Alliance calculates it at £1.5bn over the past two years. 

Most infuriatingly, this would be easily fixable if the government was minded. There needs to be a youth group travel scheme, indeed there needs to be a full youth mobility chapter added to the TCA to enable young Brits and Europeans to gain experience from visiting each others’ countries and understanding each others’ cultures. 

And the sooner the better. The longer this goes on, the more the commercial networks that facilitate such exchanges will continue to decay.

And, finally, three more unmissable Brexit stories

• Economics editor Chris Giles concludes that Jeremy Hunt’s package of measures outlined earlier today was the biggest budgetary squeeze since 2010. “There was no sugar coating the horrible economic forecasts in the Autumn Statement,” he writes.

• Global investors were relieved that the measures announced by the chancellor were an orthodox response to an economic crisis, writes our Lex column, in sharp contrast to Kwasi Kwarteng’s “loopy growth plan” from September. The fact that the yield on UK government bonds rose and sterling fell after the statement was more to do with the dire economic outlook than the performance of Hunt, it says.

• The overhaul of the Solvency II insurance rules is one of the more concrete post-Brexit opportunities, writes Helen Thomas. But, she says, the nerdy topic has become a tug of war over who sets the tone and the pace in crafting our approach to financial services.