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Good afternoon. Critics of Brexit often focus on the primary impacts of leaving the EU on trade and investment — which are real — but equally alarming and destructive are the secondary effects on the stability of the UK’s political and regulatory environment.
When businesses complain that the UK is becoming “uninvestable” it is this phenomenon to which they are often referring, not the complexities of customs paperwork and rule of origin, irritating though they be.
Previous editions of this newsletter have dwelt on Dominic Raab’s Bill of Rights legislation, for example, which has been derided by pretty much every serious lawyer in the land; similarly the Retained EU Law Bill, which wants to “review or revoke” over 4,000 pieces of EU-derived legislation by the end of 2023.
What is striking is how widely such legislation is seen as self-evidently absurd. In the case of the REUL bill, the UK parliament is sovereign and can override any piece of EU-derived legislation at any time it chooses. So why say you’ll do it all in a year?
It just unnerves investors, winds up pressure groups — from trade unions to conservationists — and makes the government look ideological and unserious. Plenty of Rishi Sunak’s team know this, but tip-toe round the issues to assuage their political right flank.
The latest addition to this mountain of sloppy, ideologically driven legislation is the National Security bill, which contains proposals for a US-style register of “foreign influence” and which is causing huge alarm in the City, industry, charitable and academic sectors.
As I reported earlier this week, the City and other business groups say the system, which is far more all-encompassing than its US or Australian equivalents, risks destroying Britain’s reputation as a global investment hub.
But it’s important to understand this is not just City fat cats talking up their book. There is a very good briefing by the law firm Herbert Smith Freehills on why this legislation — which was bunged late in at the committee stage of the bill — is so ill-advised.
In short, the legislation captures any foreign organisation or its UK representative in any of its interactions with MPs, Peers or government officials in a way that is both bureaucratically impractical and risks creating a plethora of unintended consequences.
For example, Bond, the UK network for organisations working in international development, fears that with penalties of two years in jail for failing to register an “influencing activity” within 10 days, it will simply deter organisations from engaging.
As Bond’s policy manager Rowan Popplewell explains, this is likely to have a chilling effect on smaller organisations that don’t have big compliance teams — and the loss will be to the government and the civil service as much as to charities.
“It’s an important part of charities’ work to brief MPs, raising awareness of what is happening on the ground and in humanitarian operations. The concern is that it will have a negative impact on UK development policy if ministers and MPs aren’t getting that information,” she says.
This is but one example. The Herbert Smith Freehills briefing cites plenty of others — like the Singaporean scientist who goes to a UK conference and briefs MPs and policymakers and on their return home find their bank’s compliance team raising questions. The risk is that it’ll be safer, in future, to stay away.
There are also privacy and security questions caused by a register that lists all engagements with MPs, Peers and government policymakers. So if a rights groups fighting for oppressed Muslim groups in Myanmar or the Uyghurs minority in China list all their engagements, that’s an open book for governments that have a record on cracking down on such groups.
I give these ‘softer’ examples before we get to business, accounting and finance which, behind the scenes, is vociferously warning ministers that this will have a huge negative impact on the UK’s position as a global hub for trade and investment.
As Miles Celic, head of TheCityUK lobby group put it in their letter to security minister Tom Tugendhat, the scheme, as currently conceived, “risks seriously damaging the UK’s financial and related professional services industry, as well as our reputation as one of the world’s most attractive jurisdictions for cross-border business, trade and destinations for foreign investment”.
And as one former Tory minister put it, this also runs completely contrary to the government’s nimble, ‘global Britain’ narrative espoused this month by the Chancellor Jeremy Hunt, who promised his Edinburgh reforms for the City would “unlock investment and turbocharge growth” .
“Introducing a law that will put the relationship between business and politicians and government into the deep freeze is an interesting way to go about it,” said the ex-minister with links to the City.
For now the Home Office is sticking to its guns, but time is short as the bill is already through the Commons and at the committee stage in the Lords.
Tugendhat, in a speech on “Defending Democracy” this week to rightwing think-tank Policy Exchange, said the register would target those “working on covert political interference” and would “not impose restrictions on legitimate activities of people or businesses”.
To put it kindly, that’s not a view widely shared. Real spies won’t register, obviously, but unless the scheme is more carefully circumscribed it will inevitably catch “legitimate activity” as James Palmer of Herbert Smith Freehills has observed. How could it not?
Such denialism has become a hallmark of this series of post-Brexit governments, but constantly saying things that everyone can see are untrue is not a way to imbue confidence in those who would interact with the UK — from investors to academics, charities to industries.
The solution, as an amendment tabled by two eminent KCs with experience in national security, Lords David Anderson and Alex Carlisle, shows, is to remove this slapdash scheme from the National Security bill so that it can be properly debated and consulted upon and then reinstated in a usable form.
(It’s worth noting that legal experts who criticise the register acknowledge that other parts of the bill are carefully drafted to avoid inadvertently criminalising the innocent.)
As for the register, Anderson calls it an “ill-directed and vastly overbroad control on foreign lobbying, not a national security measure”.
He tells me that it is itself a function of a dysfunctional legislative process that means bills are often not being preceded by Green or White papers, with measures being added midway through their parliamentary process, as was the case with this registration scheme.
“This is not how lawmaking should happen. Early consultation, and the scrutiny of draft bills, are quality control mechanisms which would nip the more ludicrous schemes in the bud and result in better and more durable laws,” he said.
As with Raab’s Bill of Rights, this kind of criticism comes from sources eminent enough to be frankly embarrassing for the government. Lords Carlisle and Anderson served consecutive terms as the Home Office’s own Independent Reviewer of Terrorism Legislation.
As one senior civil servant put it to me, the ideological pursuit of Brexit and then Covid — where fast policymaking was at a premium — has “seriously undermined” checks and balances in Whitehall.
In the past the pace was slower, they said, but that was a design feature, not a bug, since it led to better policy, forcing ministers to check assumptions and use better evidence, so half-baked ideas were ditched or improved. “I’d argue that is not happening now,” the civil servant added.
The risk is that in post-Brexit UK this is increasingly accepted as a new normal. MPs, Peers and media commentators implicitly shrug and say that the “politics is difficult” or that, even if Sunak and Hunt have reassured financial markets, we have to recognise the “political constraints”.
This may indeed be the political reality. But they should remember that those foreigners that will soon be signing the Home Office’s register — academics, financiers, industrialists, charity bosses — have a world of choice about where they deploy their money, energy and expertise.
It’s getting to that time of year when we’ll review the progress of Britain after Brexit in 2022. Looking ahead to 2023, what areas would you like the newsletter to cover next year, and what questions do you want answering? Reply to this email and I’ll do my best.
Brexit in numbers
This week’s chart comes from some fascinating analysis by the dons at the UK in a Changing Europe think-tank in response to polling that shows that the worm of public opinion is slowly turning against Brexit.
But digging deeper into the YouGov data, what Joris Frese, Juho Härkönen and Simon Hix find is that while some older, pro-Brexit voters are slowly being replaced by younger, less anti-Brexit voters, Tory attitudes remain pretty deeply entrenched still.
To the point about political constraints above, it turns out that while pretty much all age groups of Labour voters have converged, with over 75 per cent of all cohorts thinking it was “wrong to leave the EU”, a strong majority of Tory voters continue to believe the opposite.
There has been some movement, as the chart shows, but even among younger Tories born since 1970, only around a third think the UK was “wrong to leave” — in both cases less than felt this in 2016, when the survey began, even if the dissatisfaction has grown somewhat since 2020.
As they neatly sum it up: “The British public appear to be turning against Brexit. But, as a result of the large birth cohort differences in support for Brexit, fewer people have in fact changed their mind about Brexit than it might seem.”
And, finally, three unmissable Brexit stories
Financial regulation editor Laura Noonan is picking up disappointment among UK banks with the Bank of England’s proposal to implement new capital requirement rules which diverge from the EU and are at odds with the post-Brexit vision, they say.
Spain said it cannot negotiate “eternally” with the UK over Gibraltar as the two sides seek to agree a treaty that defines the British territory’s relationship with the bloc. Spain’s foreign minister José Manuel Albares made the comment after meeting his UK counterpart James Cleverly this week in Madrid.
Kemi Badenoch refused to commit to a deadline to finalise a much-hyped trade agreement with India. She told the Financial Times while on a trip to India this week “my view is that timelines are not helpful”. Boris Johnson and Indian prime minister Narendra Modi had previously set a deadline for the Hindu festival of Diwali in October.
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